Los Angeles, CA – May 2: WGA members take a selfie before heading to the picket line on the first day of their strike outside Hollywood’s Paramount Studios on May 2, 2023. The union failed to reach a last-minute agreement. with major studies on a new three-year deal to replace the one that expired Monday night. (Genaro Molina/Los Angeles Times via Getty Images)
Genaro Molina | Los Angeles Times | Getty Images
Media companies presenting to advertisers this week will have to do their best to cut through a lot of noise in the industry.
The advertising market has been weak since last summer, and companies are also cutting costs as they seek to make their streaming businesses 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 advertising sales events known as Upfronts. Some of them have already worked on the so-called Newfronts, which are similar events focused only on streaming.
The start of the week will be ComcastNBCUniversal Upfront, which saw last-minute changes when global advertising chief Linda Yaccarino resigned last week Twitter kept her busy to replace owner Elon Musk as CEO.
Fox Corp., Disney, Warner Bros. Discovery and a rookie Netflix is holding events this week as well. Paramount Global opted out of Upfronts this year in favor of intimate dinners with advertisers.
Streaming remains a hot topic of discussion, especially as ad-supported tiers gain importance in the face of slowing subscriber growth.
And franchise content is likely to be a big presence as media companies lean on blockbuster series and movies to retain viewers.
Here’s a look at what’s coming up for Upfronts.
Writers’ strike concerns
Members of the Writers Guild of America it stopped working and earlier this month he turned to demonstrations and halted production of movies and TV shows.
Media executives say the strike will have no immediate impact on programming tables, but that could change depending on how long the strike lasts.
“There are certainly other elements of fluidity this year, like the WGA strike, that are most important to advertisers and make flexibility even more important in this year’s negotiations,” said Amy Leifer, director of advertising sales at DirecTV. “Even if there is a shutdown of scripted TV production due to the writer’s strike, we know that viewers will still consume TV content.”
This is likely to mean more emphasis on live content such as sports and news if the strike drags on. Fox chief executive Lachlan Murdoch said he did not expect his company to be affected by the writers’ strike given its sports and news presence.
While this helps traditional media companies like Fox, Warner Bros. Discovery and NBCUniversal, which all have robust sports and news offerings, could put a strain on entertainment-only networks as well as streaming services.
A scene from Netflix’s “Stranger Things” season 4.
Courtesy: Netflix
Already, a series of productions were suspended, incl Netflix “Stranger Things,” Disney and Marvel’s “Blade,” Apple TV+ “Department” a by Paramount “Evil.”
However, an immediate concern with the Upfronts could be if protesters show up outside the events. Many top Hollywood talent, especially late-night talk show hosts who had already seen their shows shut down, showed support for the writers. Often these are comedians and talk show hosts to participate in Upfronts.
During the recent Newfronts, protesters performed outside the events. Netflix, which is having its inaugural Upfront this week since its recent rollout advertising supported layerhas a yearallegedly chose so that his presentation is only virtual.
Soft advertising market
Media executives are not as optimistic about the advertising market as they were a year ago.
“I feel like I’m at a party here,” then-NBCUniversal CEO Jeff Shell he said at the Cannes Lions advertising conference last year it was held just over a month after the initial presentations. “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 market drop.”
In November, the advertising market collapsed due to rising interest rates and fears of a recession.
“The advertising market is very weak,” said the CEO of Warner Bros. Discovery David Zaslav at the November investor conference. “It’s weaker than during Covid.”
Executives have seen limited recovery in recent months.
“The overall entertainment advertising market has been challenging,” Disney CFO Christine McCarthy said during Disney’s second-quarter earnings conference call last week. “While the weakness has moderated somewhat, we expect that the modest weakness may continue into the back half of the fiscal year.”
NBCUniversal, Paramount Global, Warner Bros. Discovery and Disney reported a 6% to 15% decline in TV ad revenue in the first quarter.
Media executives’ messages to advertisers this year could focus on value, especially as companies continue to offer more content on their streaming services. Warner Bros. Discovery will introduce Max, its new HBO Max-Discovery+ combo product, launching later this month. Disney announced last week that it is adding a feature that allows Hulu programming to be part of Disney+, a change that CEO Bob Iger said will “provide greater opportunities for advertisers” when it launches later this year.
Cost reduction
As media executives try to convince advertisers to maximize their spend, they will push the narrative while making fewer shows. Disney said last week that it plans to produce less content next year. Warner Bros. Discovery spent the last year removing content z Max to reduce costs.
“It’s important that we rationalize the volume of content we create and what we spend to produce our content,” Disney’s Iger said.
