Disney Ban's Netflix ads as Streaming's Marketing Wars intensifies

Disney, whose properties include ABC and Freeform, earlier this year issued an edict to staff that it would not accept ads from any rival streaming services, but later reversed course and found a compromise with almost all companies, say people who is familiar with the situation. The exception was Netflix.

When Disney made its decision, Disney considered whether it had a mutual business or advertising relationship with the companies, one of the people said. Netflix does not show ads in its programs.

In a statement, Disney said that the subscription video streaming business has evolved, "with many more participants wanting to advertise on traditional television, and across our portfolio of networks." The company said it was reviewing its first blanket ban on streaming ads "to reflect the extensive business relationship we have with many of these companies."

Netflix declined to comment.

Marketing Blitz

Netflix's advertising spend increased 66% in 2018, with much of it going to TV.

Netflix & # 39; Global Advertising Spend

Estimated US Netflix Advertising Spend

Disney's deep influx leads to tension with the tensions of tech giants on multiple fronts. The company is individually at odds

Amazon.com Inc.

over the financial terms of their apps in Amazon's Stream Media player from Fire TV, a reason why Disney's upcoming streaming service Disney + doesn't have a Fire TV deal in place, The Wall Street Journal reported Thursday.

Meanwhile, Disney CEO

Robert Iger

resigned from Apple Inc.'s board in September on the same day that Apple announced its own competing streaming service.

Disney's ban on Netflix ads marks a significant shift. In the television industry, it is not uncommon for television networks to reject direct rival ads, especially if they include the specific time and date when a competing program is to be broadcast. But broadcasters have generally allowed streaming services like Netflix and Amazon Prime Video to advertise, even when it became clear that they were attracting viewers.

Now the landscape is changing. When traditional media companies launch their own streaming services, they will go head-to-head with the tech giants – and with each other – like never before.

Disney, whose $ 6.99 per month Disney + service launches in November, decided it was no longer interested in playing home to Netflix ads anymore. Netflix spent $ 99.2 million on US TV ads during 2018, with 13% going to Disney-owned entertainment networks, according to estimates from ad-measurement firm iSpot.TV.

Disney's service will offer programming from franchise services such as Star Wars and Marvel, the complete catalog of "The Simpsons" and a variety of classic films, including Price.

Apple s

TV +, also ready for a launch in November, will offer a handful of shows with top stars and producers. Comcast's Peacock and AT & T's HBO Max – which are yet to be priced as streaming services are expected to launch next year – will pack original and library programming from across these companies.

The companies have committed billions of dollars to develop new content for their initial streaming outlets, fade in big talent deals and acquire classic TV series such as "The Big Bang Theory" and "The Office."

They also plan to use liberally on advertising. Comcast's NBCUniversal has been aiming to spend about $ 100 million on ads outside its own properties to launch Peacock, which is expected to debut in April next year, according to people familiar with the company's advertising plans. The number may increase, some people said.

NBCUniversal is expected to spend at least twice the amount on its own properties, including airing a large number of Peacock campaigns on the coverage of the 2020 Olympics, the people said. NBCU declined to comment.

AT & T's WarnerMedia plans to spend about $ 300 million on advertising next year to push HBO Max, according to people familiar with the company. HBO declined to comment.

Building a new media brand can be costly. Hulu, now majority owned by Disney, has spent a lot on campaigns. It was shelled $ 574 million in 2010 amid great pressure, and even as a more mature company last year spent $ 161.2 million, according to estimates by ad-tracking company Kantar.

Although Disney's ban only applies to Netflix, some in the industry are considering restrictions that may affect other players in streaming, including the new entrants. Disney's ESPN will continue to accept Netflix ads.

TV executives have discussed setting guidelines to limit how much new power services can generally advertise on their airwaves, say people familiar with the discussions. One idea is to limit how much of the money spent in the summer to advanced ad sales that can be used to market power services, someone added. Another tactic being discussed is to charge streaming companies premium rates for ad time, they said.

Netflix has significantly increased its advertising spend in recent years as it expanded, adding subscribers and new shows at a fast clip. The company now boasts about 60 million domestic and 91.5 million international subscribers.

Netflix has warned investors about how business can be affected if media channels do not accept the ads. "If the available marketing channels are reduced, our ability to attract new members could be adversely affected," the company said in part of its annual report focusing on risk factors.

In August, Disney's stance on streaming became public when ABC Entertainment President

Karey Burke

said at a television industry conference that the network would not allow streaming of ads, according to a report in Adweek. Disney finally dropped its stance after deciding that they had mutually beneficial relationships, including advertising opportunities, with a number of streaming companies, such as Apple, Amazon and Quibi.

Disney had an expansive pact to license programming to Netflix for years, but withdraws shows and movies for its Disney + streaming service.

Write to Alexandra Bruell at alexandra.bruell@wsj.com and Suzanne Vranica at suzanne.vranica@wsj.com

Corrections & Enhancements
Netflix spent $ 1.8 billion on advertising last year. An earlier version of the chart with this article labeled the devices incorrectly in millions.