Month: November 2021

Premium TV

The key hits:

• Discovery, Disney, NBCUniversal, ViacomCBS and WarnerMedia are charging higher-than-average prices for their respective ad-supported streaming services.
• Considering the services’ premium programming, the pricing premiums are to be expected, but NBCUniversal’s and WarnerMedia’s rate cards, in particular, are giving advertisers sticker shock.
• But advertisers are paying up if only to insulate themselves against eventual, more drastic price hikes as streaming grows and linear TV dwindles.

Less than two years into the current phase of the ad-supported streaming era, ad buyers are experiencing sticker shock when it comes to the prices for top-tier streamers, such as WarnerMedia’s HBO Max and NBCUniversal’s Peacock. Problem is, as expensive as top-tier streaming ad inventory is currently, in a few years today’s prices may be considered comparatively cheap.

“If you’re going to bet [on streaming] at any point in time in the future, it’s probably best to get in right now. That’s from a pricing perspective. It’s only going to get worse as TV gets tighter and more people come rushing and want it,” said one agency executive.

In general, streaming ad prices average between the high $10s and low $20s per thousand impressions when buying against the most basic audience segment of anyone who’s at least two years old (a legacy TV buying option referred to as “P2+”). However, the cream of the crop — major ad-supported streamers that are owned by TV network groups and feature actual TV and TV-quality programming — are charging a premium above that average. Here is how rate card CPMs for buying directly against a P2+ audience break down for the five major ad-supported streamers, according to five agency executives:

• Discovery’s Discovery+: Low-to-mid $20 CPM (lately ticking toward $30, per one agency executive)
• Disney’s Hulu: Low-to-mid $20 CPM
• NBCUniversal’s Peacock: $30 to $40 CPM
• ViacomCBS’s Paramount+: Low-to-mid $20 CPM
• WarnerMedia’s HBO Max: $40+ CPM

Spokespeople for each of the five companies either declined to comment or did not provide a comment by press time.

As those numbers indicate, while the major ad-supported streamers are more expensive than the average supply of streaming inventory, some are much more expensive than others. “Streaming runs the gamut on pricing. Kinda like TV,” said a second agency executive.

The pricing differences appear to come down to the amount of inventory a streaming service has on offer, per the agency executives: The smaller a streamer’s audience base and the lower the number of ads it airs per hour of programming, the pricier those ads are likely to be.

“The ad load makes a lot of difference. Peacock and HBO Max are limiting to less than five minutes [of ads] an hour. Hulu is closer to six,” said a third agency executive.

Hulu is considered to be typically the lowest-priced of the aforementioned streamers because it has the most inventory available thanks to the size of the audience it has accrued over more than a decade of being in market and the opening up of more inventory over the past few years; Hulu had 42.8 million subscribers as of July 3, per Disney’s most recent earnings report, but the parent company did not specify the number of ad-supported subscribers. 

On the other end of the spectrum is HBO Max, which was the latest to launch an ad-supported tier (technically Paramount+’s ad-supported tier debuted a week later, but the previous incarnation of Paramount+, CBS All Access, had already been operating an ad-supported tier). WarnerMedia has not reported the number of ad-supported subscribers to HBO Max, but it tallied 69.4 million subscribers to HBO or HBO Max at the end of September, per parent company AT&T’s latest earnings report.

“HBO is the smallest with the smallest ad load — although they all argue about who has the smallest ad load — but HBO has the smallest user base since it just launched ad-supported. Peacock is next,” said a fourth agency executive.

WarnerMedia and NBCUniversal have also been particularly aggressive in setting the prices for their respective streamers, said the agency executives. 

As high as HBO Max’s rate card CPM is currently, it was roughly double that a little over a year ago when WarnerMedia began pitching the then yet-to-be-launched ad-supported tier at an $80 CPM. By the first quarter of 2021, the company had cut the price to $65 and eventually whittled it down to the $40 range in this year’s upfront negotiations. 