Cost-cutting efforts are driven by an urgent motivation to make streaming profitable. Paramount Global, NBCUniversal and Disney have promised that streaming will stop losing money by next year. Warner Bros. Discovery said earlier this month that its US streaming business would be profitable in 2023 – a year earlier than planned.
“The key is that our US streaming business is no longer bleeding,” Zaslav said. “It’s hard to do business when you’re bleeding heavily.
Still, landing pages are the time to showcase your content. If the investor’s message is focused on cutting fat, the ad buyer’s message will be about showcasing the quality of existing franchises.
Franchise Madness
If one thing’s for sure, media networks and their streaming counterparts will showcase slates with a heavy emphasis on franchises.
It’s been a theme at Upfronts for the past few years. During last year’s NBCUniversal Upfront, late-night host and “Saturday Night Live” alum Seth Meyers teased the show’s schedule for spinoffs and reboots.
“I don’t have to tell you that the last two years have been transformative, not only for the television business, but across all industries. We’ve needed to be resourceful, agile, forward-looking, and yet and we’re still doing it up front,” Meyers said last year. NBC doesn’t accept 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 data from Parrot Analytics, franchises attract a lot of viewer demand for both Hollywood movies – which are an important part of the program offerings of streamers such as Disney+, Paramount+ and Peacock – as well as TV franchises.
“Hollywood has been recycling for the last 12 to 13 years because it hasn’t been able to break through with more content,” said Brandon Katz, entertainment industry strategist at Parrot.
The Paramount+ streaming service logo on the logo wall at the launch of the Paramount+ event. (recrop) Paramount+ streaming service is now available in Germany.
Jörg Carstensen | Picture Alliance | Getty Images
Paramount in particular has seen a heavy reliance on franchises, particularly with its Paramount+ streaming service. Star Trek content accounted for 32.4% of Paramount+’s US viewer demand in 2022, while Yellowstone spin-offs accounted for 11.4%, according to Parrot.
Last week, the Paramount CBS broadcast network announced three new series for next season — one is “Matlock,” a reboot of the late 1980s and 1990s series starring Academy Award-winning actress Kathy Bates, and the other, “Elisabeth,” which is based on a character from “The Good Wife” and “The Good Fight” franchises.
Disney+ has relied heavily on series drawn from its Marvel and Star Wars libraries. However, Parrot Analytics found that there was a decline in demand for Marvel content in the US at the end of 2022, likely due to the mixed reception its latest series received.
Move to streaming
Ad-supported streaming will be an even bigger part of the conversation this year.
With cord-cutting accelerating — total pay-TV subscribers fell 3% last quarter, a “universal deterioration” according to Wells Fargo analyst Steven Cahall — digital advertising is likely to take a bigger slice of the pie.
“It’s a pretty unmistakable trend where linear TV continues to decline and digital video and connected TVs rise to fill the gap,” said Paul Verna, principal analyst at Insider Intelligence. Advertisers are expected to spend $12.48 billion on digital media this year during Upfronts and Newfronts, a 28% increase from last year, Verna added.
According to Insider Intelligence, US TV ad spending during the Upfronts is expected to fall 3.6% to $18.64 billion in the 2023-24 season, indicating that the market has stopped growing on the traditional TV side, while more dollars is moving to digital broadcasting.
Netflix and Disney+ launched ad-supported tiers for their services late last year. As streaming subscriber growth stagnates and companies push toward streaming profitability, management hopes cheaper options will retain or bring in customers.
Disney recently said it is relying on its ad-supported option to help turn a profit with its streaming offerings. Society will adding Hulu content to Disney+which, according to Iger, is “a logical evolution of our DTC offerings that will provide greater opportunities for advertisers.”
Increasing prices for ad-free options to increase revenue for these businesses could also drive customers to cheaper options with ads.
Paramount+ and NBCUniversal’s Peacock offer ad-supported tiers from each launch. While Peacock held a presentation at Newfront to showcase its content, the streaming service will be a key part of NBCUniversal’s Upfront on Monday.
“Even a year ago, when you looked at the makeup of Paramount’s ad revenue, about 25% went to digital,” said David Lawenda, Paramount’s director of digital advertising. “Now it’s about 40%. That’s 40 cents out of every dollar that goes into digital.”
Free, ad-supported platforms like Paramount’s Pluto and Fox’s Tubi will also see more ad money.
“We look forward to Tubi being a central part of our initial negotiations,” Murdoch said during Fox’s earnings call recently. “Obviously, it’s not just a strategic driver for us. It’s an important driver for the future.”
These free, ad-supported streaming television, or FAST, services have seen explosive growth. They saw an increase in viewership even at the height of the pandemic, when production was stopped and there was a lack of new content. If the writers’ strike continues, it could be that way again.
Disclosure: NBCUniversal is the parent company of CNBC.
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