Media Update: Disney Considers Sale of Linear Networks, Meta Launches Threads, and Positive Economic Outlooks

The ad-supported video supply was again relatively flat through the first half of July.
Industry Notes (Video)
1. Ad-supported video on demand (AVOD) and free ad-supported television services (FASTs) are gaining momentum and their impact on revenue has become increasingly evident. The global ad revenue from FASTs is projected to triple from $6 billion in 2022 to $18 billion by 2028, with the United States contributing nearly $6 billion to this growth. Platforms such as Pluto TV, The Roku Channel, and Samsung TV Plus are set to dominate half of the global total ad revenue, with Pluto TV projected to quadruple its ad revenue through international expansion, reaching $4.2 billion in 2028. These trends highlight the increasing popularity and adoption of ad-supported streaming platforms, emphasizing the pivotal role of streaming advertising in driving revenue growth.
However, these platforms were not immune to the pullback in advertising. According to estimates by MoffettNathanson Research, ad revenue at Hulu is predicted to drop by 10% this year. Offsetting this somewhat, subscription revenues are projected to rise by 12% to $8.17 billion. The anticipated increase is attributed to ongoing price hikes, improved ad monetization, and a projected addition of about two million subscribers in the next few years, bolstering Hulu’s customer base to an impressive 55.2 million. As the streaming landscape matures, the ad revenue will continue to be a driving factor in the development of these platforms. | Media Post, Media Post
2. The advent of streaming has revolutionized the entertainment landscape, offering consumers unparalleled access to a vast array of content. However, while streaming has brought tremendous benefits to consumers, traditional media and entertainment companies have suffered significant financial losses. The high costs of content creation, coupled with a shrinking ad market and the need for cost-cutting measures, have led to losses exceeding $20 billion for major media companies since 2020.
To offset these losses, publishers have resorted to raising prices, putting pressure on consumers to carefully select the platforms that offer the best content. Just recently, Peacock announced it would raise prices ($1 on the ad-supported tier, $2 on the ad-free tier) and Amazon is reportedly looking to cut costs in its Prime Video division, in addition weighing the introduction of ad-supported tier. While streaming initially provided a more affordable alternative to expensive cable bundles, the rising costs of streaming services have left consumers questioning the value of each subscription increased churn. This dynamic has driven industry consolidation, with the hope of reducing customer churn and eventually achieving profitability. | WSJ
3. Another month, another addition to the Nielsen Gauge. In June, Paramount+ reached 1% of TV usage to earn a callout on the Gauge. As you can see, the breakout of the streaming section has become increasingly crowded recently – the bottom five only entered in the past year, and their combined share is still less than Netflix. Relatedly, the streaming section has grown to 37.7% of share, an increase of >6 points, mostly coming at the cost of cable.
Looking at the gauge as a whole, broadcast reached an all-time low, consistent with seasonal declines. With original programming limited through the end of the year (because of the ongoing strikes in Hollywood), we could see a further acceleration towards streaming as the market becomes more fragmented. | Nielsen
Sports viewership surged in the first half of July, as golf, tennis, men’s and women’s basketball, and more all achieved multi-year viewership highs. Furthermore, several tentpole events like the ESPY awards and MLB All-Star game occurred a week earlier, affecting the YoY comparison.
Industry Notes
1. Women’s sports are gaining popularity, there’s no doubt about it. Earlier this year the NCAAW basketball final smashed viewership records when it was broadcasted on network TV, drawing nearly double the audience of previous years. You may also remember that the women’s soccer league, the NWSL, is also pacing high this year. Continuing this trend, the U.S. Women’s Open golf tournament averaged 895,000 viewers on linear and streaming, an increase of 118% from last year. This was the largest audience for the Women’s Open since 2014. In other women’s sports news, WNBA viewership is pacing 46% higher in the first half of the season. Taking these together, the rise of women’s sports is irrefutable. As we look towards the second half of the year and beyond, we can expect the rising popularity of women’s sports to increase opportunities for advertisers to reach audiences at scale. | SMW, Sports Video
2. Disney CEO Bob Iger is considering selling some of the company’s linear TV networks, which might not be considered “core” to Disney. With surprising candor, Iger noted that the disruptive forces in the linear TV market were greater than he initially understood and strongly implied that the sale of Disney’s portfolio of linear networks (excluding ESPN) is forthcoming. To illustrate Iger’s reasoning, we’ll once again refer to these charts, which show the immense value of ESPN versus other networks and the challenge that networks face in the era of cord-cutting:
There will come a time in the future that ESPN becomes a DTC product – its value as a sports aggregator, bundle element, and ad revenue generator is too great for Disney to let go. But the Mouse House is looking for a strategic partner to help it do that, and who that will be is the source of much speculation. At the end of the day, we might be looking at a jarring disassembly of one of the largest media companies, as it prepares – and commits to – the next era in entertainment, which will force the hand of the entire linear TV business. | Stratechery, WSJ
1. How do you get Meta CEO Mark Zuckerberg to tweet for the first time in eleven years? Just have him launch a direct competitor to the drama-engulfed platform.
As you’re undoubtedly aware, Meta launched Threads just after the July 4th holiday, in a not-subtle attempt to wrest from Twitter the prize of being the central node for online public conversation. Zuckerberg wrote, “I think there should be a public conversations app with 1 billion+ people on it. Twitter has had the opportunity to do this but hasn’t nailed it. Hopefully we will.” Threads is off to a fast start – over 70m people signed up in the first 48 hours.