NBCUniversal, meanwhile, has used the high demand for and correspondingly tight supply of its linear TV inventory to press advertisers to pay up for Peacock, which had 20 million monthly active accounts as of late July (Discovery and ViacomCBS do not break out Discovery+’s and Paramount+’s specific subscriber counts). “Because of the situation in the linear marketplace, they had a lot more leverage than if [Peacock] was a standalone property. You give in to Peacock at a higher price to land linear dollars. That’s the value of exerting the full value of the portfolio,” said a fifth agency executive.

There is a trade-off to the higher prices, though. Some advertisers have limited the amount of overall money they are spending on streaming with WarnerMedia and NBCUniversal because of their comparatively higher prices, said two of the agency executives. 

“Because they wanted price over volume, they got a high price but definitely less volume than people would have paid if they were more in line with the low $20s or high teens,” the fifth agency executive said.

“No they are not getting the same amount of budget. It’s much lower for that very reason. I’ve just got to have them on the buys so I can have a base,” said the first agency executive.

And there’s the rub. As much as ad buyers are agitating against the streaming prices being set, they are still paying them because they cannot afford not to. Streaming viewership is likely only to grow, likely at the expense of linear TV and likely leading to even higher prices in the future. As a result, advertisers are approaching streaming today as if it were linear TV in the mid-twentieth century. 

The advertisers that began buying traditional TV decades ago have had to accept pricing increases, especially as more demand entered the market and viewership began to erode. However, the pricing increases those advertisers experienced typically still resulted in those advertisers paying lower rates than the advertisers who entered the market later. By that token, ad buyers are ponying up for today’s streaming CPMs because they are only likely to rise in the future.

“It’s quote-unquote setting a base, but these are the ugliest bases I’ve seen in a long time,” said the first agency executive.

What we’ve heard

“If there’s a linear TV buy, there’s one set of expectations, but as soon as they hear CTV, they start completely going down a different road. And there’s a tension there.”

— An attendee at Digiday’s Business of TV Forum on advertisers’ linear vs. connected TV perspectives

Overheard at Digiday’s Business of TV Forum

TV and streaming ad buyers have plenty to talk about these days, from frustrations with linear ad availability and streaming ad pricing to approaches to frequency management and ad fraud avoidance. And then there’s measurement. Always a hot topic, measurement talk has heated up in the wake of the Media Rating Council stripping Nielsen of its accreditation, sending TV ad buyers and sellers searching for alternatives.

At Digiday’s Business of TV Forum held in New York City on Nov. 1, TV and streaming ad industry executives gathered to discuss the top topics of today, and measurement was the center of conversation during a town hall session held under Chatham House Rule, allowing Digiday to share what was said while withholding speakers’ identities. Here’s a sample of what the group had to say about measurement.

• “On the buy side, lIke everyone else, we’re waiting for someone else to make the first move.”
• “There will be a number of identifier measurement solutions based on the needs of the partner. Right now with fragmentation occurring [among] consumers’ behavior and buying TV is so prevalent… but then you have buyers in the same group buying things like Hulu, Roku, Samsung… how do you deduplicate all that so you understand what the true reach is.”
• “There’s so much you can measure with digital, but there’s also so much you can’t measure. So when we at least talk to clients about this, they immediately flip to a mentality of an unrealistic buyer journey. They’re trying to take what they would measure in the linear world, combine that with what they would do in a digital world, and they started going down a direct response mentality. And it’s really tough. Just because you can measure it doesn’t mean they’re going to buy it.”
• “A cool dashboard is not a true measurement solution.”
• “No one holds the market on incremental reach. There’s so many different ways to get into a household… just because you’re measuring Vizio TVs or just because you have Roku data, doesn’t mean you have incremental reach. Somebody has to bring it all together.”
• “[Frequency] is one of the biggest things that needs to be addressed by these new nascent-type measurement type solutions that are out there.”

Numbers to know

4.2: The number of streaming services that the average U.S. streaming subscriber subscribes to.

<47 million: Number of subscribers that ViacomCBS has across its streaming portfolio, which includes Paramount+.

20 million: Number of subscribers that Discovery has across its streaming portfolio, which includes Discovery+.

9 million: Number of streaming subscribers that AMC Networks expects to reach by the end of 2021.

18 million: Number of streaming subscribers for Starz, which parent company Lionsgate is considering selling or spinning off.

