att – Cinematic Slant

Given the slate of movies Disney has scheduled for release in 2019 it can’t be good news for YouTube and parent Alphabet that the entertainment company is reportedly pulling its advertising from the streaming platform in the wake of revelations of how often comments are used to highlight sexually exploitative material.

Movie ads are commonly seen on YouTube as pre-roll spots, and sponsored placements often contain prompts to watch new trailers for upcoming movies. Disney pulling their advertising spending from the platform means YouTube will not be used as part of the paid marketing for movies including:

Captain Marvel
Dumbo
Avengers: Endgame
Aladdin
Toy Story 4
Spider-Man: Far From Home
The Lion King
Artemis Fowl
Frozen 2
Star Wars: Episode IX

In 2018, Disney commanded 26.1 percent of overall U.S. box-office revenue, bringing in over $7 billion. The studio released the top three films of last year, including the top performing Black Panther, and its dominance is expected to become more substantial as it finalizes its acquisition of Fox.

Basically this is not who you want to have on your bad side if you are a platform or other outlet that’s reliant on movie marketing and other advertising income.

What Disney and others, including the maker of the Fortnite video game, are doing is deciding that YouTube-hosted content is no longer a safe space for their brand. They’ve determined that they risk substantial reputational damage that could potentially translate into lost revenue because they’re seen as supporting material that’s not just offensive but harmful and reprehensible.

That’s the last thing Disney wants to have happen. Look at all those movies listed above. They are all family-friendly franchise installments or starters that are designed to not just generate ticket sales but also theme park attractions, consumer merchandise and additional revenue streams both today and, through sequels, for years to come. Each is sure to be accompanied by massive ad campaigns in addition to the publicity tours and earned media efforts, and YouTube was positioned to receive a good chunk of that spending.

This is far from the first time YouTube has faced this kind of decision from advertisers. AT&T just recently returned ads to the site after pulling them two years prior for similar concerns only to reverse that decision in the wake of this latest controversy. Other companies have, at various times, removed their advertising and marketing from other sites, platforms and networks.

Yet where the line is between “acceptable” and “too far” remains mysteriously vague and uncertain. Facebook is currently under fire for its role in helping to spread harmful anti-vaccination conspiracy theories. Anti-Semitism is rampant on Instagram. Criticisms of how Twitter fails to protect women and minorities from harassment of all kinds are almost as old as the site itself. There don’t, though, seem to be any concerns over promoted posts and other ads being placed on those social networks, indicating the problem isn’t specific or substantial enough to warrant such measures.

In the last 10 years or so, Hollywood studios have increasingly worked to balance their roles as creative storytellers and brand managers. Disney is the best example of that new reality, releasing almost nothing that isn’t a remake, sequel, adaptation or spinoff. It can’t afford to be seen as endorsing, through advertising, those engaging in the sexual abuse or exploitation of children because doing so would harm not just the corporate brand but all the IP the company oversees. There’s simply too much at stake.

Yet the problems of offensive material go far beyond one platform or network. As has been the case since the first Google AdWords were placed in the right rail of a blog, advertisers can’t always guarantee their messages will appear alongside wholesome, brand-friendly content, but the reach of consumer-generated media is too enticing for most to pass up.

Right now corporate boycotts and ad blackouts are relatively isolated incidents. The platforms impacted by these actions as well as user backlash usually follow a script of pledging to do better followed by the CEO or other executive giving multiple interviews where they talk about how much they’ve learned from the episode. The cycle then repeats in four to seven months when the next outrage or crisis breaks. Indeed it seems YouTube isn’t doing anything substantively different in the wake of the most recent crisis, just offering explanations of existing policy to make sure creators and publishers understand when they might be penalized.

YouTube, like the other social networks, won’t react until they feel a threat to their income has been presented. On that front Disney has a lot of leverage, even just counting its movie advertising budget outside of everything else the massive company promotes on a regular basis. It simply can’t risk the damage that could be done to entertainment franchises that are designed for decades of profitability, at least not at the moment. My hunch, though, is that we’ll be having this same conversation sooner rather than later.

