1. Netflix’s 150 Percent Problem

Netflix reported a 150 percent YoY increase in 2024 upfront ad sales commitments, a stat that sent their stock price up two percent to its highest point in three years.

The growth was impressive on one level in that their worldwide ad-supported subscriber base only grew by 74 percent since January, going from 23 million to 40 million. 

What’s more, they confirmed partnerships for a number of their popular series, including  Squid Game, Wednesday, Outer Banks, Happy Gilmore 2, Ginny & Georgia, and Love Is Blind.

And yet despite that impressive showing, many people in the industry confess to being underwhelmed.

Why It Matters

There’s a sense that even though Netflix claims (or perhaps because Netflix claims) that 45 percent of new subscribers are choosing the ad-supported tier, that those subs don’t represent committed eyeballs, but rather, people who are signing up to watch one or two series and/or live sports, which is why they are choosing the ad-supported tier. (Live sports on Netflix all come with ads anyway, so sports fans get zero benefit from subscribing to one of the ad-free tiers.)

There’s also the sense that this is not the same upscale audience that subscribes to ad-free Netflix, that this is a different, somewhat less desirable demo. I have yet to see stats that confirm this in any way, it’s more of a vibes-based thing. Vibes-based things being particularly in vogue these days.

And while 40 million ad-supported subs spread across 12 different countries (the US, Canada, UK, France, Germany, Australia, Brazil, Japan, South Korea, Spain, Italy, and Mexico) sounds like a big number, there’s no indication as to how those numbers break down and a sneaking suspicion from people I talk to is that the US numbers are not that great, both for current subs and for sign-ups. 

So there’s that.

There’s also the myriad of ways that Netflix can be bought. I’ll just leave this paragraph from The Wrap out there for you to absorb it:

Those include private 1:1 marketplace deals directly through The Trade Desk, Google’s Display & Video 360 or Xandr, which will be extended across different buy types, including a programmatic guarantee in November. It also introduced Google’s Campaign Manager and Innovid for impression verification and extended its relationship with DoubleVerify and Integral Ad Science for fraud and viewability verification into programmatic channels, which will be available across all buying channels in October. 

If the phrase “confusing AF” does not come to mind…

I mean I get they are trying to accommodate all the different ways streaming is bought, sold and measured these days, and that it’s not Netflix’s fault that the streaming ad ecosystem is completely FUBAR, but that sort of thing is not exactly going to cause marketing teams to want to move nine-digit budgets over to streaming.

That said, Netflix’s seeming success is a good thing for the streaming ad market.

It creates a sense, valid or not, that the market is growing in leaps and bounds and that brands are moving more and more dollars (and euros and pesos and yen) to streaming as streaming expands.

It’s one of Netflix’s more magical qualities, their ability to get otherwise savvy people to temporarily suspend their critical thinking abilities. It’s why, for example, the acronym “FAANG” still survives, despite the fact that Netflix as a business has almost nothing in common with tech behemoths like Apple, Amazon, Facebook (Meta) and Google, and their multitude of multibillion dollar lines of business.

Again, not really Netflix’s fault—it’s not like they’re going out and promoting the use of “FAANG.” But it sticks and that belief that “as Netflix goes, so goes the industry” is not a bad thing for streaming, especially if Netflix is goes-ing well.

What You Need To Do About It

If you are the advertising part of the TV industry, you need to get your act together. I have been banging this particular drum pretty hard as of late, but people are getting fed up with how slow any sort of normalization is going and they get it’s because too many of the players think they’re going to “win” (whatever that means) versus looking to try and collaborate, which would actually result in a rising-tide-lifts-all-boats style victory.

If you are Netflix, take a bow. Well done getting so many new advertisers in, regardless of how you did it. 

If you are the industry, remember that after Hulu, Amazon is your main source of ad-supported subscription inventory. While they don’t disclose subscriber numbers, our estimate is that they have somewhere in the vicinity of 60 million ad-supported Prime video subs in the US alone. And that the more sports content they take on, the more eyeballs they have. 

