Buyers are earmarking ad spend for new ad-supported tiers

During this year’s upfront season, streaming services that are readying ad-supported tiers became everyone’s favorite punchline.

“After those smug bastards choked the life out of us for years, it feels really good to see them stoop to selling advertising,” ABC late night host Jimmy Kimmel joked about Netflix at Disney’s upfront presentation. Network execs got in on the action, too. “They can’t afford to build their paywall without your money,” Fox Entertainment CEO Charlie Collier said of rivals Netflix and Disney+, while NBCUniversal chairman of global advertising and partnerships Linda Yaccarino suggested that other companies’ approaches to advertising “might actually seem like an afterthought—or even worse, just a new idea to turn on a new revenue stream.”

But joke’s on them. With Disney+’s ad-supported tier arriving in the second half of 2022, and Netflix racing to get its own ad-supported tier by the end of the year, buyers are setting aside some of their clients’ 2022 advertising dollars toward those platforms—or at least keeping their buys flexible enough that they have the option to move upfront dollars around.

Ad agencies are telling advertisers that they “have to have [the] budget available to be where we need to be,” Meredith Zander, group media director at the ad agency Fallon, told Marketing Brew. “A lot of that can go into an upfront buy, but not all of it can go in an upfront buy.”

Off-limits

Even though Disney+’s ad-supported tier won’t arrive until the tail-end of the year, agencies are already allocating some of their clients’ advertising budgets toward the platform in upfront conversations.

The late-year arrival of the tier, though, is “throwing a monkey wrench” into planning, said one media buyer, who asked to speak on background.

“They’re bringing [Disney+] online this broadcast year,” the buyer told Marketing Brew. “So I have to reserve money to spend on Disney+.”

Ahead of upfronts, Disney has shared details about its advertising plans for the service, including its four-minute-per-hour ad load and its inclusion of standard 15- and 30-second ads. Those details make it more feasible to cordon off some spend early, even though it’s anyone’s guess as to the initial audience and scale of the ad-supported tier, said Maureen Bosetti, chief investment officer at the media planning and buying agency Initiative.

“We are really trying to plan for that [based on] as much as we know today,” Bosetti told Marketing Brew. That means talking to advertisers now about “how we can carve out some budgets or plan for it in the future,” she said, as well as hashing out what price advertisers would be willing to pay to be part of the platform during upfront deal-making.

Zander, too, said details from Disney about its ad-supported tier have made it easier for more advertisers to rope off spend, even though there are still unknowns.

“When you can anticipate launches like this, and you know it’s right for your target, and you know it’s right for your audience—that is so important,” Zander told Marketing Brew. 

The exclusivity factor in particular is giving Disney+ a leg up in discussions. “Everyone wants to be the first to be somewhere and to get in with limited advertisers and exclusive sponsorships,” Zander added.

Musical chairs

Netflix’s forthcoming ad-supported tier, meanwhile, has no formal rollout date and only a few details about its ad strategy, like the fact that there will be no ad breaks mid-programming to start. That means advertisers aren’t exactly clamoring to earmark spend now. Instead, they’re building in flexibility during their upfront negotiations to make sure they can move money around if they have to.

“Because we have flexibility in the upfront, it may mean, ‘Hey, let’s take some of the media from some of the upfront and shift it over to Netflix,’” Bosetti theorized. “It’s something we could do, and that’s why we have flexibility to be upfront—so we can take advantage of new opportunities as they arise across the year.”

That flexibility, though, can go both ways. If ad-supported tiers don’t arrive in time for clients, they can always move the dollars they set aside elsewhere.

Zander explained that even if we don’t get ad-supported Disney+ or Netflix this year, “there’s lots of other places that we can buy to get those impressions and to get the reach that we need.”