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Mark Zuckerberg's long game

Moving the Market: Facebook's market capitalization grew by $40 billion in after-hours trading last night on a positive earnings report, even as the company said it expects to be fined up to $5 billion by the Federal Trade Commission for privacy violations.

• The big picture: Mark Zuckerberg can pay off his problems. So long as he gives users and advertisers what they want, Facebook's scandals will amount to line items in the operating budget.

One strange thing about the Facebook story is how often media outlets overlook this. The company is consistently covered as though it's facing an existential threat, when in fact it's growing by every conceivable metric (albeit more slowly than in the past.)

• The real Facebook story isn't that it has violated privacy, abused data, strangled digital advertising or enabled election meddling; it's that it's done this without alienating 2.38 billion monthly users.

• Facebook critics say the company is "widely hated," but how "widely hated" is a service that more than 1.56 billion people now use on a daily basis?

• There is a disconnect between the opinion makers who have more or less demonized Facebook and the mass audience of consumers who continue to use Facebook's services.

What's next: Facebook's scandals have hastened its inevitable run-in with regulation. But where regulation has happened, as in Europe, it has done relatively little to curb growth. Where regulation is pending, as in the United States, the jury is still out on what rules lawmakers will actually impose.

• Moreover, regulation may help Facebook and other tech giants by creating financial burdens like hefty fines and demand for legal resources that only the biggest companies can afford.

The long game: Facebook's demise won't come about because of scandal, regulation or the outrage of elite opinion makers. It will come about because the company fails to innovate (or fails to acquire other innovative companies) and therefore stops satisfying consumer demand.

• On that note, the real threat posed by Facebook's scandals is that all the distractions will force Zuckerberg to miss the next great innovation.

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Sheryl Sandberg's new ad play

Big in Menlo, big on Madison Ave.: Facebook chief operating officer Sheryl Sandberg says that three million advertisers are now using Facebook's various Stories platforms to reach consumers.

• Their audience: More than 500 million users, given that Facebook Stories, WhatsApp Status and Instagram Stories now boast 500 million users each (likely with considerable overlap).

• Meanwhile, Snapchat, which invented the Stories format, has a total audience of just 190 million daily users.

The big picture: Facebook's ability to rapidly grow and monetize Stories is a reminder of the almost unimpeachable power that comes with scale, whether you're creating or copying a new service.

• The Verge's Nick Statt: "While we don’t have a financial breakdown of how lucrative those ads are," it makes "perfect sense that Facebook took the concept and applied it across its entire mobile portfolio."

🐦 Rally the Market 🐦

Keeping Perspective: Pew Research Center is here to remind you that Twitter is not America.

Snap's Peter Hamby was on this six weeks ago.

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Randall Stephenson's TV test

Big with the Bell Heads: Randall Stephenson is losing AT&T television subscribers at a record clip, with 544,000 customers jumping ship from DirecTV and U-Verse TV in the last three months.

• More than 1 million subscribers have left in the last six months, bringing AT&T's total pay TV audience to 22.4 million.

• DirecTV Now, the online subscription service, lost 83,000 subscribers and now has an audience of just 1.5 million.

• AT&T's main competitor, Verizon, has also reported losing 53,000 video subscribers in the first quarter of this year.

What's next: Stephenson needs to move all that much faster to launch WarnerMedia's new streaming service. On the earnings call, he said AT&T will hold an event in the early fall to unveil the offering.

• The big picture, via WSJ: "The still unnamed service... is slated to join an increasingly crowded market for internet-based entertainment that includes new offerings from Disney and Apple."

Bonus: Stephenson also said that NFL Ticket would stay on DirecTV, seeking to allay concerns raised by the mounting interest from Amazon, Disney and others that I reported last week.

Market Links

• Satya Nadella keeps Microsoft safe from the techlash (Axios)

• Matt Sacks loses Joe Rogan amid Luminary concerns (HotPod)

• Alan Horn brings the ax down on Fox's film inventory (THR)

• Gwyneth Paltrow jumps on the Buttigieg bandwagon (Variety)

• Bari Weiss divides and conquers New York (Vanity Fair)

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Reed Hastings fights flight

Talk of Tinseltown: Netflix's Reed Hastings and Ted Sarandos are preparing for a world where they no longer have access to the streaming service's most popular shows, WSJ's Joe Flint and Amol Sharma report:

• "Three of [Netflix's] biggest programming suppliers" — AT&T's WarnerMedia, Disney and Comcast’s NBCUniversal — "are entering the streaming-video arena. After licensing content to Netflix for years... they are looking to take their hit content back to feed their own platforms."

• "The three companies... have created TV shows and movies that make up nearly 40% of the viewing minutes on Netflix, according to data compiled and analyzed for The Wall Street Journal by Nielsen."

The big picture: "Netflix has an air of invincibility in the entertainment world, with a huge audience, a hefty war chest and a sizzling stock. But the moves by its Hollywood rivals are a gathering threat."

• What's next: Netflix "could lose some of its most-watched programming or have to pay a steep price to keep it."

🎞🎞🎞

"Avengers: Endgame" watch: The Marvel box office juggernaut officially ended its opening day in China at $107 million, moving it closer to a $1 billion global opening.

• My colleague Daniel Arkin rightly notes that the film's success marks the culmination of several longstanding storylines, including "Disney’s cultural dominance, China’s box office explosion and Hollywood’s investment in branded tentpoles."

🎞🎞🎞

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Lessons from the NFL Draft

New rules of engagement: The NFL Draft kicks off tonight in Nashville, and the heightened interest among U.S. football fans offers an important lesson about how we engage with content today.

First, the stats:

• Last year's draft was the most-watched ever, with 45.8 million viewers tuning in at some point across the three-day period.

• This year's ratings are expected to be even higher, as Disney is broadcasting all three days on both ABC and ESPN.

Second, an observation:

• In an interview with Bill Simmons this week, author Michael Lewis said fans increasingly see sports "through the eyes of the GM," or general manager, as digital journalism and data allow them to keep tabs on player movement, draft order, trades, salaries, etc.

The lesson: Audiences increasingly want to be more than passive consumers of a finished product. They want to feel actively involved on the back end, from strategic vision to the production process.

• This has created demand for an endless stream of secondary, "behind the scenes" content, of which the NFL Draft is the greatest expression.

• Fans aren't content to watch 16 games a year. They want to be present for the creation of the team (the Draft), its production (documentary series like "Hard Knocks,") and all in-season developments, in real time.

• The same is true in entertainment, where there is unprecedented interest in who is being cast for a film or show, how it came together and what the talent has to say about it (See: Game of Thrones).

Just a thought bubble, fwiw.

What Next: The Draft kicks off at 8 p.m. ET. Speculate away.

See you tomorrow.