3 JUN 2022

Could the merged Warner Bros. Discovery push ad prices up?

In order to display ads on its prime content, the newly formed Warner Bros. Discovery is adopting an aggressive position in early upfront talks with advertisers, eMarketer noted in its latest report.

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In order to display ads on its prime content, the newly formed Warner Bros. Discovery is adopting an aggressive position in early upfront talks with advertisers, pressing them to purchase a significant swath of inventory from its vast media holdings, eMarketer noted in its latest report. Many media buyers say the asking prices are too high, per Ad Age — and could drive costs up industrywide. One buyer said Warner is looking for a 15% to 25% jump in CPMs (cost per 1.000 viewers) and is not interested in negotiating much on price for volume purchased.

The former Discovery Inc. has been selling a “premiere” package since its 2018 acquisition of Scripps Networks, giving advertisers the opportunity to purchase premium ad slots at higher CPMs. In exchange, Discovery promised advertisers a reach equivalent to broadcast and access to millennial households and mobile viewers. The bundle was priced between broadcast and cable prime at the time, according to Discovery’s Ad Sales Chief, Jon Steinlauf. The new premiere package, which would include Turner Sports, CNN originals, and All Elite Wrestling in addition to Discovery’s top 30 series, would charge substantial premiums above what advertisers might have paid Warner Bros. or Discovery alone last year.

According to eMarketer, Warner Bros. Discovery’s strategy could affect the CPMs other media giants ask for. Disney+, for example, is seeking premium pricing for its inventory as it launches an ad-supported tier. Buyers have indicated Disney is looking for a CPM of $50, exceeding streamers such as Hulu. Rita Ferro, Disney's Head of Ad Sales, recently confirmed that the lower ad load of Disney+ means its ads would be sold at a higher price than those of Hulu. On the other hand, Netflix is slowly unveiling the strategy for its ad-supported tier, and could seek higher prices if Warner’s gambit pays off.

“There are no guarantees Warner Bros. Discovery’s bid to get higher CPMs will be successful. But it has to try since the merger left the media behemoth with billions in debt, which could have contributed to the rapid shuttering of CNN+ and explain why it is hoping for big things from DC Entertainment’s intellectual property,”  the report says.

“Linear TV ad prices keep rising but are still cheaper than digital options —at least on a per-viewer basis— due to TV having big reach but little targeting options. But if TV prices get too high, social video could become more attractive,”  explained Senior Analyst Ross Benes. “Another option for advertisers wanting reach is audio. Terrestrial radio represents $11 billion in ad spending in the United States alone, and reaches three in four consumers,”  he added.

According to eMarketer, for advertisers, Warner Bros. Discovery’s moves could mean higher CPMs not just for inventory across its portfolio, but could raise prices across linear TV and streaming. If WBD’s strategy succeeds, it could inspire other media entities to make acquisitions and increase industry consolidation.

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