Future of TV Briefing: The Disney-Charter deal signals looming equilibrium between traditional TV and streaming

The Disney-Charter detente is neither pay-TV’s savior nor its death knell. Instead it’s the latest signal of pay-TV’s slow surrender to streaming and streaming’s succumbing to traditional TV’s economics.

In the agreement to continue carrying (some of) Disney’s TV networks, Charter gained the right to offer access to two of Disney’s streaming services — ad-supported Disney+ and ad-supported ESPN+ — to its pay-TV subscribers. It will remain to be seen to what extent that forestalls the rate of Charter subscribers cutting the cord or increases the number of people advertisers can reach on the two streamers. But it seems somewhat more clear that this is the new model for pay-TV distribution deals, as linear’s and streaming’s opposing sides of the broader TV business lean more on one another.

“Our collective goal has always been to build an innovative model for the future. This deal recognizes both the continued value of linear television and the growing popularity of streaming services, while addressing the evolving needs of our consumers,” said Charter CEO Chris Winfrey and Disney CEO Bob Iger in a joint statement announcing the deal on Monday.

For as much as the traditional TV and streaming businesses have been heading in opposing directions over the past decade, they seem to be trending toward a sort of stasis. 

Traditional TV is still bleeding subscribers but still dominates TV watch time and TV ad spending. In the second quarter of 2023, 1.7 million pay-TV subscribers canceled their service with the major pay-TV providers, which is roughly the same amount as did so the year prior, according to Leichtman Research Group. But per Samba TV’s “The State of Viewership” report for the first half of 2023, roughly half of U.S. adults had a cable or satellite TV subscription, and roughly 57 million U.S. households could be reached via traditional TV in the first half of 2023, a 5% increase year over year. A few years ago, CNBC reported that some major media companies had come around to the idea that the eroding pay-TV subscriber base would eventually settle to number around 50 million U.S. households.

Meanwhile, streaming services are gaining subscribers but at a slowing rate. This deceleration seems to correlate with an increase in the number of streamers people are being pressed to pay for. According to Comscore’s “State of Streaming 2023” report, the average U.S. household watched 6 streaming services in May 2023, compared to 5 in May 2021 and 4 in May 2019. Additionally, the services are getting increasingly expensive, with Apple TV+, Disney+, Hulu, Max, Netflix, Peacock and Paramount+ each raising their subscription prices in recent years. 

All of which brings us back to the bundle and the Disney-Charter deal. Disney has been the biggest purveyor of the bundle in streaming, having started selling its Disney+-Hulu-ESPN+ bundle in November 2019. And next month it will start selling a new ad-free Disney+-Hulu bundle as others like Paramount and Starz making bundling more central to their streaming strategies.

Bundling Disney’s streamers with Charter’s pay-TV subscriptions is a different type of bundle, though. And while acquiring/retaining subscribers is a motivating factors for both sides, acquiring/retaining ad revenue would be another, at least for Disney, which would help to explain why Charter will only offer the ad-supported version of Disney+ in addition to ESPN+, which is also ad-supported. ESPN chairman Jimmy Pitaro seemed to acknowledge as much in an interview with The Hollywood Reporter published on Monday.

“Another point is ad inventory, with expanded reach comes expanded ad inventory, and we have a fantastic sales team. There’s a lot of demand for sports content. And we’re confident that we’ll be able to sell that inventory,” said Pitaro of the Charter deal.

As Disney has been building up its streaming ad footprint, it has relied on being able to use its traditional TV networks to make up for any audience reach shortcomings. Meanwhile, ad prices on streaming services overall have been high enough to be price prohibitive for some advertisers, a topic that Georgia-Pacific vp of marketing Laura Knebusch discussed with me on this week’s Digiday Podcast episode. In other words, the day when a company like Disney can count on its streaming properties to replace the ad revenue generated by its traditional TV networks seems fairly far off.

Sure, the amount of money advertisers spend on traditional TV is declining. But it’s not evaporating. 

According to media researcher and Madison and Wall writer Brian Wieser, advertisers’ spending on non-digital national TV — i.e. traditional TV — for Q4 2023 is expected to be 12% lower than last year, whereas ad spending on digital TV is expected to increase by 13% year over year. However, non-digital TV’s share of national TV ad spend for Q4 2023 is still pegged at 63%. More to the point, non-digital TV’s share of national TV ad spend is estimated by Wieser to remain the majority until 2027 when it will reach 50% and then finally surrender the majority share to digital TV in 2028. 

