In Q2 2023, PARQOR will be focusing on three trends. This essay covers:
The definition of scarcity is continuously evolving away from linear and towards walled gardens, and
"Premium content" is being redefined by creators, tech companies and 10 million emerging advertisers.
A reminder that this newsletter is now The Medium from PARQOR. It's the same newsletter focused on three to four key trends per quarter, but it is now oriented a bit more narrowly.
And, as you may have figured out, the new branding is a nod to Marshall McLuhan's "The medium is the message" and my focus on the moving pieces of media's evolution from wholesale to retail models.
PARQOR will remain the corporate brand, and I will be building out membership services under that brand.
Some housekeeping: I will be on holiday for the second half of June. There will be a Monday AM Briefing on June 19th, and then the next mailing will be Thursday, July 5th with the key trends for Q3 2022.
If anything significantly newsworthy happens between now and early July — unlikely but one never know — you will be hearing from me!
Two significant — and fascinating — stories on Amazon’s ambitions in advertising emerged last Wednesday.
First, The Information reported that “Amazon ended up losing hundreds of millions of dollars during its first year of streaming Thursday Night Football, estimate TV, sports and ad industry insiders, given both the $1 billion-dollar a year rights fees and production costs.” Amazon is emerging more cautious than confident with its first season of the NFL's Thursday Night Football broadcast under its belt, and with major sports rights deals like the NBA up for grabs in 2025.
Second, The Wall Street Journal reported Amazon is planning to launch an advertising-supported tier of its Prime Video streaming service. That plan also relates to sports rights — a Prime Video ad-supported tier could help pay for NBA rights — but exists moreso because “ad buyers say they want more access to premium movies and programs that have remained largely ad free, content that often garners more buzz.”
Both shed light on the evolution of two of the market trends The Medium and PARQOR have focused on in Q2 2023:
The definition of scarcity is continuously evolving away from linear and towards walled gardens, and
"Premium content" is being redefined by creators, tech companies and 10 million emerging advertisers.
Key Takeaway
If we believe that exclusivity is the new scarcity in connected TV advertising, then the stories that emerged about Amazon last week suggest that they seem to have neither exclusivity nor scarcity yet.
Total words: 1,000
Total time reading: 4 minutes
Scarcity
Last month I wrote about how scarcity is a hot topic now after the past month of Upfronts (last week) and Newfronts. Historically, scarcity has meant the linear distribution model’s historical moat of millions of households aggregated locally, regionally and nationally. Advertiser demand for the scarcity of linear inventory is ebbing as cord-cutting accelerates. But the budgets remain the same, so where will those budgets go?
These two articles offered different lenses Amazon's answer to that question. The NFL story highlighted how, even with NFL broadcasts and even with more than 11 million viewers to Prime Video each week, according to an Amazon spokesperson, Amazon is failing to replicate the scarcity of linear channels.
The Information reported that Thursday Night Football games on Amazon Prime last season “ended up averaging 41% fewer viewers than the league had averaged for Thursday night games in the 2021 season when they aired on the Fox network, the NFL Network and Prime Video.”
For the 2023-24 season, Amazon is taking a more "flexible approach to the terms it offers advertisers", effectively conceding it has not achieved linear-like scarcity yet. It has reduced by 10% to 20% the audience it guarantees advertisers buying time on for Thursday Night Football. If the actual viewership falls short of the audience guarantee, Amazon will offer make-goods elsewhere in the Amazon video ecosystem.
The irony of that detail is make-goods are a solution cable networks can offer because they have scarcity. So, oddly, advertisers are not happy with the scarcity that Amazon’s NFL broadcasts offer, but they are open to advertising within the scarcity of Amazon’s larger ecosystem.
“Premium content” redefined (?)
The Wall Street Journal article confirmed this second takeaway: “Advertisers say they are eager to have Amazon offer an ad tier for Prime Video service, which would follow similar moves by other streaming platforms including Netflix and Disney.”
Amazon offers premium movies and programs in its free ad-supported service FreeVee. But, as The Information reported: “Freevee is not a ‘must-have’ for clients based on their belief that viewers don’t widely use the streaming service.” This would suggest that advertisers are open to advertising within Amazon’s larger ecosystem, but they are not actively seeking it.
