When people only watched network television broadcasts, it was a widely accepted norm that one network simply would not accept advertising for another network’s programming. Doing so would only help competitors, so why would the company allow it? But that norm has changed dramatically in the streaming era, in which ads for HBO or Showtime pop up all the time on Hulu, and vice versa.
When Disney introduced its streaming service, to great fanfare, it initially planned not to allow any competitors to advertise on the Disney+ platform. But further research led it to decide that it could allow other streaming services to appear, in a sort of quid pro quo agreement, such that both sides would allow advertising. In making this decision, Disney avoided a blanket rule though; it took a careful look at the individual agreements it could enter into with each of its competitors and adopted a nuanced, specific approach. As a result, many competitive services are allowed to advertise on the Disney+ platform—but Netflix is not.
Netflix does not run ads for other streaming services in its content, and that barrier represents the primary reason Disney chose not to allow Netflix advertising among its shows either. Basically, the company determined that if Disney ads would not run on Netflix, neither would Netflix ads appear on Disney+. At the same time, because Disney needs content for its streaming platform, it has pulled some of the shows and movies that it owns from Netflix, to ensure consumers have to subscribe to its dedicated services to get their Disney fix.
But beyond the streaming platform, Disney also owns several other broadcast channels, and on those, viewers certainly see Netflix advertising. The company spent an estimated $99.2 million on advertising last year, so on ESPN and ABC network broadcasts for example, consumers can still encounter advertising for Netflix. Furthermore, it is not as if Netflix is severely limited in where it can advertise, and in recent years, it has significantly increased its advertising spending on televised channels, by an estimated 66 percent.
These advertising efforts represent attempts by the various services to increase their customer base and attract new consumer subscribers. But the foundation for placing, selling, and buying such advertisements depends strongly on the business-to-business relationships that the various competitors develop and maintain. If companies cannot come to an agreement about how to collaborate on advertising while still competing for customers, it could have negative effects for everyone involved: platforms that lose advertising revenue, advertisers that get locked out of a viable marketing channel, and customers who fail to receive pertinent marketing information about appealing service offers.
- What factors should streaming services consider when deciding whether to accept advertising from their competitors?
- Are the risks of blocking Netflix advertisements worth the benefits that Disney might accrue from this strategic choice?
Source: Alexandra Bruell and Suzanne Vranica, “Disney Bans Netflix Ads as Streaming’s Marketing Wars Intensity,” The Wall Street Journal, October 4, 2019