Monday AM Briefing #59
The stories and trends in OTT streaming you *need* to know for this morning & the week ahead
A Short Essay on NBCU, Ad Buying & The Olympics
I’ve been watching The Olympics via Peacock so far, as I cut the cord over a year ago.
NBC executives were reported to be betting that pent-up demand following last summer’s postponement will drive higher viewership and turn around recent ratings declines.
There was certainly greater demand from advertisers: since Rio 2016, NBCU has added 20+ premium advertisers ($ - paywalled) and is on pace to set a record with $1.25B+ in ad sales.
But, while watching Rich Eisen’s Tokyo Gold show on Peacock, I began to wonder which demand NBC needs to meet with the 2021 Tokyo Olympics broadcasts: advertiser demand for Olympics ad inventory, or consumer demand for Olympics content?
The question reminds me of something a quote from a Mike Shields post that I highlighted in Member Mailing #271: AVOD after the 2021 Upfronts:
Brands are ready to shift [spend to Connected TV]. Agencies are still hung up on processes that once made sense, but don’t anymore - which is holding back the medium’s evolution.
Tokyo Gold has the look, feel and tone of a karaoke version of 1990s-2000s SportsCenter (Eisen was an anchor for the show between 1996 to 2003). Then, and now, Eisen offers humorous commentary alongside sports highlights. It seems targeted to cord-cutters nostalgic for 1990s-2000s ESPN SportsCenter with Rich Eisen.
For this reason, I imagine media buyers for The Olympics would love the SportsCenter format with Rich Eisen:
Eisen is a proven host with audiences across platforms (Linear TV, podcasts, Peacock) and networks (The NFL Networks, NBC Sports)
His demo is probably older (45+) and higher income, and
the SportsCenter highlights format is familiar, proven and therefore “brand safe”
Eisen and NBCU can deliver a high-quality, brand-safe and familiar production against which advertisers will be extremely happy to have their ads run.
As per Mike Shields, in that type of ad sale two things probably happen:
the TV ad buyer buys both Peacock and linear inventory (Peacock is subscale with 14MM MAUs), and
Premium Peacock ad inventory gets discounted in that package.
That creates a problem for Peacock: Eisen’s audiences are smaller and therefore hyper-passionate and more niche, making his audience more valuable to Peacock’s addressable advertising model. As Shields writes, “increasingly CTV is the only way to reach certain people -and often these people are uber-engaged with their favorite shows.”
The ad package in #1 discounts CTV’s value proposition because NBC must take on additional “tonnage” to make ad buyers happy. But, it does so at the cost of creating content like Tokyo Gold for subscale audiences that won’t generate enough scale to meet that “tonnage”.
My question after watching Peacock is: how many bets like Tokyo Gold NBC has made among its 7,000+ hours of programming? In other words, how costly will “tonnage” become for NBC’s Olympics broadcast when targeting may be the better model for Peacock viewers?
“Tonnage” is expensive if audiences don’t show up for niche content (especially if the digital marketing is weak). Moreover, “tonnage” is especially expensive if valuable target audiences end up consuming more content via Peacock and digital than linear TV.
One problem is audiences already are not showing up as predicted: around 17 million Americans tuned into the opening ceremony for the Tokyo Olympics on Friday across cable and streaming, a “steep dropoff” from previous Olympics (The 2016 Summer Games in Rio de Janeiro netted 26.5 million viewers for its opener).
Also, ad load across NBC channels, streaming and online is up and viewers are taking to Twitter to complain.
Another way to look at this question is, how costly is it for NBC’s future Olympics broadcasts if NBC doesn’t embrace “tonnage” and price discounts?
NBC Sports PR revealed that among the 17MM, its streaming audience for the opening ceremony on NBCOlympics.com and the NBC Sports app increased 76% from the 2018 PyeongChang Opening Ceremony and 72% from 2016 Rio opening ceremony.
So, niche content like Tokyo Gold may be ideal for ad buyers accustomed to real-time bidding and addressable advertising to reach hard-to-reach audiences. But “tonnage” and “processes that once made sense, but don’t anymore” are discounting that value proposition both nominally and in practice.
This dynamic is playing out at a time when NBCU needs to prove out the competitive value proposition of its NBCUniversal One addressable advertising platform against the likes of Roku, Amazon, and Google. 73% of CTV buyers report shifting budget from broadcast and cable to CTV in 2021, according to the IAB.
The Olympics are prime-time auditions for NBCU’s Connected TV sales pitch.
The dynamics of “tonnage” that will keep advertisers happy during, and after, The Olympics may overwhelm NBCU’s Connected TV sales pitch.
Must-Read Monday AM Articles
NBCU seems to be aware of the problem of “tonnage”, adopting an Ad-ID identifier backed by several industry trade bodies to clean up things like repetitive ads. ($ - paywalled)
Mark Lazarus, chairman of NBCUniversal television and streaming, shared a bullish projection for Peacock for the Olympics to Alex Weprin of The Hollywood Reporter.
Chairman of NBCUniversal’s direct-to-consumer and international networks Matt Strauss told the LA Times, “we feel that we now are in a much better position to tap into the Olympics than we would have been a year ago”.
Bloomberg’s Tara LaChappelle explained why “Cable cord-cutters don’t have attractive options as Comcast uses the event to promote Peacock”.
In-house TV promos for the Olympics on NBCU networks had a total media value of $49.9 million, and Awful Announcing’s Andrew Bucholtz has a good breakdown of the implications.
Toyota pulled its Olympics-related TV ads off air in Japan, despite being one of the International Olympics Committee’s (IOC) top corporate sponsors. Imogen Watson of The Drum explains why this was “a smart move”.
Jessica Toonkel of The Information had a must-read piece on Mike Hopkins, SVP of Prime Video & Amazon Studios that breaks down its emerging new strategy.
Disney+ and ESPN+ president Michael Paull discussed Disney+’s growth, to date, with Insider ($ - paywalled)
After another strong quarter, WarnerMedia CEO Jason Kilar gave interviews to Bloomberg, The Wall Street Journal, Reuters and The New York Times.
Netflix reported a growth rate that’s “a little wobbly right now”. Part of the problem is that 80% of people aged 18 to 34 in the UK are now either subscribers or have access through their families or shared passwords, according to research from Ampere Analysis.
Netflix had a restructuring of the physical production department with the objective of creating regional physical production teams
Buzzfeed is making QVC/HSN-type bets in livestreaming. In India, YouTube acquired Simsim, an Indian social commerce startup that helps viewers discover and buy products from local businesses through review videos created by influencers.
Bloomberg’s Kelly Gilblom wrote about how product placement is “an even more popular form of advertising thanks to factors including increasingly sophisticated data collection and the rise of streaming and mobile video.”
The Harvard Business Review dives into how to build a basic bundle with “biphasic subscription monetization”.
Discovery is bracing for a bitter fight to keep its business in Poland amid an aggressive drive by the country’s ruling right-wing party to block foreign ownership of media.
Myles Tanzer of The Wall Street Journal wrote about how HBO Max’s Gossip Girl is “part of a spate of newer teen shows—especially those airing on streaming platforms—that are more diverse and envelope-pushing than the versions that came before them.”
The Trade Desk issued a “The Future of TV Report” for June 2021 with the results of a survey of 150 advertisers in the U.S. (free - registration required)