As for Amazon’s focus on investing in more content, CEO Andy Jassy “has told people internally that he sees the value of entertainment and particularly live sports”, according to The Wall Street Journal. Amazon spent about $7 billion last year on Amazon originals, live sports programming and licensed third-party video content included with Prime.
Exclusivity is the new scarcity
As I wrote last month, YouTube and Netflix both pitched a new definition of scarcity to advertisers, marketers and media buyers at Upfronts: Scarcity is exclusivity and exclusivity is the new scarcity. The key takeaway was that the future of Upfronts is platforms selling hyper-engagement of target audiences exclusively within their niche walled gardens ("niche" meaning their smaller size relative to linear's reach across over 75 million pay-TV households as of Q1 2023).
The stories that emerged about Amazon last week suggest that they seem to have neither exclusivity nor scarcity, even though its advertising business generated $37.7 billion in 2022 from selling hyper-engagement of target audiences within Amazon. To be fair, they have exclusivity — original programming which shows up Nielsen — but they are not yet able to sell that exclusivity as a value proposition without an ad-supported tier.
As for scarcity, Amazon have achieved it as an ecosystem — average unduplicated monthly audience of 155MM+ across Amazon Freevee, Amazon Publisher Direct, Fire TV Channels, Thursday Night Football, and Twitch. But they do not yet seem to have achieved it for any individual programming beyond Thursday Night Football, and in those broadcasts scarcity has been inconsistent.
After Upfronts, it is not clear Netflix has scarcity either. There has been a lot of chatter about what the nearly 5 million global monthly active users the Basic with Ads tier actually signifies. That metric was revealed at its upfronts presentation last month. Netflix is offers exclusivity, but it is nowhere near scarcity in linear terms.
YouTube seems to be the only service which has achieved both scarcity and exclusivity and has done so by betting on creator content. It revealed at Upfronts in now reaches over 150 million unique viewers on connected TVs in the U.S., at least 50% of content consumed on YouTube is creator content (as YouTube CEO Susan Wojcicki revealed to YouTuber Hank Green in a 2020 interview.), and a recent Think with Google research post revealed 68% of Gen Z YouTube viewers agree that creators are why they visit YouTube. They also now distribute the NFL’s Sunday Ticket broadcasts.
We do not yet know how well YouTube’s 2023 upfront went for them. But one gets the sense from both this recent news on Amazon and questions around Netflix’s metric for scarcity that only YouTube is achieving both exclusivity and scarcity as advertisers shift their spend away from TV.
Must-Read Monday AM Articles
* Messi’s move to MLS is a big deal for Apple, and “Apple is using the world’s highest-profile athlete as lead gen” for Apple TV+
* How the PGA Tour Made a Deal with Saudi Arabia ($ - paywalled)
* Since the first podcast was released two decades ago this month, the medium has upended pop culture in countless unexpected ways, from revolutionising standup comedy to providing storytelling fuel for drama and documentary.
* Bill Simmons, founder of Spotify-owned podcast network The Ringer, said the streaming platform is developing AI tools trained on its hosts' voices to create targeted ads
* Firing Chris Licht won’t fix CNN
* The foundation of the tech and data investments Disney has been making to support its ad business is the global unified advertising platform initiative it started about three years ago.
* Much like how Netflix would once go on buying sprees at Cannes and now makes reality shows like Too Hot to Handle, Spotify is moving away from pricey originals and embracing amateur podcasters and creator partnerships.
* After years of focusing on DTC, Nike is quietly bringing more wholesale partners back into the fold (and a good history of Nike’s strategy)
* CNBC’s Alex Sherman argues, “Had [departed CNN CEO Chris] Licht persuaded the Discovery executives to keep CNN+, it’s possible his tenure at CNN would have developed differently.”
* Eric Seufert argues “The digital marketing ecosystem is very obviously moving into a permanent state of low visibility. Marketers must develop the capacity to ‘fly blind.’”
* Variety VIP’s Andrew Wallenstein argued “Disney’s Vision Pro segment of Cook’s presentation made for a tantalizing dream — even if making it a reality may take Disney’s Imagineering division a century to execute.” ($ - paywalled)