The Streaming Wars Move To Madison Avenue

In advertising, there have been a number of memorable product category wars. Perhaps the most famous and competitive were the cola wars (Coke vs. Pepsi) and beer wars (Budweiser vs. Miller), but there have been iconic battles for market share in car rentals, fast food restaurants, pizza and even soup.

Advertising wars are often started within new product categories as companies vie for share of market by increasing their share of voice. There have been epic battles with video game consoles (Sega vs. Nintendo), satellite TV (DirecTV vs. DISH), mobile phones (Samsung vs. Apple), personal computers (Apple vs. Microsoft) and telecom (AT&T vs. Verizon vs. T-Mobile).

There is another product category war heating up on Madison Avenue: streaming video. This war includes several deep-pocketed media and digital companies. Some already are established (Amazon Prime Video and Netflix), some are recently launched (Disney+ and Apple+) and some are to be launched this year (AT&T’s HBO Max and Comcast’s Peacock). Additionally, Hulu, CBS All Access, Sling TV, YouTube and Vudu have been expanding their ad budgets in the increasingly crowded category.

Already there has been competition among streaming providers for big name producers such as Shonda Rhimes, Ryan Murphy, David Benioff and D.B. Weiss (the creators of Game of Thrones) and Greg Berlanti. These showrunners have signed multi-year deals valued in the hundreds of millions of dollars.

There is also a competition for licensing programs. The 236-program library of Friends has left Netflix and will reappear, at a cost of $425 million, with the launch of HBO Max in May. Next year, Netflix will lose The Office when it moves to Comcast’s Peacock. It has been reported that Comcast will pay $500 million for exclusive streaming rights for the popular sitcom.

The new competitors already have hindered the subscriber growth of existing streaming providers. Netflix reported 420,000 net new subscribers in the U.S. during fourth quarter 2019, below the expected 600,000. Netflix cited the launch of Disney+ in November 2019 as one reason for the sluggish subscriber growth domestically.

Fueling the marketing battle between Netflix and Disney was the announcement in October 2019 that Disney will ban any Netflix ads across their entertainment properties, including ABC. Jon Swallen, the Chief Research Officer at Kantar Media, feels the impact is minimal. “Netflix can still achieve mass reach with the advertising it buys on other TV networks,” he said. “In addition, when subscribers use Netflix, the company leverages its knowledge of their viewing history to suggest programming of potential interest. It’s another form of promotion to try and increase usage.”

As a marketing strategy, Netflix, Amazon and Hulu already have come to dominate at televised awards shows. Besides bestowing prestigious awards and critical acclaim, the Golden Globes, Emmy Awards and Oscars telecasts have also become a promotional platform.

There are several different strategies in the ad wars for streaming video.

·       Disney+ said it had ten million accounts the day following its launch on November 12. Helping the larger than anticipated launch was Verizon offering Disney+ free for 12 months to some of their customers. Disney also promoted the new service across a wide variety of owned properties from television to cruise lines and theme parks.

·       Apple is no stranger to competitive advertising or creative ads that stand out. For   Apple+, however, the marketing strategy before and after its launch on November 1 has been somewhat muted. In September and October 2019, Apple spent more ad dollars promoting its iPhone than Apple+, although they did inundate the Emmy Awards in September with ads. To boost subscriber growth, Apple+ is giving the service free for 12 months with the purchase of any new iPhone, iPad, Apple TV, Mac or iPod touch device.

·       Comcast is expected to invest $100 million for Peacock’s launch and upwards of $200 million of value in promoting the service across Comcast owned properties. Peacock had teased viewers with a 15-second ad during the NFL post-season and Golden Globes on NBC.

·       Amazon Prime has been increasing its marketing budget. According to Kantar, in the first nine months of 2019 Amazon Prime Video doubled its measurable ad spend compared to the previous year. Amazon also surpassed Netflix as the leading advertiser for streaming video in the first half of 2019 with 13 campaigns promoting new shows. Amazon Prime Video also advertised in Super Bowls LIII & LIV.

·       In the wake of this new competition, Netflix projects its total global content spending will rise to a reported $17.3 billion in 2020, up from $15.3 billion in 2019. According to SEC filing, in 2018 the advertising budget of Netflix was $1.8 billion.

A primary reason for escalating ad budgets has been the consumer. A recent YouGov survey found there are limitations to what consumers are willing to pay each month and how many streaming services to which they are willing to subscribe:

·       56% of Americans already subscribe to between one to three streaming video services, with 26% appearing ready to add a new subscription.

·       37% of Americans say between $1 and $20 is the maximum they’re willing to spend on a monthly entertainment subscription; 22% say between $21 and $40 and 10% between $41 and $60.

·       56% of cord cutters are likely to sign up to a streaming service to watch a specific show.

With tens of billions of dollars being invested in original and licensed content, programs will be heavily promoted to differentiate from their competitors. An emphasis on original content already has begun, including most recently, The Morning Show on Apple+, The Mandalorian on Disney+ and Star Trek: Picard on CBS All Access. This strategy will continue. By promoting these individual shows and project-specific content, streaming providers are also publicizing their “A-list” talent.

As Kantar’s Swallen points out, “Streaming providers are using consumer advertising to promote signature shows throughout the year as they get released. As the competition heats up and more series become available from more providers, they are going to have to decide which content to promote and how to promote it. Expect streaming services from Comcast, Disney, AT&T and CBS to take advantage of their broadcast and cable networks as a free promotional platform for their streaming products.” So, ironically, the marketing strategy for streaming providers includes the heavy use of television, a medium that has lost millions of viewers, in part because of streaming options.

Billions of ad and promotional dollars will be spent in the U.S. in 2020 and beyond in support of streaming video, a category that didn’t exist ten years ago. The streaming providers also are expected to launch brand image campaigns as well as program launches to distinguish themselves from competitors.