February 21, 2024


LOS ANGELES, CA – MAY 2: WGA members take selfies in front of the picket line before the first day of strike in front of Paramount Studios in Hollywood on May 2, 2023. The union failed to reach a last-minute deal to sign a new three-year contract with the major studios to replace the contract that expired on Monday night. (Genaro Molina/Los Angeles Times via Getty Images)

Gennaro Molina | Los Angeles Times | Getty Images

Media companies pitching to advertisers this week will have to do their best to overcome a lot of noise in the industry.

The ad market has been weak since last summer, and companies are cutting costs in an attempt to make streaming profitable.

Meanwhile, the Hollywood writers’ strike is sure to play a role in the conversation, especially if picketers show up this week outside the annual ad sale called Upfronts. Some of them have already participated in the so-called Newfronts, which are similar streaming-only events.

This week will start with ComcastNBCUniversal Upfront, which saw a last-minute change when global advertising chief Linda Yaccarino resigned last week before Twitter hired her to succeed owner Elon Musk as CEO.

fox corp., disney, warner bros found and newcomer Netflix There will also be events this week. Paramount Global Opted out of Upfronts this year in favor of Dinner with Advertisers.

Streaming continues to be a major topic of discussion, especially as user growth slows, making the ad-supported layer more important.

Franchise content is likely to take a big chunk, as media companies have turned to series and movies with a proven track record to retain audiences.

Here are the contents of Upfronts.

writers strike fears

A scene from season four of Netflix’s “Stranger Things.”

Courtesy: Netflix

soft advertising market

Media executives overall aren’t as bullish on the ad market as they were a year ago.

“It felt like a party here,” said then-NBCUniversal CEO Jeff Shell. Said at last year’s Cannes Advertising Festival, held for more than a month after the pre-introduction. “I don’t know if it’s because most of you are out for the first time in a long time or because we’re in the south of France in June, but no, it doesn’t feel like a down market.”

By November, the ad market was collapsing on soaring interest rates and recession fears.

“The ad market is very soft,” Warner Bros. Discovery Channel CEO David Zaslav said at an investor conference in November. “It’s weaker than it was during Covid.”

In recent months, executives have noted a limited recovery.

“The overall entertainment advertising market has been challenging,” Disney Chief Financial Officer Kristen McCarthy said on Disney’s second-quarter earnings call last week. “While the softening has moderated, we expect this to likely persist into the second half of the fiscal year.”

NBCUniversal, Paramount Global, Warner Bros. Discovery and Disney all reported first-quarter TV ad revenue declines of between 6% and 15%.

Media executives’ message to advertisers this year is likely to center on value, especially as the company continues to offer more content on its streaming service. Warner Bros. Discovery will showcase Max, its new combined HBO Max-Discovery+ offering launching later this month. Disney announced last week that it would add a feature to Disney+ that would allow Hulu programming, a change that CEO Bob Iger said would “open up more opportunities for advertisers” when it launches later this year.

cost cutting

franchise frenzy

If anything, the media network and its streaming peers will present a franchise-focused roster.

This has been a theme at Upfronts in recent years. During last year’s NBCUniversal Upfront, late-night host and “Saturday Night Live” alum Seth Meyers lashed out at the timeline for the spinoff and reboot.

“I don’t need to tell you that the last two years have been transformative not only for the TV business but for the entire industry. We need to be creative, agile, forward-thinking, but it’s still up front in what we’re doing,” Meyers said. Said last year. “That’s not to say NBC isn’t embracing the future—next year promises exciting new shows and ideas like ‘Law & Order,’ ‘The Fresh Prince of Bel-Air,’ ‘Night Court,’ and ‘Quantum Leap.'”

According to Parrot Analytics, franchises are driving demand for Hollywood movies — a big part of streaming offerings like Disney+, Paramount+ and Peacock — and TV franchises.

“Hollywood has been in a cycle for the last 12 to 13 years because other content failed to explode,” said Brandon Katz, entertainment industry strategist at Parrot.

A logo for streaming service Paramount+ on the sign wall at the Paramount+ launch event. The (re)streaming service Paramount+ is now available in Germany.

Jörg Karstensen | Image Alliance | Getty Images

Paramount, in particular, relies heavily on franchises, especially its Paramount+ streaming service. The Star Trek franchise accounts for 32.4% of Paramount+’s U.S. audience demand in 2022, while the Yellowstone spinoff accounts for 11.4%, according to Parrot.

Last week, Paramount’s CBS broadcast network announced three new episodes for the upcoming season — Matlock, a reboot of the 1980s-to-late 90s series, directed by Oscar Starring award-winning actress Kathy Bates, the other “Elisabeth” is based on characters from the “The Good Wife” and “The Good Fight” franchises.

Disney+ relies heavily on series from its Marvel and Star Wars libraries. However, Parrot Analytics found that demand for Marvel content in the US has declined through the end of 2022, likely due to the mixed reception to its most recent series.

The shift to streaming

Ad-supported streaming will become a bigger part of the conversation this year.

Wells Fargo analyst Steven Cahall said that as cord-cutting accelerates — overall pay-TV subscribers fell 3% last quarter, “generally deteriorating” — digital advertising is likely to take a larger share.

“It’s a very clear trend that linear TV continues to decline, while digital video and connected TV are on the rise to fill the void,” said Paul Verna, principal analyst at Insider Intelligence. $12.48 billion was spent on digital media, an increase of 28% over last year.

According to Insider Intelligence, U.S. TV ad spending is expected to drop 3.6% to $18.64 billion in 2023-24, suggesting the market has stalled on traditional TV and more dollars are shifting to digital.

Netflix and Disney+ launched ad-supported packages for their services late last year. As streaming subscriber growth stalls and companies push to make streaming profitable, executives are hoping that cheaper options will retain or attract customers.

Disney recently said it relies on its ad-supported options to help monetize its streaming offerings.The company will Adding Hulu content to Disney+, which Iger said is “a logical progression for our DTC offerings, will open up more opportunities for advertisers.”

Price increases for the ad-free option to boost revenue for these businesses may also drive customers to cheaper ad options.

Both Paramount+ and NBCUniversal’s Peacock have offered ad-supported tiers since launch. While Peacock held a Newfront demo to showcase its content, the streaming service will be a big part of NBCUniversal’s Upfront on Monday.

“Just a year ago, if you looked at the composition of Paramount’s ad revenue, it was about 25 percent digital,” said David Lawenda, Paramount’s chief digital advertising officer. “It’s about 40 percent now. That’s 40 cents of every dollar spent on digitization.”

Free ad-supported platforms like Paramount’s Pluto and Fox’s Tubi will also see more ad revenue.

“We expect Tubi to be a core part of our upfront negotiations,” Murdoch said recently on Fox’s earnings call. “It’s clearly not just a strategic driver for us. It’s been an important driver going forward.”

There has been an explosion in these free, ad-supported streaming TV or FAST services. They also saw an increase in viewership during the height of the pandemic, when production stopped and there was a dearth of new content. It could happen again if the writers strike continues.

Disclosure: NBCUniversal is the parent company of CNBC.

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