Trend watch: TV screens dominate streaming watch time

When people are streaming videos today, they are most often doing so on a TV screen. In the third quarter of 2021, connected TV devices, smart TVs and gaming consoles accounted for 73% of streaming video watch time worldwide, according to video measurement and analytics firm Conviva. In North America, the TV screen was even more predominant at 82%, though in Asia the category only accounted for 14% of watch time.

Beyond the overall dominance of TV screens, people are particularly spending more time streaming video on smart TVs. In Q3 2021, smart TVs’ watch time increased by 64% year over year, whereas CTV devices’ watch time only increased by 5% and gaming consoles’ watch time actually dipped by 1%. That’s notable as the smart TV slice of the CTV market grows more competitive, with Amazon and Comcast recently rolling out their own smart TVs and TV manufacturers like Samsung, Vizio and LG developing their own CTV platforms to contend with the likes of Amazon and Roku.

Of course, while smart TVs are on an upswing, they are not necessarily responsible for the bulk of streaming watch time on TV screens. Amazon’s and Roku’s CTV platforms, which are available on some smart TVs as well as CTV devices like streaming sticks, continue to account for nearly half of streaming TV watch time.

What we’ve covered

AMC Networks’ Kim Kelleher says the TV ad market is still speeding up:

• This year’s upfront deals only took effect a month ago, but conversations about next year’s upfront cycle have already started up.
• AMC Networks’ ad sales boss also discussed how the company is adapting to advertisers’ supply chain challenges and making more inventory available for addressable advertising.

Listen to the latest Digiday Podcast here.

Roku’s audience, revenue and viewership continue to grow, but it’s dealing with supply chain challenges:

• In the third quarter of 2021, Roku saw a return to sequential growth in the amount of time people spent streaming video on its connected TV platform.
• However, supply chain challenges have cut into its hardware business and curtailed the number of new accounts added.

Read more about Roku’s latest earnings here.

Billboard looks to sponsored TikTok strategy to help it become a more consumer-facing brand:

• The Penske Media Corporation-owned publication has rolled out a singing competition on TikTok that is sponsored by Samsung.
• The competition is part of Billboard’s recent audience development strategy push to create more consumer-facing programs.

Read more about Billboard’s TikTok strategy here.

What we’re reading

How AMC Networks is seeking to separate itself in the streaming wars:
AMC Networks is not among the biggest entrants in the subscription-based streaming market, so the cable TV conglomerate has sought to stand out from the general-interest pack by taking a more specialist approach, according to Vulture. AMC Networks’ strategy of focusing on targeted audiences, such as horror fans and Anglophiles, positions its streamers as a complement to the likes of Netflix, Disney+ and HBO Max, a position that Discovery had also adopted with Discovery+.

Why ex-Disney execs are paying $3 billion to acquire a children’s entertainment company:
After acquiring Reese Witherspoon’s production company Hello Sunshine earlier this year, former Disney executives Kevin Mayer and Tom Staggs are now scooping up Moonbug Entertainment — the company behind uber-popular, kid-centric YouTube channel and Netflix show “Cocomelon” — for roughly $3 billion, according to Bloomberg. With major entertainment companies increasingly containing their own studios’ programming to their companies’ respective streaming services, Mayer and Staggs are among the outfits looking to fill the gap as independent programming providers. And children’s programming has been particularly in demand as families are an especially attractive and valuable customer base among streamers, as demonstrated by Disney+.

TikTok doesn’t fit on TV:
TikTok has rolled out an app on Amazon’s connected TV platform, but the short-form video service doesn’t fit the big screen, according to The Wall Street Journal. For as much time as people may spend watching TikTok videos in a single sitting on their phones, the platform’s vertically oriented programming isn’t suited to the horizontal TV screen. Additionally, TikTok’s CTV app is missing some core features, like scrolling through the feed video, searching for entertainment and commenting on clips.

Peacock’s original programming strategy hasn’t panned out:
More than a year after its national roll-put, NBCUniversal’s Peacock has yet to premiere a hit original show, according to Variety. One industry told the publication that “the demand for its originals is effectively nonexistent.” If you’re being reminded of the criticisms surrounding Quibi, you’re not alone.

