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LOS ANGELES, CA – MAY 2: Members of the WGA take a selfie before heading to the picket line on the first day of their strike in front of Paramount Studios in Hollywood on May 2, 2023. The union was unable to reach a last-minute agreement with the major studios on a new three-year contract. years to replace a contract that expired Monday night. (Gennaro Molina/Los Angeles Times via Getty Images)
Gennaro Molina | Los Angeles Times | Getty Images
The media companies pitching to advertisers this week will have to do their best to drown out a lot of the noise in the industry.
The advertising market has been weak since last summer, and companies are also cutting costs as they look to make the live broadcast business profitable.
Meanwhile, the Hollywood writers’ strike is sure to play a role in the conversation, especially if the takers show up this week outside of the annual ad sales events known as the Upfronts. Some of them have already performed at so-called Newfronts, which are similar events focused solely on broadcasting.
The week will begin ComcastNBCUniversal Upfront, which saw some last-minute changes when global advertising director Linda Iaccarino resigned last week before Twitter hired her to replace owner Elon Musk as CEO.
Fox Corporation.And DisneyAnd Discovery Warner Brothers and newcomer Netflix Events will also be held this week. Paramount Global I opted out of Upfronts this year in favor of an intimate dinner with advertisers.
Streaming remains a major topic of discussion, especially as ad-supported layers have gained more prominence in the face of slowing subscriber growth.
Franchise content is likely to have a significant presence as media companies have turned to series and films with proven track records to maintain viewership.
Here’s a look at what’s in store for Upfronts.
Writers strike concerns
Members of the Writers Guild of America He stopped working and went to sit-down lines earlier this month, halting production of films and TV shows.
Media executives say the strike will not have an immediate impact on programming slate, but that may change depending on the duration of the strike.
“There are definitely additional elements of liquidity this year, like the WGA strike, that are higher on advertisers’ minds and make flexibility even more important in this year’s negotiations,” said Amy Leifer, DirecTV’s chief ad sales officer. “Even if scripted television production is halted due to a writer’s strike, we know viewers are still consuming television content.”
That is likely to mean more focus on live content, such as sports and news, if the strike continues. Fox CEO Lachlan Murdoch said he doesn’t expect his company to be affected by the writers’ strike given its large slate of sports and news.
While this helps traditional media companies like Fox and Warner Bros. Discovery and NBCUniversal, which all have strong sports and news offerings, but may affect entertainment-only networks, as well as streaming services.
A scene from season 4 of the Netflix series Stranger Things.
Courtesy: Netflix
Already, a number of productions have been paused, including Netflix’s “Stranger Things,” Disney and Marvel’s “Blade,” AppleTV+’s “Severance,” and Paramount’s “Evil.”
However, an immediate concern for Upfronts could be if detainees post to juveniles. Many of Hollywood’s top talents, especially late-night talk show hosts who’ve already seen their shows stalled, have shown their support for the book. Oftentimes, these are comedians and talk show hosts Take part in advance.
During Newfronts recently, protesters stood up to events. Netflix, which is offering its first show this week since recently creating an ad-supported category, maychose eportly to make its presentation only by default.
Soft advertising market
Media officials across the board are not as sanguine about the advertising market as they were a year ago.
“It feels like a party here,” then-CEO of NBCUniversal Jeff Shell he said at last year’s Cannes Lions ad conference, which took place just over a month after the pre-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, I don’t feel like the market is bear.”
By November, the advertising market had collapsed amid rising interest rates and recession fears.
“The advertising market is very weak,” Warner Bros. Discovery CEO David Zaslav said at an investor conference in November. “It’s weaker than it was during Covid.”
In recent months, executives have noticed a limited recovery.
“The overall entertainment advertising market has been challenging,” Christine McCarthy, Disney’s chief financial officer, said last week during a conference call on Disney’s second-quarter earnings. “While the weakness has moderated somewhat, we expect some softness to continue in the back half of the fiscal year.”
NBCUniversal, Paramount Global, and Warner Bros. have all reported. Discovery and Disney reported declines of between 6% and 15% in television ad revenue in the first quarter.
Media executives’ messages to advertisers could center around value this year, particularly as companies continue to offer more content on their streaming services. Warner Bros. will show. Discovery Max product, the new combined HBO Max-Discovery + product launching later this month. Disney announced last week that it’s adding a feature to allow Hulu programming within Disney+, a change that CEO Bob Iger said “will provide greater opportunities for advertisers” when it rolls out later this year.
Cut costs
While media executives will try to convince advertisers to maximize their spending, they will push this narrative with fewer shows. Disney said last week that it plans to produce less content next year. Discovery Warner Brothers He spent the last year removing content from Max to cut costs.
“It’s important that we justify how much content we create and what we spend to produce our content,” said Disney’s Iger.
