Omnicom-Interpublic Merger, Disney's ESPN+ Integration, Warner Bros. Discovery's Comcast Deal
Author's Note #1: A reminder that I am running a survey about the seven entrepreneurs or "builders" I interviewed this year.
Please take a couple of minutes to let me know what else would you want to learn about them in a new offering. And in which other formats?
It is invaluable to me to get your feedback. Thank you!
Author's Note #2: Some quick housekeeping for this month:
Back in January, I made 10 predictions for 2024. With the holidays fast approaching, I am going to revisit them on Thursday
Next week, I will make my 10 predictions for 2025. This essay will be my last for 2024 barring any significant headlines or developments.
Given these two projects, there is no full essay today. Below, exclusive to subscribers are two short takes on Omnicom and Interpublic merger and recent headlines for Disney and Warner Bros. Discovery.
Total words: 700
Total time reading: 3 minutes
Observation #1: Omnicom + Interpublic
Omnicom Group announced this morning it will acquire Interpublic Group IPG. The deal would create the world’s largest advertising company.
The Wall Street Journal reports that Interpublic is “struggling to keep pace” with its rival Publicis, which “adapted faster to the technological shifts that reshaped how brands connect with consumers.”
Large holding companies more generally have been “struggling to develop new lines of revenue” and their best-known products—TV commercials and print ads—are seen as less effective in spurring consumer purchases and response. They are “working to stave off competition from tech companies such as Alphabet’s Google and Meta Platforms that are using AI to drive deeper into the business.”
According to the announcement, the purpose of the merger is "to accelerate innovation and harness the significant opportunities created by new technologies in this era of exponential change."
This reads like an understatement if you have been reading my essays on Meta CEO Mark Zuckerberg’s vision of “hundreds of millions” of small businesses becoming creators. Their competition for consumer attention is exploding exponentially as creators become small businesses.
There is still consumer demand for large brands: Interpublic's client roster includes L’Oréal, Johnson & Johnson and Geico, and Omnicon's includes Disney, AT&T and PepsiCo.
Broadly speaking, there are three challenges to this merge presented by creators as small businesses:
Creators compete for and capture attention that blue chip brands badly need;
Creators with small businesses have more resources to compete for the same inventory to reach those same consumers; and
Creators with small businesses have full-funnel models—meaning, they leverage advertising to drive awareness, purchase consideration, and purchase decisions—whereas blue chip brands rely more heavily on awareness.
This reads like an updated, more globalized version of the market dynamic the Interactive Advertising Bureau (IAB) has described as “The 200 vs. the 10 million”. I wrote about this dynamic in October's "Meta, Small Business Creators & “AI Television Universes”.
In the past, the television marketplace offered a fixed supply of linear inventory to a fixed demand of buyers. 200 “retail-cartel” advertisers supplied 88% of U.S. network television revenue (the term “retail-cartel” applies to the brick-and-mortar retailers who have historically bought from networks).
But, Meta, TikTok and Google also have been proving over the previous six or seven years that over 10 million advertisers in the U.S. are willing and eager to spend on direct-to-consumer advertising. Those platforms have been democratizing the competitiveness of smaller brands in the advertising marketplace and pushing both advertiser supply and demand away from television and other traditional formats.
In other words, this deal is a bullish signal for Meta.
Observation #2: Disney & Warner Bros. Discovery Go Tactical
Last Wednesday, Disney debuted a dedicated ESPN tile on Disney+ for people who subscribe to ESPN+. This morning, Warner Bros. Discovery announced it had finalized a wide-ranging cable distribution deal with Comcast, giving Comcast expanded rights in how it sells the Warner streaming service Max to its customers in the U.S. Also, Sky will become a distributor of Warner’s Max streaming service starting in early 2026.
For both streaming ventures, these are tactical moves with marginal value mostly targeted to lowering churn. Disney needs Disney+ consumers to watch ESPN and it is easier to consolidate those views on a single platform. The bet is that they are less likely to churn out if they do.
Warner Bros. Discovery needs to lower churn and Comcast has the rights to package the ad-supported versions of Max and Discovery+ in its streaming bundles.
Incremental progress is progress. These businesses are starting to run more efficiently after five years of inefficiency.
However, it is worth remembering what I wrote last month on Comcast and Disney:
"[E]fficiency as an outcome will always be insufficient. Meta, Netflix and generative AI are redefining "efficiency" for these [media companies] faster than they can redefine it for themselves."
Both companies' big bets on streaming's future seem to be destined for disappointing outcomes. Disney and Warner Bros. Discovery should be pivoting more aggressively towards a licensing model for their libraries of intellectual property (IP). The pace of change being driven by artificial intelligence is extraordinary and is creating more opportunities for monetizing IP.
The rationale for the Omnicom-Interpublic merger is "to accelerate innovation and harness the significant opportunities created by new technologies in this era of exponential change." Neither of these deals accomplish this outcome for either Disney or Warner Bros. Discovery.