In its Empathy in Business Survey, which polled more than 1,000 workers in the U.S., EY found that 90% believe empathetic leadership leads to greater job satisfaction, while 79% think it lowers employee turnover. 

More good news for employers: An overwhelming number (85%) see empathetic bosses as having an effect on increased productivity among employees. 

“For years, we’ve heard that employers should treat employees like customers,” said Cydney Roach, global chair of employee experience at the global PR firm Edelman, which produces its own Empathy Guide for business leaders. “Empathic listening to customer sentiment is routine for companies who want to win consumer trust and loyalty. Employers who practice that same kind of empathy and really listen, acknowledge and incorporate worker sentiment into the employee experience are much more likely to attract and retain the talent they need to succeed.”

Advertising is one business where a dose of empathy is in order, noted Sandy Greenberg, cofounder of the New York agency Terri & Sandy. Low morale, internal politics, long hours and employees’ feeling unappreciated are among the negatives of the industry which led her and partner Terri Meyer to start their agency, which does work for brands like Disney and Keebler. “We built a company where we don’t just say we care, we show we care,” Greenberg said.

For example, despite being a small agency where every person is essential to the work at hand, Terri & Sandy makes the extra effort to give its people paid time off to take care of sick family members or their own mental health. That means hiring freelancers to fill in, which Greenberg admits has been a hit to the bottom line. But the positives have far outweighed the downside — for one, the employee retention that has plagued much of the industry has been a nonissue.

However, wanting a boss who’s empathetic may be universal — but trusting that bosses are empathetic is another story. 

While employees surveyed by EY said they value empathetic employers, nearly half (46%) felt their company’s efforts to be empathetic toward workers were dishonest. Similarly, 42% of employees said their companies don’t follow through on their promises.

The solution, according to a number of executives, is simply for bosses to walk the walk. 

“When there is a ‘say-do gap,’ employees will rightfully recognize it and call you out for it,” said Sarah Engel, chief people officer of the New York agency January Digital, whose accounts include Peapod and DKNY. “I have often witnessed in the past that a company can have every policy in place, every standard written down, and every best intention, but when direct people managers or executives take actions that do not align with the empathy the company portrays, it erodes trust instantly.”  

Much-touted benefits like mental health days are often viewed by employees as surface-level solutions that don’t address the core issues, added Amy Small, evp of creative and brand at the San Francisco agency Media Cause, which works with nonprofits like the Parkinson’s Foundation and the National Park Trust. “In employees’ minds, bosses should be more proactive about not letting things get to the point of needing a mental health day in the first place,” she said. “Bosses must understand the difference between preventative, proactive resources and treatment and supportive resources, and emphasize both in their organizational culture.”

Despite a boss’s best intentions to be empathetic, some have observed that the pandemic, having turned all our lives upside down — including the boss’s life — has effectively created an environment where an employer cannot possibly be all things to all people at all times.

While stressing the importance of management listening to the concerns of employees, “unfortunately, both employers and employees alike have been trying to navigate unchartered waters for the past two years,” said Danielle Koffer, chief client officer of the U.S. at global media agency Mindshare. “I can see where in any industry employees can get frustrated when they don’t get concrete answers around policies that are still in flux. Employees want definitive answers and employers are still working through the unknown of the world around us.”

“It’s all about authenticity,” said Kim Moran, head of Insights to Impact, U.S. for the pharmaceutical maker UCB. “Employees are more likely to share their realities and vulnerabilities when they see leadership model the same behavior.” For example, if a boss shares that she was up all night with a sick child, then the employee may better understand why she seems distracted at the morning meeting, she explained. 

“Empathy is more than just an HR initiative — it needs to be a cultural shift that companies embrace on a daily basis,” Moran said.

While it is essential for bosses to see that “there is a human behind each Zoom screen,” Ran Craycraft, cofounder and managing partner of the Los Angeles digital agency Wildebeest, whose clients include Google and Frito-Lay, acknowledged that when it comes to being empathetic, many managers are trying hard — maybe too hard.

