1. Netflix’s 150 percent problem
Netflix reported a 150 percent year-over-year increase in upfront advertising sales for 2024, a statistic that sent the company’s stock price up two percent to its highest level in three years.
The growth was impressive given that the global ad-supported subscriber base has only grown by 74 percent since January, from 23 million to 40 million.
They also confirmed partnerships for a number of their popular series, including Squid Game, Wednesday, Outer Banks, Happy Gilmore 2, Ginny & Georgia, And Love makes you blind.
And yet, despite this impressive achievement, many people in the industry admit to being underwhelmed.
Why it is important
There is a feeling that although Netflix claims (or perhaps Because Netflix claims that 45 percent of new subscribers choose the ad-supported package, that these subscribers are not loyal viewers, but people who sign up to watch a show or two and/or live sports, and that’s why they choose the ad-supported package. (Live sports on Netflix are associated with ads anyway, so sports fans get no benefit from subscribing to one of the ad-free packages.)
There’s also a sense that this isn’t the same upscale audience that subscribes to ad-free Netflix, that this is a different, slightly less desirable demo. I haven’t seen any statistics to confirm this in any way, it’s more a mood thing. Mood-based things are particularly in vogue these days.
And while 40 million ad-supported subscribers in 12 different countries (US, Canada, UK, France, Germany, Australia, Brazil, Japan, South Korea, Spain, Italy, and Mexico) sounds like a big number, there’s no indication of how those numbers break down, and the people I talk to have a sneaking suspicion that the numbers in the US aren’t that great, both in terms of current subscribers and signups.
So that’s that.
There are also countless ways to buy Netflix. I’ll just skip this paragraph The Wrap out there for you to record:
This includes private 1:1 marketplace deals directly through The Trade Desk, Google Display & Video 360 or Xandr, expanding to various buy types, including a programmatic guarantee in November. It also introduced Google Campaign Manager and Innovid for impression verification and expanded its work with DoubleVerify and Integral Ad Science for fraud and viewability verification to programmatic channels, which will be available across all buy channels in October.
If the phrase “confusing AF” doesn’t spring to mind…
I get that they’re trying to accommodate all the different ways streaming is bought, sold, and measured these days, and that it’s not Netflix’s fault that the streaming advertising ecosystem is in a total mess, but that’s not exactly what’s going to get marketing teams to shift nine-figure budgets to streaming.
Nevertheless, Netflix’s apparent success is a good thing for the streaming advertising market.
The impression, justified or not, is that the market is growing by leaps and bounds and that as streaming becomes more widespread, brands are pouring more and more dollars (and euros and pesos and yen) into streaming.
One of Netflix’s more magical qualities is that they manage to get otherwise savvy people to temporarily turn off their critical thinking skills. This is why, for example, the acronym “FAANG” has stuck to this day, even though Netflix as a company has almost nothing in common with tech giants like Apple, Amazon, Facebook (meta), and Google and their numerous multi-billion dollar businesses.
Again, it’s not really Netflix’s fault – it’s not like they encourage the use of “FAANG.” But it persists, and the belief that “as Netflix goes, so goes the industry” isn’t a bad thing for streaming, especially when Netflix is doing well.
What you need to do about it
If you’re in the advertising side of the television industry, you’ve got to get your act together. I’ve been banging on this particular drum pretty hard lately, but people are sick of how slow any kind of normalization is moving, and they understand that it’s because too many of the players think they’re “winning” (whatever that means) instead of trying to work together, which would actually lead to a “the tide lifts all boats” victory.
If you’re Netflix, take a bow. Well done for getting so many new advertisers, no matter how you did it.
If you’re in the industry, remember that Amazon is your number one source of ad-supported subscriptions after Hulu. Although they don’t disclose subscriber numbers, we’d estimate they have about 60 million ad-supported Prime Video subscribers in the US alone. And the more sports content they offer, the more viewers they have.
