Media companies court advertisers as spending shifts to digital

Media giants are making their annual presentations to advertisers this week amid significant disruption in the industry.

The Hollywood writers’ and actors’ strikes are over, which means Upfronts will likely be star-studded again, major cost-cutting is largely in the rearview mirror, and streaming has fully embraced advertising models. Yet this year’s Upfronts come amid new tumult for the industry.

“I feel like this is a moment, a moment in time for what the next year, or the next two years, will bring,” Discovery of Warner Bros. said CEO David Zaslav during the company’s earnings conference call last week. “I said a while ago that this was a generational upheaval.”

Here are the likely topics of discussion during Upfronts Week, whether on stage, in public or in private.

Media companies just released their quarterly results, showing that traditional television still lags behind streaming and digital in advertising revenue.

Traditional TV ad buys at Upfronts are expected to increase about 1% to $18.79 billion this year, according to eMarketer data. This is an improvement from last year, when it was down about 4%, to $18.64 billion.

Meanwhile, digital advertising spending during Upfronts and Newfronts – which take place a few weeks before traditional media events – is expected to increase nearly 32% to $16.45 billion this year, according to eMarketer.

There was a general improvement in traditional TV ad revenue last quarter, down 8%, compared to nearly 16% in the same quarter last year, according to a note from Tim Nollen, senior media technology analyst at Macquarie. Streaming advertising grew 22% among media companies and now accounts for 18% of total advertising.

Technology companies, including Instant, Roku, Google And Microsoft everyone saw digital advertising revenue make a comeback in the last quarter. And Netflix, Amazon And AlphabetYouTube all have growth stories to tell advertisers.

“Netflix is ​​in many ways the gold standard in streaming,” Disney CEO Bob Iger said during the company’s earnings conference call this month.

Netflix finished last quarter with about 270 million subscribers worldwide, riding a wave of password-sharing freeloaders turned paying customers over the past year.

The company relied on its cheaper, ad-supported tier — at $6.99 a month in the U.S. — to entice price-conscious subscribers to pay a monthly subscription fee. As of January, just over a year after its launch, Netflix’s ad-supported tier had more than 23 million monthly active users.

Amazon Prime Video launched its advertising tier earlier this year. Amazon has spent billions on live sports rights — coveted advertising real estate — in recent years, including paying about $1 billion a year to broadcast “Thursday Night Football,” one of the National League game packages football throughout the season. Amazon announced last month that its advertising revenue jumped 24% in the first quarter, to $11.8 billion.

YouTube’s first-quarter ad revenue also jumped more than 20% to $8.1 billion, beating analysts’ estimates. In February, YouTube became the most-watched streaming app for 12 consecutive months, according to Nielsen.

Amazon will hold its Upfront presentation on Tuesday in New York, followed by Netflix and YouTube a day later.

The mood may not be as positive among some traditional media players.

National advertising for ComcastNBCUniversal was flat in the first quarter at around $2 billion, but streaming service Peacock was boosted by ad revenue. NBCUniversal will kick off the initial week on Monday at Radio City Music Hall.

Disney reported lower first-quarter ad revenue for its traditional cable networks and at Hulu, although ESPN’s national ad sales rose more than 20% in the quarter from a year earlier. Disney will hold its presentation on Tuesday.

“The challenge, obviously, in today’s advertising market is that there is a lot more supply in the market, largely due to one of our competitors entering the advertising sector,” Hugh said Johnston, Disney’s chief financial officer, during this month’s earnings conference call. “But having said that, I think overall we feel like we’re in a better place than we were a year ago.”

Warner Bros. Discovery, which holds its presentation at Madison Square Garden on Wednesday, announced that revenue from traditional television advertising fell 11% last quarter from a year earlier, to about $2 billion. Streaming ad revenue jumped 70%, but the overall figure is much lower: just $175 million.

Warner Bros. Discovery and Disney announced last week that they would offer their streaming services – Max, Disney+ and Hulu – together, marking the first set of major streaming services. The two companies, along with Fox, are also working on a sports streaming joint venture. It remains to be seen which other companies will join the fray in the bundling space.

Sport remains the glue of the television package, always attracting the largest audience. And in the background of Upfronts Week conversations is the future of NBA rights.

While Warner Bros. Discovery owns it until the end of the 2024-25 season, the next owner is currently being selected. NBCUniversal has emerged as one of the main competitors, while Warner Bros. Discovery wonders if it will match NBC’s offer.

The future of regional sports networks also remains a question, and broadcasters are gradually taking over the rights to local matches.

EMarketer senior analyst Ross Benes noted that for Warner Bros. In order for Discovery to add value to its sports joint venture with Disney and Fox, it must retain its NBA rights.

“Without NBA rights, WBD will become a weak third leg of the JV sports tricycle… If it loses the NBA, many WBD customers will wonder what all these cost cuts are for,” he said. declared.

Fox Corp., which is holding its Upfront on Monday, said first-quarter ad revenue was down from the previous quarter, when the Super Bowl aired on its broadcast network. CEO Lachlan Murdoch said during last week’s earnings conference call that advertising trends are “clearly moving in the right direction” in Upfront’s early discussions, thanks in large part to Fox’s sports slate.

Like last year, Paramount Worldwide did not hold an Upfront presentation this year. Instead, the media company held nine events starting in April in Los Angeles, Chicago and New York.

Although there was no big presentation at Carnegie Hall, the events still included previews of upcoming content and featured stars such as Nicole Kidman, Demi Moore, Stephen Colbert, Tony Romo and more. ‘others.

Paramount is grappling with an ongoing sales process and currently does not have a single CEO.

Disclosure: NBCUniversal is the parent company of CNBC.