Paid Media Updates

Media Update: Netflix Cracks Down on Password Sharing, Stanley Cup Viewership Down YoY, and Retail Spending Up in May

By Tinuiti Innovation & Growth Team
Media Update header 6-21-2023

Key Highlights

  1. Streaming: Netflix’s password sharing crackdown has increased sign-ups, which could increase the streamer’s supply of ad-supported viewers.
  2. Linear: Viewership for the Stanley Cup was down 43% over last year, while NHL regular season viewership was relatively flat YoY.
  3. Ad Economy: Projections of ad spending growth were downgraded slightly, but the U.S. Ad Index increased for the first time in 11 months. 
  4. Consumer Economy: Retail spending rose 0.3% MoM in May, another indication of consumer resilience as we head into the summer months.

Streaming

Ad-supported video supply ticked up slightly in June. 

Industry Notes (Video)

1. Starting last year we began telling you about Netflix’s evolving stance on password sharing, beginning with 2017’s full-on embrace …

Netflix tweet from March 10, 2017 that reads "Love is sharing a password."

… to this year’s “clarification” about account sharing:

Netflix tweet from Feb 8, 2023 clarifying Netflix accounts being intended for one household.

The company finally began cracking down on U.S. moochers sharers  in the final week of May, and it subsequently saw more new U.S. Netflix subscriptions than over any similar time period in at least several years, even surpassing the early days of the pandemic:

Netflix daily U.S. sign-ups, seven-day rolling average

There is of course a crucial difference between spring 2023 and the winter of 2020: Netflix has a lower-priced ad tier to offer as a substitute. Those who were previously borrowing account credentials are presumably among the most price-sensitive Netflix users – now, Netflix can offer them a $7/month option to keep Netflix rather than the harder choice of ~$20/month. Not only does this help Netflix to bank a few dollars from users it might otherwise have lost; it also provides a significant boost to its nascent ad product, which hasn’t yet amassed a significant audience and even returned money to advertisers because it couldn’t fulfill its audience guarantees. A large number of new subscribers, many of whom will likely opt for the ad-supported tier because of their price sensitivity, elegantly solves both problems – especially given that the company’s AVOD users reportedly generate more per-user revenue than SVOD users.

Netflix has not confirmed any of this – the figures come from third-party app install trackers – but Wall St finds the evidence sufficiently credible to boost Netflix’s share price by about 17% since the policy went into effect. This suggests we could see a much larger supply of ad-supported eyeballs on Netflix in the second half of this year.  |  WSJ 

2. Netflix is taking its first steps into the realm of live-streamed sports events with a celebrity golf tournament, highlighting the streaming giant’s recognition of the special allure that live events hold for audiences. While streaming services have traditionally focused on time-shifted content to cater to viewers’ on-demand preferences, the landscape is evolving rapidly. Platforms like Peacock and Paramount+ have already offered live sports for the past couple of years. Netflix’s foray into live-streamed sports events, not only showcases its endeavor to keep pace with other prominent competitors but also signifies its recognition of the distinctive charm of live events.

Having access to these events doesn’t come without its woes. Platforms face significant  technical challenges when it comes to live streaming high-viewership events. Execution involves intricate technical complexities, including real-time data processing, transmission, and robust infrastructure requirements. Bandwidth limitations and the risk of disruptions can impact the viewer experience which Netflix knows all too well with its botched attempt to live stream Love is Blind. To ensure optimal performance and maintain high-quality streaming for a large audience, platforms must seek sophisticated solutions. But if streamed successfully, these events hold the potential for higher CPMs, benefiting advertising revenue. This focus on simultaneity allows platforms to attract larger audiences and create engaging experiences by broadcasting events in real-time. However, Netflix is cautiously entering the sports domain to diversify its content offerings and explore new revenue streams. Live sports provide an avenue for Netflix to experiment with live viewing, assess consumer interest, and evaluate incorporating more live content in the future.  |  WSJ

3. Uber is set to introduce full-length video ads across its various service apps, including UberEats, Drizly (an alcohol delivery platform owned by Uber), and its main ride-hailing app. Leveraging its users’ data for precise targeting, Uber’s expansion of full-length video ads extends beyond its service apps to also include in-vehicle displays, enhancing the overall ad experience for passengers. While users can opt-out of receiving targeted ads based on demographic data, they will not have the option to disable the video ads completely. As Uber harnesses its users’ data across its platforms and even in vehicles, the company’s ad executives emphasize the potential in utilizing passengers’ attention during their journeys. “We have two minutes of your attention. We know where you are, we know where you are going to, we know what you have eaten,” said Uber ad exec Mark Grether to The Wall Street Journal. “We can use all of that to then basically target a video ad towards you.” Two minutes is roughly how long Uber estimates an average customer looks at the Uber app on a typical 15-minute long journey.

Capitalizing on the first-party data and location information of its users, which is particularly appealing to advertisers seeking precision marketing is what is significant about this announcement. In a changing digital environment where traditional tracking methods like cookies are becoming obsolete, this approach to advertising could offer a viable alternative. Uber is not the first to implement such a strategy; Lyft has already been displaying video ads in its vehicles in Los Angeles, Apple places more ads in iPhone’s app store, which indicates an evolving approach to advertising and monetization in the digital space. Uber’s data-driven approach addresses the challenges posed by the diminishing effectiveness of traditional tracking methods while staying aligned with industry trends.  |  The Verge, WSJ

Digital Audio

Spotify is shifting its podcast strategy and introducing new analytics tools. The company recently announced a restructuring of its podcast business, cutting 200 jobs and merging Parcast and Gimlet into a renewed Spotify Studios operation. With this pivot, Spotify is aiming to expand partnerships with leading podcasters and focus on original programming that drives strong, loyal audiences and attracts advertisers. With the new structure, Spotify Studios and The Ringer will produce high-impact original content like Stolen, The Journal, Science Vs, Heavyweight, Serial Killers, and Conspiracy Theories, and will greenlight new shows with a focus on always-on programming. This is part of an effort to better support the creator community through a tailored approach optimized for each show and creator​​.