Meaning they may already even be ahead of Hulu.

Not that they’d tell us, but worth noting nonetheless.

2. Fubo’s Gift To Venu

Venu, the sports app formerly known as Spulu, was never a good idea.

Creating a sports app that was missing NBC and CBS, two of the major purveyors of sports programming made no sense.

It was reminiscent of the app that some (but pointedly not all) of the record labels tried to roll out back in the day as a hedge against Napster. People did not know which songs and artists were on which labels and so the app quickly failed. (HT to Hub’s Jon Giegengack for that analogy.)

If that wasn’t problematic enough, WBD failed to keep its NBA rights, meaning that Turner wouldn’t have a whole lot to contribute to the app, which would also be sadly Barkleyrein.

Then they announced that the price of the app would be $43/month, about $30 less than a full vMVPD package which also included access to around 100 broadcast and cable channels, including all the ones on Venu along with NBC and CBS.

So news that Fubo had succeeded in securing a preliminary injunction against Venu this week may have been the best thing that ever happened to the app as it appears to provide them with an easy way to bow out and put the entire misguided project to rest.

As if.

Why It Matters

The notion of a sports-only bundle is not a bad one.

Fans had gotten tired of having to subscribe to multiple apps to watch the games they wanted to watch. And then not being able to find them without resorting to Google.

Unfortunately, Venu was never going to be the answer.

Offering an incomplete package that didn’t even offer full coverage of a single sport was never a good idea and I struggle to understand what the companies behind it were thinking.

There is certainly much uncertainty in the sports industry today, with teams moving away from RSNs to broadcast and Diamond Sports, the biggest player in the streaming RSN market, facing bankruptcy proceedings.

One key factor the machinations around Venu seemed to ignore is that, on a very macro level, there are two types of sports fans: there are those who are fans of the sport and are happy to watch any game so long as it is a good matchup. 

And then there are fans of a particular team who are happy to watch any game….so long as the Boston Celtics are playing in it.

The latter will generally pay higher prices to watch their teams. These are, after all, the people who buy season tickets. The former, not so much. Certainly not $43/month much.

And that’s just one of the  big issues to consider when looking at sports rights.

The other is the disparity between various teams in each league and the role the leagues themselves need to play. 

Follow me on this. For some teams, the New York Yankees, for instance, finding an audience for a streaming app will not be a problem. They will sign up fans locally, nationally and even internationally. The Cleveland Guardians, OTOH, don’t really have those sorts of options.

The way the situation has been described to me is that the leagues can go one of two ways. They can be “socialists” and create a league-wide app where the more popular teams support the less popular ones, keeping things relatively even in terms of income from rights to the games. The benefit there would be that the league itself would generate more interest overall because the teams would all remain more competitive.

The other option is for the leagues to be ”free market capitalists,” where each team fends for itself and some teams are naturally wealthier than others and are able to use that money to buy better players. That is, in many ways, how European soccer works, and it’s not as if they’re hurting. The upside is popular teams can gain even bigger audiences for both themselves and the league. The downside is that it creates greater disparity and may be a death knell for teams in smaller markets where they’re already struggling.

Europe, we should note, only has one massively big pro sport. The US has four, and staying competitive with a mediocre team in a smaller market is no mean feat. 

And that’s before you factor in college sports.

What You Need To Do About It

If you are Fox, Disney and, especially, WBD, you should probably say a silent thank you to David Gandler and Fubo for giving you a viable and very demure way out. “The courts forced our hand” is far more mindful to investors than “we messed up.”

If you are Fubo, don’t ever let "The Little Engine That Could” thing get old. You are fighting the good fight, hopefully someone will buy you and you can cash out. But until then, definitely take a bow.

If you are one of the leagues, you are going to be better off if you make a decision and pick a course of action now, rather than waiting to see how things shake out. I get that may not be possible for political reasons, but the sooner you force the hands of the billionaire owners, who are definitely not used to having their hands forced, the easier life will be down the road. 

Trust me.