Meta has priors when it comes to “borrowing” its competitors’ best ideas, i.e. those that most successfully vie for online attention. In 2017 it copied Snapchat Stories, even using the same name as its rival’s hit feature; in 2020, it launched Reels, aping TikTok’s short-form video in an attempt to compete with the wildly popular app. Ominously for Twitter, in both cases it has been quite successful – there are over 500m active daily Stories users and Reels now accounts for over 20% of time spent on Instagram.
For all the Sturm und Drang surrounding Twitter in the past year, as an advertising proposition it has fallen short in three critical areas:
On these counts, Meta seems exceptionally well positioned to succeed.
Add to this Meta’s extensive existing advertiser relationships and payment rails, and it’s not hard to see how this becomes a meaningful advertising surface in a very short amount of time. There are no ads on Threads yet, but we can be sure they’re coming soon, and it’ll just be a Meta Ads Manager checkbox away. | Digiday, AdAge
2. We’ve written often, and often favorably, of YouTube’s strategy during this epochal shift in how video is consumed. While that strategy has shifted meaningfully over the years, it’s hard to argue with the results – in the brutally competitive streaming ecosystem, YouTube has taken a heterodox approach to leadership of the pack:
That heterodoxy lies in the fact that YouTube does not spend 11-figure sums on original and acquired programming; instead it spends close to nothing. What it does spend (a lot of) money on is creator payments, indeed it spends about what Netflix spends on programming!
While this approach clearly has its merits (see above), it means YouTube has some unique problems – namely, how do you ensure a quality advertising experience (for both brands and viewers) when you control neither what’s on the platform nor, really, where the platform itself is? That issue exploded in massive negative publicity recently when Adalytics, an advertising analytics firm, published a scathing research report claiming that up to 80% of videos playing on partner websites violated YouTube’s own standards for site and ad quality.
First, what’s this about partner websites? Briefly, YouTube TrueView – Google’s proprietary cost-per-view, choice-based ad format – places ads both on YouTube and on partner sites and apps. These partner sites and apps constitute the Google Video Partner (GVP) Network, YouTube’s version of an audience network. Per YouTube policy, when TrueView ads are placed on GVP, ads must be skippable, audible, and playing of the video (and ad) cannot be solely initiated by passive user scrolling.
As noted above, the Adalytics study found that this policy was routinely violated, implying potentially large sums of advertiser dollars being “wasted” on substandard ads. Unsurprisingly, Google vehemently contests the findings of the report, highlighting the following points:
Setting aside the particulars, this is a public black eye for Google at a time when it is already under extreme pressure for its business practices, and it will need to rebuild trust with advertisers. For those of you who have run YouTube campaigns with us, we emphasize three main points:
Please feel free to reach out to your team if you have any questions specific to your own campaigns. | Adalytics, AdAge, WSJ, AdExchanger
1. With 209,000 jobs added to the economy in June, the labor market sustained its tightness through the second quarter. As you are well aware, the strength of the labor market has been one of the key factors influencing the Fed’s decisions to increase interest rates.
Those rate hikes have had some success in tamping down inflation – the Consumer Price Index fell to 3%, the lowest point in nearly two years. In this there were major decreases in the prices of gas/energy and food. It’s providing a respite for consumers who have struggled to afford essentials over the past year. Another positive note for consumers, wage growth is now exceeding inflation:
To be certain, interest rates are still high and unlikely to come down any time soon as the Fed targets 2% inflation. However, these positive indicators signal that consumers will likely continue to spend and that the risk of a recession in the near-term is low. | WSJ, WSJ
2. A couple of weeks ago we told you that consumer confidence had surprisingly jumped, reaching a level not seen since 2022. This week, a separate gauge of consumer opinion, the University of Michigan Index of Consumer Sentiment, ticked up to its highest point since mid-2021. These gauges, while not perfect indicators of consumer health, can still be used as an important metric in assessing how consumers will spend in the future. In combination with the aforementioned data on inflation, wages, and job growth, there is certainly cause for optimism from consumers and businesses heading into the summer. | Bloomberg
3. In yet another sign of healthy consumer spending, Amazon Prime Day recorded its highest sales ever – $12.9 billion globally. This represents a 6.7% increase in sales over last year. As Prime Day has become a regular event in the shopping calendar, the event has lost some of its explosive growth, but it now seems fairly evident that Prime Day is moving along a consistent growth trajectory:
For non-Amazon sellers, the sales and promotion strategy around Prime Day has become more proactive. Typically ecommerce stores across the web sees a bump, and this year was no different. However, in some cases the increases over the two day period were smaller than the year previous, as stores extended July 4th sales, broadening the range of Prime Day. Additionally, again this year consumers opted to buy home goods and everyday items over electronics, the category that is typically the best selling. This can be viewed in two ways, 1) that consumers were waiting for sales to purchase goods, evidencing the solidification of this event in the retail/ecommerce cycle or 2) that ecommerce has become more of a mainstay in consumer spending habits. To that latter point, online sales (as reported in monthly retail sales) have led growth where other categories have been stagnant. Both of these interpretations are likely correct to some degree, and the bottomline is the same – consumers continue to spend. | Digital Commerce 360