Cost-cutting efforts are driven by an urgent drive to make live broadcasting profitable. Paramount Global, NBCUniversal, and Disney have all promised that streaming will stop losing money by next year. Warner Bros. said: Discovery earlier this month said its US business will be profitable in 2023 — a year ahead of schedule.
“The key here is that the broadcast business in the US is no longer a drain,” Zaslav said. “It’s hard to run a company when you have a big hemorrhage.”
However, introductions are a good time to showcase the content. If the investor’s messaging is about cutting fat, the advertising buyer’s message will be about showcasing the quality of existing franchises.
Franchise madness
If one thing is for sure, media networks and their streaming counterparts will feature panels with a heavy focus on perks.
It has been a topic on Upfronts in recent years. During this past year’s NBCUniversal Upfront, late night host and “Saturday Night Live” alum Seth Meyers introduced about the schedule of spin-offs and reruns that are being offered.
“I don’t need to tell you that the last couple of years have been transformative not just in television but in all industries. We’ve needed to be creative, smart, and forward, and yet, and we’re still doing it upfront,” Meyers said last year. “That’s not to say NBC isn’t embracing the future — this coming year promises exciting new shows and ideas like ‘Law & Order’, ‘The Fresh Prince of Bel-Air’, ‘Night Court’ and ‘Quantum Leap’.”
The franchises are attracting a large slice of audience demand for both Hollywood blockbusters — which are a significant part of the programming slate for streaming creators like Disney+, Paramount+ and Peacock — as well as TV franchises, according to data from Parrot Analytics.
“Hollywood has been recycling in the last 12 to 13 years where other content has failed to pan out,” said Brandon Katz, Parrott’s entertainment industry strategist.
The Paramount+ streaming service logo on the logo wall at the Paramount+ launch event. (Re) Paramount + streaming service is now available in Germany.
Jörg Carstensen | Image Alliance | Getty Images
Paramount, in particular, has seen a massive buildup of franchises, especially for its Paramount+ streaming service. Star Trek series content accounted for 32.4% of Paramount+ audience demand in the US in 2022, while Yellowstone spin-offs accounted for 11.4%, according to Parrot.
Last week, Paramount’s CBS broadcasting network announced three new series for the upcoming season — one is “Matlock,” a reboot of the late ’80s and ’90s series that will star Oscar-winning actress Kathy Bates, and the other is “Elizabeth.” . Based on a character from “The Good Wife” and “The Good Fight” franchise.
Disney+ has relied heavily on series from Marvel and Star Wars libraries. However, Parrot Analytics found that there was a drop in US demand for Marvel content in late 2022, likely due to the mixed reception its latest series received.
Switch to flow
Ad-supported streaming will be a bigger part of the conversation this year.
With cord-cutting accelerating — total pay-TV subscribers fell 3% in the past quarter, “and it’s getting worse globally,” according to Wells Fargo analyst Stephen Cahal — digital advertising is likely to take a larger piece of the pie.
“It’s a very clear trend where linear TV continues to decline and DVDs and connected TVs rise to fill the gap,” said Paul Verna, principal analyst at Insider Intelligence. Verna added that advertisers are expected to spend $12.48 billion on digital media during Upfronts and Newfronts this year, up 28% from last year.
US TV ad spending during the Upfronts is expected to drop 3.6% to $18.64 billion for the 2023-24 season, according to Insider Intelligence, evidence of the market stopping growing on the traditional TV side while more dollars are shifting toward digital.
Netflix and Disney+ launched ad-supported tiers for their services late last year. As subscriber growth for streaming stagnates, and companies push toward stream profitability, executives are hopeful that cheaper options will retain or attract customers.
Disney recently said that it relies on its ad-supported option to help make a profit from streaming shows. will be the company Adding Hulu content to Disney+, which Iger said is “a logical progression for DTC offerings that will provide greater opportunities for advertisers.”
Price increases for ad-free options, to increase revenue for these companies, can also drive customers to cheaper options with ads.
Paramount+ and NBCUniversal’s Peacock have offered ad-supported layers since their respective launches. While Peacock held a Newfront presentation to showcase its content, the streaming service will be a major part of NBCUniversal’s Upfront on Monday.
“Just a year ago, if you look at the composition of Paramount’s ad revenue, about 25% went to digital,” said David Lawenda, Paramount’s chief digital advertising officer. “Now it’s about 40%. That’s 40 cents of every dollar that goes into digital.”
Free ad-supported platforms like Paramount’s Pluto and Fox’s Tubi will see more advertising dollars coming their way.
“We look forward to Toby being an integral part of our pre-sale negotiations,” Murdoch said recently during Fox’s earnings call. “It’s clearly not just a strategic driver for us. It’s been an important driver going forward.”
Free ad-supported TV streaming services, or FAST, have seen exponential growth. They also saw an increase in viewership during the height of the pandemic, when production was halted and new content was in short supply. If the writers’ strike continues, this could be the case again.
Disclosure: NBCUniversal is the parent company of CNBC.
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