Disney Wants to Compete With Big Tech - While Getting Smaller

Could a TV ad sales collaboration make all parties happy?

A few quick notes:

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Disney announced earnings yesterday, and the company once again showed how tough CEO Bob Iger’s second tenure is turning out to be. The streaming wars are taking casualties, as the traditional TV business continues to descend - so much so that Iger is talking about selling assets such as ABC, Freeform, FX and maybe even parts of ESPN.

Iger was pretty clear on the company’s priorities going forward - theme parks and streaming. Caught somewhat in the middle is ad sales. On the one hand, Disney seems to be pushing people to the ad-supported version of Disney+ and Hulu, as ads help drive up the average-revenue-per-user in streaming.

On the other hand, if you start getting rid of assets - even declining ones - like ABC and Disney’s cable networks- well you start becoming less of a significant TV ad sales player overall, and the pieces you are left with - like say Hulu - could end up weaker by potentially losing content deals. That’s assuming that Disney holds onto Hulu - which increasingly seems like a good bet.

I was lucky enough to catch up with Disney Advertising boss Rita Ferro just before earnings on my Next in Media podcast. While for some reason, I wasn’t able to ask her about her most recent chit chats with Iger, we did talk about the strategic value of Hulu, and the company’s various associated ad tech pieces, in a dynamic and still challenging ad market.

“Its an advantage,” said Ferro of having a full tech stack. With Hulu, “We acquired a significant amount of tech. When Hulu came on board we realized the competitive advantage they had by owning their own tech stack and being able to innovate in real time versus getting in a queue.”

Hulu’s logged in subscriber base is also crucial for Disney’s own data graph, and its ability to be able to match up brand’s own first party data with millions of ID files (100 households, 116 mill devices, etc.) “It’s really made a difference in how we talk to partners,” Ferro said.

That is crucial because increasingly, big traditional TV companies like Disney aren’t just competing with a small subset of other networks. That’s why providing options like data graphs, innovative ads and particular self serve ad buying are crucial for their future ability to compete.

“That wasn’t core to what a traditional media business is,” said Ferro. “It is core to platforms. It allows us to compete with platforms. We can because we have the scale. In order to really drive the performance you need to own your own tech stack.”

So what happens if Iger and company start dismantling all that? If the company starts unloading lots of TV assets, does the identity graph get thinned out? Does the scale start to diminish? Can you really compete with platforms by getting smaller?

Of course, Iger doesn’t necessarily see this through an ad sales lens. I do wonder however, if there is a way to divest ownership of certain pieces, while somehow retaining rights to some data and ad inventory, as to not dilute what Rita and her team are building. I even wonder if the play over time in TV is for more collaboration among partners.

We’ve already see rivals like NBCUniversal and Paramount work together - through OpenAP - to for the Joint Industry Committee to focus on new forms of measurement (Disney has been a notable holdout). Would a joint ad sales platform - maybe one built on top of Hulu - make sense for the legacy TV players. Putting aside the inherent conflicts and egos, this would allow for beleaguered media CEOs to continue to cull their own operations while still bringing in ad revenue, while focusing on growth areas.

This is most likely a pipe dream. But as The Information put it, the entertainment business is facing nothing short of an existential crisis.