Madison and Wall: Saturday Summary
For the week ending June 23, 2023
The Cannes Lions have now concluded. For me, as always it’s an exhilarating marathon of one-on-one meetings alongside bigger get-togethers, and always something I look forward to coming back to. I hope to see everyone there again in 2024!
Speaking of marathons, on Sunday (June 25) I will be engaging in what I call a “chocolate marathon”, essentially 26 miles of walking around Paris while shopping for (and tasting) chocolate at many of the world’s greatest chocolateries. If you’re in Paris then and want to join some or all of it between 10:30am and 7pm local time please reach out and let me know. I’ll almost certainly be passing by wherever you are at some point during the day.
Meanwhile, beyond all of the gatherings, there was some actual news that came out of Cannes this past week.
To start, the ANA (the US-based Associated of National Advertisers, a trade group representing the country’s largest marketers) released the first part of a long-awaited Programmatic Media Supply Chain Transparency Study. Large marketers have been particularly concerned about whether their digital media budgets are actually getting deployed as intended, especially since 2020 when the ANA’s UK-based peer ISBA released a study highlighting an “unknown delta” of untraceable spending, initially pegged at 15% (and with process revisions in a subsequent study reducing the figure to 3%).
The big finding in the ANA’s report related to how much money has been directed (or potentially unwittingly diverted) to so-called “Made for Advertising” (MFA) sites, commonly defined as sites whose sole purpose is to provide advertising without other content. According to the ANA, whose efforts involved a sample of $123 million in spending from 21 advertisers, 15% of budgets went to MFA sites. Extrapolating from this figure, the ANA calculated $13 billion of what might be considered low-quality (if not brand-unsafe) spending globally on an annual basis. As marketers look to refine how they spend their money in response to the study, known publishers – whether premium journalistic entities or walled gardens – are likely beneficiaries.
Separately, although reflective of some of the higher quality media inventory that could benefit from such a reallocation, Comcast’s NBC Universal announced agreements with broadcasters in many countries around the world to expand the footprint of NBCU’s One Platform later this year. The news relates to efforts that would enable broadcasters not owned or affiliated with Comcast (such as France’s TF1, Australia’s SevenWest, Germany’s Pro7Sat1, etc.) to pair NBCU’s established processes with technology from Comcast’s Freewheel to help TV network owners in multiple markets sell cross-platform audiences to marketers. A brief explainer of Comcast’s One Platform can be found here through an interview between Marketecture’s Ari Paparo and NBCU’s Krishan Bhatia last year.
Evidently, building out a platform that allows a TV network owner to broaden the pool of advertising budgets they can capture will appear to be increasingly urgent for the entire industry as the year proceeds: press reports are indicating that volumes are down significantly in the negotiations that have been ongoing between media agencies and TV networks over the past month. While the relationship between upfront negotiations and actual revenues are not direct, the downward trend for traditional TV – including its streaming components – is going to continue on an ongoing basis.
Which then leads to two other news items from the week which I thought worth highlighting: Warner Bros. Discovery appears to be pursuing or revisiting additional efforts to improve near-term cashflow despite the longer-term negative strategic consequences that will follow.
First came news that WBD would license some HBO library titles to Netflix. Although the reporting appears to only involve a limited number of titles, the spirit of such an agreement reduces or potentially eliminates the need to buy the Max streaming service for some consumers, especially those who are already Netflix consumers. The bet that WBD has to make is that any payments they receive from Netflix and intangible benefits which follow from broader exposure for any of these properties offsets any incremental churn or lost subscriptions they might experience in the future. More generally Max also loses a chance at more firmly associating its brand as the exclusive home of any content that WBD licenses.
However, it was notable in context of other news of a new attempt by WBD to sell certain music-related rights from its film studio, with a goal of selling half of those rights for “approximately” $500 million following an unsuccessful effort to sell all of them for more than $1 billion earlier this year. While such a transaction might be very positive in net present value terms, presumably selling rights of this nature would be offset by greater future cash outflows (if not GAAP expenses, depending on the structure of a transaction) than might otherwise be the case in order to compensate a new partner.
To the extent that traditional television advertising continues to be weak, given the company’s debt burden and needs to refinance some of that debt in the next couple of years, WBD would inevitably have to look for additional sources of liquidity, including more comprehensive sales of individual business units such as CNN.