Upfronts Upended: Streaming’s Pivot to Ads Raises Tough Questions

Upfronts Upended: Streaming’s Pivot Ads Raises
Illustration: VIP+: Adobe Stock

If any one image sums up the strange spectacle of the 2022 TV upfronts, it would be Kevin Feige, president and commander in chief of Marvel Studios, pitching the upcoming slate of Disney+ series with the help of Samuel L. Jackson. It was the kind of stunt that used to be native to San Diego Comic-Con, now happening before a roomful of advertisers rather than comic-book fans.

Of course, it wasn’t exactly out of place at the upfronts this year. The annual presentations, once the venue for TV networks to unveil their fall primetime schedules, have become cross-platform barrages, packed with A-list talent (The Rock! Lizzo! Stevie Wonder?) hawking upcoming content. 

Notably, much of that content was material either earmarked for streaming or promised to end up there at some point. While Disney touted its subscriber-exclusive Marvel titles, Fox declared this year’s FIFA World Cup matches will stream on its FAST service Tubi. At NBCUniversal’s presentation, a highlight reel of the studio’s upcoming films assured viewers potential blockbusters like “Jurassic World: Dominion” and Jordan Peele’s “Nope” will be available to stream on Peacock as soon as their theatrical-exclusive windows close — a sight that would have been nigh unthinkable just three years ago.

It all underscored not just the changing nature of the TV business but a new and increasingly important fact of that business: Streamers want advertising dollars, and they want them badly. The predominant strategy in the streaming wars has shifted from pursuing constant subscriber growth in favor of an ad-supported model remarkably quickly, after the already infamous Netflix correction shifted the battlefield in April. (“We are not chasing subscribers,” declared Marianne Gambelli, president of ad sales at Fox, during the company’s mostly virtual presentation.) 

Accordingly, the streaming ad market is about to become a lot more competitive, with both Disney+ and Netflix planning to roll out ad-supported subscription tiers later this year. Ad revenue from connected TV — meaning, in this case, ad-supported streaming platforms such as Hulu, Tubi and YouTube (which made its first-ever appearance at upfronts this week) — is projected to reach almost $19 billion this year and surpass $28 billion by 2024, according to eMarketer forecasts.

And if anything, that might be modest. While linear TV still makes up the majority of consumers’ viewing time, streaming is gaining ground, surpassing a 30% share for the first time in April, per a recent Nielsen report. Despite that, IAB’s 2021 Video Ad Spend & 2022 Outlook report projected that just 18% of total video ad dollars would go to CTV in 2022.

Still, that represents $21.2 billion in ad spend, a 39% increase from 2021, and upfronts were definitive proof that the battle for those dollars is already heating up. Disney trotting out Feige, for instance, was an unapologetic Hail Mary play to secure ad commitments for Disney+. “Look at us,” the company seemed to say. “Don’t you want your money and ads to go where entertainment’s biggest, most popular franchise lives?”

It was a shrewdly dramatic move in classic Disney fashion. It also seemed a bit desperate. 

Media stocks have been hit hard in the recent market downturn, and investors are clamoring to see more profits from the costly streaming business. Introducing ads is, in theory, a solid strategy to boost revenues and reassure investors that streaming is on its way toward a sustainable business model.

Yet one thing was noticeably absent from the bulk of this year’s upfront presentations: business strategy. Most conspicuous, there was no word on when the ad-supported version of Disney+ would launch and no announcement of the widely anticipated HBO Max/Discovery+ streaming bundle. Plans are likely underway (and Disney did reveal some details about its advertising strategy), but the way things looked this week, streamers still have nothing to tout besides the content slates they’ve poured billions of dollars into and are charging ahead without a solid strategy in place. That’s not exactly a recipe for reassuring investors.

And make no mistake, there are risks here. With ad-supported plans will come price hikes on ad-free subscriptions, which could frustrate consumers who have grown accustomed to the ad-free experience. And the return to a model that looks an awful lot like the one media companies abandoned in favor of streaming — TV with ads, bundled services — is not likely to appeal to viewers.

As such, advertisers should be wary of being taken in by the bluster. No one seems entirely sure how Netflix will achieve its goal of rolling out ads by the end of the year, but the streaming giant could very well arrive at upfronts in 2023 with the casts of “Stranger Things” and “The Crown” in tow. That kind of hype is what got us here; more of it shouldn’t be sufficient to put everyone at ease.