The biweekly one-on-one meetings between bosses and their people the agency instituted during the pandemic have proven to be not only an opportunity for employees to speak their minds but for managers to also be more vulnerable, he noted. Calling empathy a “two-way street,” he said, “As we get more data to measure, we may find some of these efforts to be more empathetic could be an overcorrection. The sweet spot may just be somewhere in the middle.”

“We didn’t think we would have to do this because we thought we’d be done before this happened,” said Sarah Kobos, senior photo editor at Wirecutter and interim vice-chair on the bargaining committee at Wirecutter Union, an affiliate of the NewsGuild of New York. “It seems like action is the only way to get them at the table, in a timely manner.”

The union chose to act now, growing concerned that a contract would not be signed by the end of this year. The three unions that represent Wirecutter, The New York Times, and tech workers at the Times are also planning to hold a rally outside of the Times’ headquarters on Nov. 16 at 12 pm E.T., Kobos said. The New York Times Guild is also currently collective bargaining with management over its contract, and the Times Tech Guild has yet to be voluntarily recognized by the company.

According to Kobos, there is only one bargaining session scheduled between Wirecutter Union and management for the rest of the year on Nov. 17. Of the 67 total union members — who are editorial non-management workers — 61 agreed to strike as of Monday evening unless management agrees to a “fair contract.” Wirecutter’s employees work remotely, so it would be a digital walkout where members refuse to work.

“We look forward to continuing to work towards an agreement with the Wirecutter Union in our standard process at the negotiating table,” said Danielle Rhoades Ha, vp, communications at The New York Times Company.

Wirecutter Union also urged its readers not to shop via Wirecutter from Black Friday through Cyber Monday if a deal with management is not reached. The union created a pledge that readers can sign to say they will “not cross the picket line.” Kobos declined to say how many had already signed.

The union is using the shopping holiday as leverage, Kobos said. The time between Black Friday and Cyber Monday represents Wirecutter’s “biggest traffic days,” Kobos said. Last year, the site had more than 1 million readers on each of the five days from Thanksgiving to Cyber Monday, she said. Black Friday is two and a half weeks out, which is “enough time to work together and do some marathon bargaining and reach an agreement,” Kobos said. “I hope that happens. I’m pretty optimistic that it will. It’s not just a very important time for us, but our busiest and most profitable time of the year for us by far.”

Purchased by The New York Times Company in 2016, Wirecutter makes revenue via affiliate sales and subscriptions. Wirecutter launched a paywall in September. According to the Times’ third-quarter earnings report released on Nov. 3, in its first month with a paywall, Wirecutter had 10,000 subscribers.

Dan Kennedy, a journalism professor at Northeastern University, said the union is “maximizing its leverage by threatening a job action timed to take advantage of the holiday shopping season.” The New York Times Company “is profitable and growing. Its employees have every right to demand a fair share of that success,” he added.

In the third quarter of 2021, The New York Times turned an operating profit of $49.0 million after growing revenue by 19% to reach $509.1 million. The media company’s subscription business was a particular bright spot, having added 455,000 new subscribers, including 135,000 who signed up for its non-news products, including Wirecutter. “This was our best third-quarter performance in both News and total net subscription additions since the launch of the digital pay model more than a decade ago, and, outside of 2020, our best quarter ever for digital subscription additions,” Times president and CEO Meredith Kopit Levien said in the company’s earnings statement.

At the crux of the union’s wants is a salary floor and a guaranteed wage increase. Union members and non-union Wirecutter employees receive merit-based annual increases but do not currently receive a guaranteed wage increase, according to the Times.

• Times management has offered so far to make Wirecutter union members eligible for up to a 2.75% wage increase, including the 0.5% guaranteed wage increase, according to sources at the company familiar with the negotiations. 
• Employees would be eligible to receive an additional merit increase based on their performance, as well as a bonus. 
• The total increases paid to all employees will be capped at 2.75%. 
• Management’s proposal provides increases to the minimum salaries for employees at the bottom of its pay scale, according to the Times, which did not elaborate. 
• Wirecutter employees were eligible for a 3.2% wage increase in 2020 and a 3% wage increase in 2021, the company said.

