Meta Platforms, Inc. (META), in its new avatar, is reconsidering whether to continue paying the news publishers on its platform or not, the Wall Street Journal stated in a report.
Don't Miss our Black Friday Offers:
- Unlock your investing potential with TipRanks Premium - Now At 40% OFF!
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
This could create a huge uproar in the news publishing world, which may have to brace up for the potential shortfall in revenues worth millions of dollars.
Shares of Meta Platforms, on the first day of its trading as META ticker on June 9, fell 6.4% to close at $184. The company has lost almost half of its market cap over the past six months.
Meta May Shift to Videos
Formerly known as Facebook, the company has a dedicated News section, comprising a selection of free articles for readers.
In 2019, in a 3-year deal, Facebook agreed to pay various news publishers to feature their content without a paywall. The deals are about to expire this year.
According to The Wall Street Journal, Facebook has paid average annual fees of over $15 million, $20 million and $10 million to the Washington Post, the New York Times, and The Wall Street Journal, respectively.
Though the deal is up for renewal, the company, so far, has not given any indication to renew the same.
According to the report, Facebook could be aiming for a paradigm shift. This means it could be potentially looking for new partnerships with short-duration video-makers to compete with ByteDance Ltd.’s TikTok.
Regulatory Landscape
The underlying reason for Meta CEO Mark Zuckerberg’s reluctance to renew the agreements could be the immense criticism from publishers and pressure from regulators globally, including the European Union, France, the U.K., Australia and the U.S.
Facebook and Alphabet Inc.’s Google (GOOGL) are forced to pay publishers for any news content available on their platforms.
Numerous publishers have blamed tech giants like Google and Facebook for not making payments for the news content featured on their platforms.
Wall Street’s Take
Amidst growing regulatory pressures, Goldman Sachs analyst Eric Sheridan has decreased the price target on Meta Platforms to $290 (30.6% upside potential) from $300, while maintaining a Buy rating.
Though bullish on Meta over the longer term, Sheridan has slashed his revenue and EBITDA forecasts based on increased competitive and regulatory pressures.
Overall, the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 26 Buys, seven Holds and 1 Sell. Meta Platforms’ average price target of $278.66 implies 51.45% upside potential to current levels.
Concluding Thoughts
With the advent of the tech giants like Facebook and Google, thousands of newspapers have gone out of business over the last two decades.
If Facebook makes up its mind to not pay to the news publishers, it could worsen an already tense relationship between the online content makers and the social-media giant.
The global investor community will keep a close watch on the turn of events in the days to follow.
Read full Disclosure
