GroupM Explains How Disney Can Have Its Premium Cake And Make Subs Eat Some Ads Too

I don’t think I fully appreciated the significance of Brian Wieser shifting his method for calculating the ad economy based on the revenue reported by media suppliers (vs. Madison Avenue’s historic top-down method based on their ad billings) until I began listening to his weekly “This Week Next Week” podcasts with GroupM colleague Kate Scott-Dawkins.

Wieser made that shift 13 years ago after succeeding Bob Coen as Interpublic’s -- and arguably the ad industry’s -- chief forecaster, and he has stuck with it ever since.

Aside from helping to explain why his numbers -- whether at IPG, Pivotal, or more recently at GroupM -- are so different than other industry sources, it also explains why it likely is a better way to predict where the future is going, because it gives you the kind of optics you’d get from looking through a telescope the other way around.



Given that, I wasn’t surprised to hear Wieser and Scott-Dawkins spend so much time talking about defaults in episode 32 of their podcast, which dropped late Friday. No, not those kinds of defaults, which you might otherwise expect to be discussed amid so many hand-wringing analyses of the overall economy.

The kind of defaults that are the basis for the subscriber revenue models of the world’s biggest premium-content providers. Specifically, the one that Disney’s management implied in is earnings release last week, which appears to have included a plan to make advertising its default subscriber revenue model.

“I think Disney+ could very well become the biggest ad-supported streaming service out there,” Wieser predicts, adding, “I assumed the default would continue to be ad-free, maybe at a higher [subscription] price. But I wasn’t thinking in terms of making the default advertising, and then essentially forcing people to upgrade.”

Assuming press reports of Disney’s new strategy are correct, Wieser says the move could prove to be a “fascinating behavioral economics” that end up leading more people to be on an advertising tier:

“Is it better to take people on an ad-free business and say, by default, now you get ads and opt-in to the ad-free version at a higher price,” he mused, adding, “Or what happens if you say everybody gets a price increase, now opt in to the cheaper ad-supported version?"

As Wieser and Scott-Dawkins ruminated about the subscriber streaming strategies to date – how Netflix began totally ad free and has only recently begrudgingly added a lower priced ad option, or even Disney’s Hulu’s migration from ad-supported to offering a ad-free premium version – I started to think that we’re actually living inside a giant experimental test tube whose results could determine much of the future of advertising growth, all based on the behavioral economics of how consumers react to the ways big media suppliers opt them in or out of revenue models.

And you can only see that if you look from the bottom up. Or a different metaphor we in the journalism business like to use: looking at the trees instead of the forrest.

In any case, I’m glad the GroupM team is, because it’s giving me new insights about what’s really going on – both near- and long-term.

And based on their most recent tracking of the ad economy – including the quarterly earnings reports of major media companies, major marketing categories, as well as macro economic data – the GroupM forecasters are actually pretty optimistic about how things are holding up.

Citing recent reports from big TV-centric companies like Fox and Disney, they said the current TV advertising composite for the second quarter is “still growing 3% to 4%,” and that when coupled with low double-digit growth for digital suppliers, “What the data is showing: It’s not a negative environment.”

With the first half “put to bed,” the GroupM team says the data more or less supports the still robust growth they forecasted in their mid-year update in June. And while many economists remain uncertain or negative about the outlook for the second half, Wieser and Scott-Dawkins, at least, are still “optimists.”

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