The company’s offered terms are insufficient, according to the Wirecutter union. The group said its members’ median salary is $43,000 less than New York Times Guild members. Wirecutter Union’s last bargaining session with management was on Oct. 21, according to Kobos.

The compensation proposal is “more generous” than what the Wirecutter union has described and “seeks to maintain a similar compensation structure for Wirecutter employees with programs in place for others at The Times Company,” said Rhoades Ha, who did not elaborate on what those programs were.

Nicole Cohen, an associate professor at the Institute of Communication, Culture, Information, and Technology at the University of Toronto Mississauga and co-author of the book “New Media Unions: Organizing Digital Journalists,” was not surprised that Wirecutter’s union was “pushed to this point.” 

“Two years is a long time to negotiate a contract,” she said. “What they’re asking for is not unreasonable. These are basic standards that media workers across the sector have been negotiating into their contracts in the past five years — especially for a really large, wealthy media outlet like the New York Times.” She pointed to other digital outlets that have staged walkouts, like Thrillist in 2018 and Vox in 2019. The New Yorker Union averted a strike in June.

“Nobody wants to actually walk out. We want to get to the table and get this done,” Kobos said. 

Discord, launched back in 2015, doesn’t allow ads. Instead, the social network collects revenue via subscriptions, making it an organic play for brands, per previous Digiday reporting. Here, Otis says it is leveraging the app as a community platform, customer service channel and product review feedback loop. Ultimately, it’s a play for the startup to build customer trust, per the brand, especially given users have to offer up their social security number and bank information to invest with the platform. A monthly subscription costs users $4.99 per month or $49.99 per year.

“Because the interactions are so valuable, it’s now part of our steady [marketing] cadence,” said Otis’ head of marketing, Cam Lay. “So every time we have an announcement, we say, ‘Join the conversation on Discord.’”

Since launch, the startup has racked up more than 400 members with at least 29 channels as well as daily conversations on the platform, per a spokesperson. Those channels, which function as discussion groups, range from topics like trading, NFTs, product drops and more — all popular topics on the platform itself alongside gaming.

While the server itself is a branded account, both Lay and Otis’ founder Michael Karnjanaprakorn are active members of the group, regularly responding to inquiries, messages and offering their own industry expertise. They’re most invested in the Discord community’s feedback about Otis’ business and thought sharing around investment news. “When we saw that we said, ‘This is something that’s really valuable. Now, we just have to get more people there,” Lay said.  

It’s been a slow buildup getting brands on board with Discord, a stark contrast to something like TikTok, which has been gaining traction with advertisers since last year.

“Discord is intimidating, honestly. It’s not structured like any platform I’ve experienced,” said Carolina Mach, an analyst at ad agency VMLY&R, who worked alongside the social media team to launch Wendy’s 50,000-member Discord earlier this year. “This is the wild west. The amount of people on the platform is encouraging, but [it] can hit the fan at any moment.”

Discord is predominately invite only, where users need a link to join a private server in most cases. Similar to Reddit, Discord users often have anonymity in screen names and avatar profile images. Finally, there’s no ad units or easily trackable metrics, making tracking return on investment tricky, Mach said.

“It’s going to be a brand affinity play, especially for brands that have their hand in gaming in any capacity,” she said. “It opens up the opportunity for one-to-one connections.”

As the conversation around media diversification continues to heat up, Mach suspects more brands, from legacy brands to startups, will come around to Discord. “We’re at a crossroads, where brands are starting to function less like brands and more like people,” she said. That level of brand affinity isn’t something that can be achieved through running traditional TV spots, especially when it comes to getting in front of Gen Z, she said.

That being said, Mach warns advertisers not to bully their way onto the platform, inciting “Silence, brand” responses from Discord users—a phrase often used in rebuttal to brands positioning themselves as fun and relatable.

“Show up where you’re invited and where it makes sense,” Mach said. “As we continue to pursue this younger demographic, they’re a lot more media literate. They’ll call [BS] in a heartbeat when a brand shows up where they’re not necessarily invited.”

For Lay, over at Otis, Discord will be something that the brand continually layers into its marketing strategy, adding more touch points to add members along the way.

“It’s really going to be the place of choice for us to have direct, productive conversations with our users, and where they can interact with each other,” he said.