In short, traditional TV is becoming a smaller part of the overall TV business while streaming is becoming a bigger part. But neither side are shrinking or growing to the extent that one will eclipse the other anytime soon. Instead they seem to be headed to a sort of equilibrium, and the Disney-Charter deal appears to be a reflection of that.

What we’ve heard

“I think there’s going to be a tipping point. I don’t think we’re there yet. It goes to supply and demand and cost versus who’s actually there. While I think there’s eyeballs [in streaming], I still think there actually are in linear as well, and I don’t think the prices necessarily reflect that today.”

— Georgia-Pacific vp of marketing Laura Knebusch on the Digiday Podcast

WTF is the Video Privacy Protection Act?

A 35-year-old privacy law is roiling today’s video ad industry. As Insider reported last week, brands including Folgers, General Mills and Mattel have been sued for violating the Video Privacy Protection Act. Insider itself was also sued for violating VPPA last year.

So what exactly is VPPA, and what does it have to do with brands and publishers running video ads? Here’s an explainer skit — and corresponding article — I put together on the privacy law last year.

Numbers to know

$49.99: Discounted monthly subscription price for Hulu’s pay-TV service that Disney is offering amid its TV carriage dispute with Charter.

37: Number of Hearst-owned local TV stations that have gone dark for Dish Network subscribers in another distribution dispute.

9%: Percentage of employees that Nielsen is laying off as the private equity-owned measurement provider tries to cut costs.

10%: Percentage of employees that Roku is laying off as the connected TV platform owner also tries to cut costs.

74 million: Number of monthly active users that Fox-owned Tubi claims to have.

42%: Percentage share of surveyed U.S. teens who said they watch national TV network news daily or weekly, including videos on digital platforms.

>90%: Percentage share of YouTube videos in the past year that had pre-roll, post-roll, skippable and non-skippable ads enabled as monetization options.

28%: Percentage share of surveyed marketers who said their companies use ad-supported streaming for marketing.

What we’ve covered

Georgia-Pacific’s Laura Knebusch breaks down CPG giant’s spending shift away from traditional TV:

• Traditional TV now accounts for less than 50% of Georgia-Pacific’s spending, but its share still exceeds streaming’s.
• Streaming’s relatively higher pricing has limited how much money Georgia-Pacific has moved to the channel from traditional TV.

Listen to the latest Digiday Podcast episode here.

Why some creators find navigating taxes so challenging as they establish their freelance businesses:

• As freelancers, creators have to navigate a complicated taxpaying process.
• Some creators mistakenly believe they are exempt from paying taxes or aren’t well-versed in what counts as a tax write-off.

Read more about creators’ tax challenges here.

DAZN is quietly ramping up its programmatic ads business:

• The sports streaming company generates a third of its ad revenue from programmatic sales.
• Advertisers can only access DAZN’s inventory programmatically though programmatic guaranteed or private marketplace deals.

Read more about DAZN here.

Publishers say Snapchat revenue is down while TikTok, Instagram are on the come-up:

• Snapchat’s removal of the Stories carousel seems to have hurt publishers’ viewership and revenue.
• Advertisers are prioritizing TikTok and Instagram when discussing deals with publishers.

Read more about publishers’ platform businesses here.

With lingering YouTube issues, Google battles broader reputational challenges from agencies:

• Agency executives said they are limited in pushing back against YouTube over Adalytics’ recent allegations.
• One agency executive is pushing back against YouTube’s self-reported co-viewing measurement.

Read more about YouTube here.

What we’re reading

“The Tonight Show”’s toxic workplace:

Current and former employees have alleged a harsh working environment at Jimmy Fallon’s late-night show, according to Rolling Stone.

Disney’s succession drama:

Disney CEO Bob Iger’s struggle to determine a successor has been well-documented, and CNBC went deep on the biggest example: Iger’s failed appointment of Bob Chapek as heir apparent.

Nielsen cancels Amazon’s measurement plan:

Nielsen has reversed course on its previous announcement to use Amazon’s data for its Thursday Night Football measurements, a precedent-breaking move that earned the ire of traditional TV networks, according to Ad Age.

Comcast-Disney fast-track Hulu talks:

The pay-TV giant and media conglomerate appear poised to settle the ownership of Hulu sometime after September 30, though it’s still unclear how much Comcast will press Disney to pay for full ownership of the streamer, according to The New York Times.

Connected TV’s looming identity crisis:

The IP address continues to be the central vertebrae in CTV advertising’s identity spine, but parts of the industry are starting to wean themselves off its use, according to AdExchanger.