Walt Disney is likely to gain more traction on Madison Avenue.
With an acquisition of a good chunk of 21st Century Fox, Disney takes control over many things it does not currently have. Its cable networks target families, kids, and young teens. Fox’s outlets go after people interested in big-swing drama and comedies at the FX Networks and non-fiction programming at National Geographic. And while Disney has developed savvy ways of weaving advertisers into programming, it has not been as vocal about new digital ad formats as some of its rivals — including ad-sales executives at Fox.
“It’s fair to say they are not considered as forward-leaning an organization,” Brian Wieser, a media-industry analyst with Pivotal Research, says of Disney/ABC. Meanwhile, ESPN has taken some dramatic steps in recent months, combining live viewership from streaming and linear TV into a single ratings number for ad clients.
But much could change once the Fox assets that Disney has purchased are placed into its mix. The five main FX and Nat Geo channels brought in more than $1.02 billion in ad sales in 2016, according to data from Kagan, a market research firm that is part of S&P Global Market Intelligence. At Disney, ABC, Freeform, and Disney XD snared more than $3.72 billion in the same time period, while ESPN captured nearly $2.11 billion (ESPN would likely not house any of the Fox entertainment assets). The Disney kids’ cable networks typically run sponsorships that are mixed in with Disney’s content, making regular ad sales more difficult to track.
The purchase would not make Disney the biggest media company in the sector in terms of number of hours of content watched, Wieser says. By his estimates, that distinction goes to NBCUniversal. But it would give Disney more scale at a time when TV companies are being outpaced by consolidation among cable and satellite distributors, all the while fighting off audience migration sparked by the availability of programs on mobile devices and streaming video.
Both companies have recently shaken up their ad sales departments. At Disney, Rita Ferro, a veteran of Disney’s kids’ networks, now runs advertising sales efforts. At Fox Networks Group, Joe Marchese, a savvy technology executive, oversees ad outreach. At ESPN, however, Ed Erhardt has long supervised a massive operation that sells ads across print, mobile, and TV, and has worked to find ways to get advertisers to pay for more of it than they have in the past.
Each company has taken different approaches. Disney/ABC has dug deep to offer various clients new kinds of hard-to-miss integrations into some of the company’s best-known programs. In August, as ABC News televised a two-hour special following a rare solar eclipse across the nation, ABC sold a sponsorship to Mitsubishi, which makes a vehicle called the Eclipse. During time reserved for commercials, photographers tried to get a shot of the car alongside the natural phenomenon.
At Fox, executives have placed more emphasis on how viewers might interact with commercials in streaming formats. Fox announced in May that it would no longer run traditional TV ads in streams of shows from its FX network. Instead, the company said it intended to try to sell FX advertisers exclusive sponsorship of on-demand streams and also thread “sequenced” creative executions through shows watched in streaming fashion. And Fox joined with Viacom and Time Warner’s Turner to form “Open A.P.,” a group that is working to set new measurement standards for advertisers eager to start buying based on particular behaviors and affinities, rather than traditional ratings.
Fox acquired Marchese’s company TrueX in late 2014, for a sum said to be near $200 million. Since that time, Marchese has talked up the value of rewarding consumers for their attention to advertising — like letting them choose an ad they might want to watch, or get a reward for deciding to interact with a commercial. Some of that expertise would come in handy when Disney launches — as it is expected to — direct-to-consumer subscription-video hubs. “ESPN Plus,” a sports product, is slated to launch in the spring of 2018. A Disney streaming service stocked with entertainment from Marvel, Pixar, Lucasfilm, and Disney itself, is slated for 2019. Under terms of the deal with Fox, Disney would take greater control of Hulu, the streaming-video site owned by Fox, NBCU, Disney, and Time Warner.
Would the two companies’ ad teams mix? Or would the Fox executives stay with their original company and focus on Fox broadcast and Fox Sports 1 (Fox News and Fox Business ad sales are run by a separate executive, Marianne Gambelli).
Two Fox Networks veterans help Marchese in his efforts: sports-ad sales chief Neil Mulcahy and Bruce Lefkowitz, who oversees national advertising at the company’s entertainment networks. At Disney/ABC, Debra O’Connell, an executive vice president, has played a pivotal role, rising from years of working with ABC’s stations.
For a little while, at least, the question may be moot. Mergers don’t happen with a snap of the fingers. The companies must navigate through shareholders and federal regulators. It’s entirely possible that FX and Nat Geo would be promoted by 21st Century Fox in 2018’s annual upfront market, where TV networks try to sell the bulk of their ad time for the coming season — not by Disney. Only later in the year, perhaps, will questions about advertising be truly answered.