Shut out of Fire TV and Roku, Peacock is the latest example of the arrival power moves to streaming

The standoff between NBCU and the CTV platforms resembles the distribution disputes between traditional pay-TV providers and TV networks. But in this case, the two sides are not haggling over subscriber fees.

Instead, they are brokering the future of streaming distribution — and using the sharp elbows approaches common in TV standoffs. While TV networks clung to their legacy linear businesses, the CTV platforms built the foundation of the streaming ecosystem. Now, as the linear TV business contracts, the CTV market matures and the TV industry shifts to streaming, major media companies accustomed to a seat of power are finding it occupied by the platforms.

“You never heard anything about these kinds of disputes [in streaming] until the big traditional media companies moved in,” Vasily Karasyov, founder and senior analyst at research firm Cannonball Research.

NBCUniversal is the latest big traditional media company to attempt to attract cord cutters with a standalone streaming service only to run into interference with the platforms needed to make that service available to CTV viewers. Last year Disney hit a roadblock in striking a CTV distribution deal with Amazon for Disney+. And this year WarnerMedia has yet to reach agreements with Amazon or Roku to distribute HBO Max on either platform. A WarnerMedia spokesperson did not respond to a request for comment regarding the status of its distribution talks with the platforms.

Media companies like NBCU and WarnerMedia may have sought out streaming as a way to untether their businesses from traditional TV as linear viewership ebbs and cord cutting accelerates. However, they are finding that CTV can tangle them up all the same. 

Amazon and Roku are fashioning themselves as playing a role similar to linear TV distributors like Comcast and Charter that serve as the gatekeepers between media companies and their audiences. Both platforms have become more aggressive in seeking access to ad-supported streamers’ ad inventory to sell themselves. They have also established their own programs to sell subscriptions to third-party streamers, which can obstruct the relationship between those subscribers and the corresponding streamers. And they have been pushing media companies to make more of their programming accessible outside of the media companies’ own apps, such as by enabling people to watch some shows within Amazon’s and Roku’s own streaming properties.

“Amazon and Roku both have clear ambitions to be bundlers,” said Alan Wolk, co-founder and lead analyst at consulting firm TVRev.

Peacock being a primarily ad-supported streamer could be a particular sticking point in its negotiations with Amazon and Roku. Both Amazon and Roku have built businesses selling ads in the third-party apps on their platforms and have become more aggressive in angling for access to inventory. Being able to include Peacock and its library of high-quality programming in their pitch decks could boost Amazon’s and Roku’s pitches to TV advertisers that perceive the platforms’ sales as supplementary to the inventory bought directly from media companies like NBCU. 

However, enabling Amazon and Roku to sell Peacock’s inventory could scuttle NBCU’s own sales pitch and compromise its initial sponsorship deals that promise category exclusivity for up to 18 months. As an ad-supported streamer, Peacock’s success is proportional to the size of its audience. Missing two of the biggest CTV platforms will limit that size. But, ad buyers have hedged their bets on Peacock by resolving that, if the streamer fails to deliver an adequate audience, NBCU will redirect their ads to its other properties to make up for the shortfall.

Historically, major streaming services like Hulu and CBS All Access have been able to negotiate sweetheart deals with the CTV platforms. Those apps were able to refrain from allowing Amazon and Roku to sell their ad inventory because Amazon and Roku needed Hulu and CBS All Access on their platforms in order to sell their CTV devices. But over the past couple years, the dynamic has changed, and the platforms have become less reliant on any individual app (save for Netflix, most likely). “Peacock is not driving Roku sales,” said Karasyov.

Amazon and Roku have each accumulated user bases of more than 40 million households, and Roku has built up its platform business to the point that it makes more money from selling ads and subscriptions than from selling devices. Meanwhile, the media companies have seen their traditional TV businesses decline, which has made it more urgent for them to pivot to streaming. At the same time, the streaming app ecosystem has grown to the point that lacking Peacock or HBO Max may not lead people to trade in their Roku dongles for an Apple TV box but instead leave them to watch Netflix, Hulu, Pluto TV or any of the other streamers available on the platform. 

“Roku and Amazon have said to themselves, Maybe people would have been pissed off not to get Disney+ on here, but at this point, there’s so much out there and these guys don’t have anything new anyway,” said Wolk.