The entertainment media has been awash in the last couple weeks with one announcement after another of another company making or adjusting their plans for a streaming subscription service. CBS Films will be absorbed by CBS Entertainment Group and tasked with finding or developing original features for CBS All Access. NBCUniversal has revamped its executive team around an anticipated “low key” streaming launch in 2020. Amazon’s IMDb has launched Freedive, an ad-supported service offering free TV shows and movies. Sinclair, tired of restricting its disinformation campaigns to broadcast, will debut STIRR, including all its libertarian propaganda.

All that comes just as Netflix announced a price hike for all subscribers, a move seen by analysts as a sign of confidence its membership will gladly continue to pay the increased fee in exchange for access to its growing catalog of original content.

All of these companies are competing for a piece of a pie that’s seen as growing, which is why there are a whole slate of serviced primed to launch in 2019. The Digital Entertainment Group just reported that spending on home entertainment had risen to a record $23.3 billion in 2018, growth driven almost exclusively by streaming platforms. Video on demand and digital purchases also rose, while physical disc sales were the only category that fell.

So if the consumer spending is gravitating to streaming that’s where media companies want to be. It’s a movement driven not only because of demand but because by offering their own platforms they can capture more of the audience data generated by usage instead of sharing it with Netflix or other aggregators. That’s particularly important when you consider AT&T and other companies are using such platforms as expansions of their advertising targeting capabilities, which is why it was big news that Nielsen will begin including OTT and mobile viewing in its measurement reporting, offering a more complete picture of audience size to advertisers.

The belief seems to be that people will keep on adding new subscriptions, driven by the perceived value of the content available. So NBCUniversal’s will undoubtedly be what finally grabs “The Office” from Netflix just as WarnerMedia’s will eventually have an exclusive on “Friends.”

Price is going to be the biggest factor in just how successful these ventures are. While a recent report revealed 56 percent of respondents prefer streaming platforms as a way to watch their favorite shows and movies an earlier study from last year claimed the spending ceiling most people identified $20 as the most they’re willing to pay for such subscriptions. If Netflix, the dominant player in the market, eats up $13 of that there isn’t much left over for others. That may be one reason why the idea of streaming bundles as an alternative to cable is being floated as it would replace five smaller recurring charges with just one.

The fight being mounted against Netflix isn’t coming cheap, though. AT&T acquiring Time Warner, Disney acquiring Fox…those moves and others like them are meant to counter the streaming giant, which is seen as a clear and present danger to the business model of studios, networks and other entrenched players. They’re being financed with massive amounts of debt, though, and the financial servicing of that debt is a major drain on cash flow and other resources. So, as Variety points out, not only are these companies taking on shattering organizational changes to play in the streaming market, but they have to walk the line between charging enough to keep paying down debt while not honking off subscribers.

The margin for success, then, is thin.

Just ask those in the retail industry, which is facing a debt crisis of its own. After all it was private equity, not shopper apathy, that did in Toys ‘r’ Us. Sears couldn’t invest in its stores and operations because it was busy financing its debt. And Gymboree, bought by a private equity firm nine years ago, just filed for bankruptcy a second time.

While the entertainment media industry may want to believe it’s immune from whatever economic downturn may be coming, the leveraged debt being taken on by corporate America is increasingly worrisome to investors, who smell a recession coming. If and when it does, consumers will be cutting back on discretionary spending, a category that includes entertainment.

Eventually the camel’s back will be broken and there will be a significant shakeout in the streaming platform market. Whether that comes as the result of consumer preferences – they signal they’d rather watch the fifth season of “One Day At a Time” on Netflix over rewatching “The Good Place” on NBCUniversal’s service – or because corporate debt becomes unmanageable and a service is shut down matters only to those who track such things for a living. For the audience it just means they will have to adjust which subscriptions they are managing.