Disney is soaking up new commitments from advertisers in one of the driest “upfront” markets seen in recent years, and the company’s efforts to win those ad dollars from Madison Avenue have some rivals spitting out dust.
In a bid to win overall commitments, Disney has been striking deals that call for significant “rollbacks” in the rates it charges to reach 1,000 viewers — a measure known as a CPM — on its Disney+ streaming hub, according to six people with knowledge of recent discussions in the industry’s “upfront” market. Each year during the upfront, U.S. media companies try to sell the bulk of their commercial inventory for their next cycle of programming.
Disney has in some cases agreed to reduce CPMs for Disney+ by as much as 10% to 15%, according to some of the executives. In exchange for the lowered rates, Disney is securing deals that call for a certain level of volume of ad support across its portfolio. But some of Disney’s rate capitulation has angered rivals, who had hoped not to roll back their numbers to such a degree, and are being forced to do so in order to match Disney’s offer.
“There are media partners who are going to be aggressive and try to win share,” says one media buying executive. Disney declined to make executives available for comment.
TV’s money scramble takes place in one of the most difficult bargaining sessions in recent memory. Executives on both sides of the negotiating table agree that overall dollar volume is likely to be down. The dim outlook comes as advertisers move their dollars to streaming and digital media, where there is less pressure to place ad cash months in advance, which is what upfront bookings represent. What’s more, there is a significant increase of digital-video inventory available, thanks to Amazon Prime Video’s recent decision to make its basic streaming service ad-supported.
The reduced demand and increased supply are hurting TV’s ad-sales efforts when the entire sector is in flux. More viewers are moving to on-demand streaming to watch their favorite dramas, comedies and movies, and, in more cases, sports. Such migration makes the job of offering big audiences — TV’s main distinction from competitors — exponentially more complex.
Disney has pursued similar strategies in previous upfront markets. The tactic has been a favorite of Rita Ferro, the company’s president of ad sales, who has often tried to broker early pacts in upfront discussions since rising to her role in 2017.
Disney’s decision comes with no small amount of risk. Executives caution that rate rollbacks can take years to reverse. Streaming is supposed to represent the future of the industry, but the rollbacks could undermine efforts in years to come to gain better pricing. If traditional TV continues to see audiences fragment around different screens and streaming opportunities, there’s no guarantee that Disney or one of its rivals will be able to make up any ground that has been lost.
And the maneuver has had a ripple effect. NBCUniversal, which has hoped to deliver ad commitments on par with last year’s, has been forced to compete with the rates Disney set, even though the company has diligently added new top-tier sports events and movies to its own streaming hub, Peacock. Warner Bros. Discovery, which has resisted the call to reduce CPMs significantly for its Max streaming service in tandem with Disney, is making less headway with buyers so far, according to executives familiar with market discussions.
Meanwhile, Amazon and Netflix, both of which are eager to create new lines of ad revenue for their streaming services, are also facing headwinds, according to executives. These people say the two digital giants have sought more aggressive CPM rates than their TV competitors, but have found less traction, other than for Amazon’s “Thursday Night Football.”
Disney and NBCUniversal are said to have moved the farthest with advertisers in the current market, along with Fox, which relies primarily on a wide swath of sports content — including next year’s Super Bowl — and has reduced its dependence on traditional entertainment shows in primetime. One person familiar with discussions says Fox has already sold a significant portion of commercial time for the first half of next year’s Big Game.
No matter how much money Disney, NBC and Fox take away from rivals, people familiar with the market project that overall volume with be down, particularly in those areas that have lost ground due to streaming. Cable networks and primetime broadcast are expected to see downturns in the amount of upfront ad commitments secured.
And despite the fact that 2024 is a presidential election year, some buyers suggest news programming is also facing new pressures. Some pharmaceutical manufacturers, typically strong supporters of news programming, are holding their purse-strings tighter. Meanwhile, many other advertisers would rather run their commercials in media environments that are less polarizing or contentious, a continuation of a recent trend.
This upfront marks the second consecutive one in which the networks have agreed to rollbacks. Ad commitments in last year’s upfront market for primetime broadcast TV fell 3%, to $9.595 billion, compared with $9.91 billion in 2022, according to Media Dynamics Inc., an advertising consultancy that tracks the market. Cable TV saw even worse erosion, with advertisers committing $9.52 billion for primetime, down 7% compared to the $10.23 billion in commitments secured in 2022.