The situation could have been different for NBCU if not for the coronavirus crisis. The crisis and corresponding cancelation of the Olympics impaired Peacock’s original programming pipeline and eliminated its marketing tentpole. Those developments may have diluted the promotional upside for Amazon and Roku to carry Peacock on their CTV platforms at launch. If Peacock had buzzy original shows and the Olympics halo ginning up audience interest, Amazon and Roku could have used the service’s launch to angle for new customers, as wireless carriers do each time a new iPhone becomes available.

At some point, NBCU and WarnerMedia will likely reach agreements with Amazon and Roku, as Disney eventually did. They may have little other choice if they hope to be legitimate contenders in the streaming wars.

“HBO Max and Peacock need Fire TV and Roku more than Fire TV and Roku need them,” said Karasyov.

Confessional

“More and more clients and even new investment leads at agencies are coming from the digital space where there tends to be more flexibility. They don’t know TV that well, so maybe they don’t understand how we run our business as well as people in the past.”

— TV network sales executive on advertisers’ flexibility demands

Stay tuned: Another sports hiatus may not put ad dollars on hold

Maybe major sports like the NBA and MLB will return this month as planned. But — with the number of new coronavirus cases soaring and states like California reverting to reclosing — maybe not. However, on the advertising side, a second sports hiatus may not put TV ad dollars on hold to the same extent as the first suspension of play.

“It’s different now. When sports was going off air, a lot of clients were trying to get out of inventory. They didn’t have the right messaging or their businesses weren’t open to promote,” said one agency executive.

When sports initially went off air in March, most advertisers deferred the money they had planned to spend on TV sporting events until major sports returned. This time around, if sports leagues have to go on TV timeout once again, the corresponding ad dollars may not.

So long as businesses that have reopened, like car dealerships and retail stores, are able to stay open, advertisers may be more willing to repurpose their TV sports dollars in order to help their own businesses rebound. “Clients will be, in theory, wanting to get back on air as opposed to getting off air. It’s a different mentality,” said the agency executive.

Numbers don’t lie

25%: Share of CBS’s script development budget that will be dedicated to projects created or co-created by Black, Indigenous and People of Color.

8: Minimum length, in minutes, for a YouTube video to carry mid-roll ads, down from 10 minutes.

8%: Estimated share of Quibi users that converted to paid subscribers after the three-month free trial period ended, according to mobile analytics firm Sensor Tower.

What we’ve covered

TikTok is coming for Facebook’s ad business:

• TikTok’s self-serve ad buying platform opened up globally right as major advertisers are boycotting Facebook.
• TikTok is also offering free ad credits to woo small- and medium-sized businesses that are Facebook’s core advertisers.

Read more about TikTok here.

FaZe Clan works to root out bad behavior in gaming community:

• Last year the esports company signed its first female member.
• FaZe Clan is using AI tools to combat divisive language from fans.

Read more about FaZe Clan here.

Pinterest tests program to co-sell ads, split revenue with publishers:

• Pinterest’s program will heavily feature video ads created by publishers.
• Tastemade is the first publisher to participate in Pinterest’s test.

Read more about Pinterest here.

Marketers pause influencer campaigns amid Facebook boycott:

• Marketers are either postponing influencer campaigns altogether or delaying the use of paid ads on Facebook and Instagram to boost influencers’ posts.
• Some marketers and influencers are pivoting campaigns to other platforms like TikTok.

Read more about influencer marketing here.

What we’re reading

Jason Kilar’s DTC strategy for WarnerMedia:
Two months into his tenure atop WarnerMedia, Jason Kilar is making good on his reputation for disrupting status quo business strategies, according to The Information. The new WarnerMedia CEO sent a memo to employees declaring the going to direct to consumer through streaming is the future of the TV business. He also told the team working on HBO Max’s ad-supported tier to reduce the planned ad load. And he wants to move away from selling shows to other TV networks and instead to make them for HBO Max.

Quibi’s pre-autopsy:
If you’re reading this, you’re probably familiar with the hype leading up to Quibi’s launch and how Jeffrey Katzenberg’s mobile app has failed to live up to the hype. Me too. Nonetheless, Vulture’s deep dive into Quibi is worth reading to get a sense of just how detached Katzenberg and Quibi CEO Meg Whitman seem to be from their target audience. Case in point: Katzenberg gets his emails printed out and folded vertically, and Whitman admits to not being an entertainment enthusiast.