Concurrently, Spotify has launched its Ad Analytics platform, a one-stop solution for advertisers and agencies to measure the impact of their ads on Spotify. The analytics platform, built on the acquisition of Podsights, offers unified access to Spotify measurement services and analytics. With this tool, advertisers can measure results from branding to performance across all ad formats on Spotify, including podcasts. The platform offers conversion tracking and attribution for podcast publishers, and introduces new levels of reporting for campaigns, including third-party audience data and first-party audience insights, allowing for a holistic view of unique listeners reached across audio, video, and display ads on Spotify. The global availability of Spotify Ad Analytics and the platform’s free-of-charge access make it an accessible and powerful service for brands, agencies, and publishers worldwide​. Spotify’s restructuring of its podcast business, combined with the launch of its Ad Analytics platform, reflects the company’s commitment to enhancing its original programming while providing advertisers with comprehensive measurement and insights across all ad formats, thereby strengthening its position in the podcasting industry.  |  Spotify

Linear Media

Viewership for all genres except sports remained lower YoY.  

P2+ Audience, Selected Genres

Industry Notes

The audience for hockey’s Stanley Cup Final was markedly low this year, averaging just 2.6 million viewers through the 5 game series. The 2023 finals averaged the lowest viewership since 2007, excluding the pandemic years, during which playoffs were off their regular schedule. As we discussed with the NBA finals, viewership during the playoffs of any sport is often highly dependent on the matchup. This year the Vegas Golden Knights defeated the Florida Panthers 4-1, hardly drawing interest in the last game. Through a broader lens, NHL viewership appeared mostly steady compared with last year. ABC and ESPN viewership was down 2% in the regular season, while TNT viewership increased just 1%.  |  SMW, Sports Pro Media

Stanley Cup Final Ratings, Viewership, 1994-Present

1. Halfway into the year we are seeing the largest advertising firms keep their projections of worldwide ad spending growth relatively steady. According to both Magna and GroupM, worldwide ad spending will grow by 4.6% in 2023, which brings the consensus of the big 4 ad agencies down a tick from 4.4% to 4.3%. This is a positive indication that the advertising industry may be pulling out of a recession. 

Big 4 Worldwide Ad Consensus, Effective June 19, 2023
202220232024202520262027
Dentsu7.9%3.3%4.7%3.8%NANA
GroupM7.6%4.6%7.2%4.4%6.5%4.0%
Magna6.6%4.6%NANANANA
Zenith7.3%4.5%7.2%NANANA
Consensus7.4%4.3%6.4%4.1%NANA


On the U.S. front, projections were slightly downgraded, bringing the consensus for 2023 down to 3.1%. While this is a fairly significant dropoff from the growth rates of the previous two years, the positive growth is still a good sign.

Big 4 U.S. Ad Consensus, Effective June 19, 2023
202120222023202420252026
Dentsu22.0%12.9%2.7%5.4%3.8%NA
GroupM23.6%9.1%1.9%8.4%1.6%7.9%
Magna25.0%7.2%2.5%7.3%NANA
Zenith18.7%11.6%4.5%9.2%NANA
Consensus22.3%10.2%3.1%7.6%2.7%NA


Further, the U.S. ad market broke its 10 month streak of declines in May, increasing 2.5%! As we mention with each edition of this tracker, it seems relatively clear that growth was steady in 2023, and it was the strong growth in the beginning of 2022 that caused recent YoY declines. While this might be an adjustment year for the advertising industry, should economic conditions hold steady, we should see a return to stronger growth next year.  |  Media Post, Media Post

Monthly Change in U.S. Ad Spending YoY

Regular readers of this newsletter will know that the streaming industry is rapidly consolidating. As we’ve seen, some of the smaller streaming services have been merged into larger ones. Recently, a group of independent streamers joined forces to form the Independent Streaming Alliance (ISA), which aims to combine approaches to measurement, distribution, and demand across AVOD and FAST offerings. The ISA includes services such as Chicken Soup for the Soul, Crackle, Redbox, and The Weather Channel. While this likely will not change how media buying is done from a direct IO or programmatic standpoint, the standardization of measurement practices should provide additional value to advertisers.  |  Fierce Video

Consumer Economy

1. While the Fed has been attempting to cool the economy over the past 18 months – the effective federal funds rate is a full five percentage points higher today than it was in January last year – consumer spending has been surprisingly insensitive to the tightening; this continued last month, with total retail spending in the U.S. rising 0.3% MoM, just slightly down from May’s 0.4% rise.

Advance Retail Sales: Retail Trade

In May, consumers spent more on groceries, furniture, and electronics; they spent less on gasoline, which is a significant element in the consumption bundle and often a key driver of swings in spending growth. Gasoline prices fell in May, contributing to lower spending in the category.As we head into the summer months, we can expect expenditures on goods to soften as consumers shift their spending to travel, entertainment, and other traditional summer-related activities.  |  WSJ 

2. In that same vein, it is beginning to look like the so-called “revenge spending” on travel and activities that were not possible during the pandemic might actually be a structural change. According to Expedia’s CEO, there’s more demand for travel generally, and United Airlines and American Airlines are seeing strong demand globally. Similarly, cruises are still seeing extraordinary demand. While there is some evidence that price inflation in the sector is slowing, we can probably expect demand to remain robust throughout the summer.  |  Yahoo

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