Streaming Surges Past Studios in Ad Spend Role Reversal

The ongoing closures of most movie theaters around the country aren’t just having an effect on theatrical release calendars. The lack of theaters is also upending television advertising, which saw movie studio ad spend—one of its most reliable categories—dry up. Theatrical ad spend, normally a top staple for TV advertisers as studios promote their upcoming and current films, is down by two-thirds this year compared to 2019, according to data from the measurement and analytics firm iSpot.tv. However, streaming television ad spend is increasingly filling the void. “There is a fundamental shift that is occurring and has already occurred within the entertainment space,” said Stu Schwartzapfel, svp of media partnerships at iSpot.tv. “We’ve seen a complete flip-flop of where theatrical and the streaming categories were last year versus this year." The data helps quantify the extent of the changes within the television advertising landscape as theatrical closures and the shifting releases of expected blockbusters like Disney’s Black Widow, Universal Pictures' Fast & Furious sequel F9, and MGM's latest James Bond film, No Time to Die, brought a normally reliable advertising segment to a halt. In 2019, studios promoting their theatrical releases spent a combined $1.64 billion in the first three quarters, making them the fifth largest advertising segment on television in terms of spend. This year, studios shelled out a combined $549 million in the first three quarters, a 66% drop that relegates the category to the 34th biggest segment. “We’re seeing a fundamental decline in spending for theatrical, and at the same time we’re seeing a massive increase in spending by steaming providers who are promoting their platforms and are also promoting new and original programming that they have on those platforms,” Schwartzapfel said. “It’s probably one of the most affected categories by Covid-19 in the industry—as much, if not more, than travel.” While streamers like Netflix and Hulu have been somewhat reliable television advertisers for years, the debuts of a number of new streamers including HBO Max, Peacock and Quibi intensified the total amount of TV ad spend from streamers on traditional television. In the first three quarters of 2020, streaming services spent the equivalent of $958 million on television advertising, making them the fifth largest advertising segment in terms of media value—right where studios were a year ago. It's also up significantly from the same time last year: In the first three quarters of 2019, streaming services had spent $418 million on television advertising. Streaming services’ ad spend on television intensified in the fourth quarter of 2019 as new streamers like Apple TV+ and Disney+ debuted and looked to attract users. Streamers spent a whopping $551 million in the fourth quarter of 2019, accounting for more than half of total 2019 TV advertising spend in the category. That surge has only intensified as Covid-19 has prompted an unusual opportunity for home entertainment providers. “There’s nothing good about Covid, but people were in a prime position to capitalize on the increased presence of streaming providers on the market when things got bad,” Schwartzapfel said. “There was a certain aligning of the moon and the stars when Covid came that is contributing to this.” Even with all the new platform debuts, there's no single standout advertiser in the streaming space. From January 2019 through the end of September of this year, Amazon Prime Video was the top video streaming service in terms of impressions, with just over 12% of total impressions; Hulu came in at a close second with 11.7% and relative newcomer Disney+ was third, at 11%. While the drop-off of studio advertising isn’t entirely surprising—there’s no reason to market movies that are not playing in theaters—it underscores just how the Covid-19 pandemic has accelerated existing trends across the industry. Take premium video-on-demand advertising, a virtually nonexistent segment as recently as a year ago. As films like NBCUniversal’s Trolls: World Tour, Warner Bros.’ Scoob! and Disney’s Mulan moved to premium video-on-demand platforms, advertising on TV followed in force, breaking out a new segment for iSpot.tv to track going forward. (ISpot.tv counts PVOD spend from studios as part of streaming spend, not as traditional theatrical releases.) “PVOD, as we call it, is an all-new type of video-on-demand,” Schwartzapfel explained. “It’s a whole new category of film releases that did not exist before.” It’s unlikely studio ad spend will return anywhere near to pre-Covid levels this year as cases continue to rise and theatrical titles that may otherwise be released in theaters remain delayed or move to on-demand platforms. Studio spend is expected to tick up in 2021, provided the state of the pandemic improves, but some of the spending shifts are likely permanent. “Even when studios ramp back up with their traditional slates in 2021, I think you are going to see PVOD here to stay,” Schwartzapfel said. “I don’t know at what scale, but I think you are going to see PVOD as a regular fixture moving forward at some scale.”