This means that they may even be ahead of Hulu.
Not that they would tell us, but it’s worth mentioning nonetheless.
2. Fubo’s gift to Venu
Venu, the sports app formerly known as Spulu, was never a good idea.
There was no point in creating a sports app that lacked NBC and CBS, two of the biggest providers of sports programming.
It was reminiscent of the app that some (but not all) record labels wanted to launch as a hedge against Napster. People didn’t know which songs and artists were on which labels, and so the app quickly failed. (HT to Jon Giegengack of Hub for this analogy.)
As if that wasn’t problematic enough, WBD couldn’t keep its NBA rights, meaning Turner couldn’t contribute much to the app, which unfortunately would also be Barkley’s.
Then they announced that the app would be priced at $43/month, about $30 less than a full vMVPD package that also included access to around 100 broadcast and cable channels, including all of those on Venu, as well as NBC and CBS.
Therefore, the news that Fubo managed to get a temporary restraining order against Venu this week may have been the best thing that ever happened to the app, as it appears to provide the company with an easy way to exit and shelve the entire misguided project.
As if.
Why it is important
The idea of a pure sports package is not bad.
Fans were tired of having to subscribe to multiple apps to watch the games they wanted to see, and then not being able to find them without resorting to Google.
Unfortunately, Venu was never the answer.
Offering an incomplete package that doesn’t even fully cover a single sport was never a good idea and I can’t understand what the companies behind it were thinking.
There is certainly a lot of uncertainty in the sports industry right now, with teams moving from RSNs to broadcasting and Diamond Sports, the largest player in the RSN streaming market, facing bankruptcy proceedings.
A key factor that seems to be overlooked in the machinations surrounding Venu is the fact that, on a very broad level, there are two types of sports fans: Some are fans of the sport and are happy to watch any game as long as it is a good matchup.
And then there are fans of a particular team who will happily watch any game… as long as the Boston Celtics are playing.
The latter generally pay higher prices to see their teams. These are the people who buy season tickets, after all. This is not so much the case with the former. $43/month is certainly not a lot.
And that is just one of the major aspects that must be taken into account when considering sports rights.
The other problem is the differences between the individual teams in the individual leagues and the role that the leagues have to play in this.
Follow me on this. For some teams, like the New York Yankees, finding an audience for a streaming app won’t be a problem. They’ll attract fans locally, across the country, and even internationally. The Cleveland Guardians, on the other hand, don’t really have those opportunities.
The way the situation was described to me is that leagues can go one of two ways. They can be “socialist” and create a league-wide app where the more popular teams support the less popular ones, so that the revenue from the game rights remains relatively balanced. The benefit of this would be that the league itself would generate more interest overall because the teams would all remain more competitive.
The other possibility is that the leagues are “free market capitalists” where each team looks after itself and some teams are naturally richer than others and can use the money to buy better players. In many ways, this is how European soccer works and it’s not as if it hurts them. The upside is that popular teams can attract even more viewers to themselves and the league. The downside is that this creates greater inequality and is potentially a death sentence for teams in smaller markets where they are already struggling.
It’s important to remember that there is only one truly major professional sport in Europe, while in the US there are four, and staying competitive with a mediocre team in a smaller market is no easy task.
And that doesn’t even take university sports into account.
What you need to do about it
If you’re Fox, Disney, and especially WBD, you should probably be quietly thanking David Gandler and Fubo for giving you a viable and very modest way out. “The courts forced us to act” makes far more sense to investors than “we screwed up.”
If you’re Fubo, never let the “little engine that made it” thing get old. You fight the good fight, hopefully someone buys you and you can cash out. But until then, by all means, bow down,
If you’re in one of those leagues, you’re better off making a decision now and choosing a course of action rather than waiting to see how things play out. I understand that may not be possible for political reasons, but the sooner you force the billionaire owners, who are definitely not used to having anything forced upon them, to act, the easier life will be in the long run.
Trust me.
