Canadian Ad Insider

The bidding war came to an end, and Netflix came out as the champion, winning its plan to acquire Warner Bros. Discovery’s film studio and HBO assets, including the streaming service, for $82.7 billion, including debt.

Well, forget that opening paragraph. We are now in the midst of a battle over who will own Warner Bros., control the future of the entertainment industry, and gain access to video inventory that can be monetized through advertising.

This deal will have tremendous impacts on agencies and brands worldwide, especially media buyers, so we reached out to two senior Canadian veterans for our latest edition of Industry Opinion.

Profectio reached out to Bruce and Devon for an interview about Netflix's latest acquisition, discussing its impact on the media buying industry and potential implications for advertising. However, the situation has changed since Paramount announced its hostile takeover. Despite this, we believe the original interview remains relevant, regardless of who ultimately acquires Warner Bros.

UPDATED: Responses were provided before Paramount's hostile takeover; we have updated comments below.

Does this consolidation finally give us the scale to rival linear TV's reach, or have we just lost our ability to negotiate favourable CPMs by creating a new monopoly?

Bruce - Consolidation doesn’t benefit the industry. Fewer options with a dominant player is not an ecosystem that provides the flexibility, access, negotiable position, transparency or innovation that we need. In Canada, Crave has the HBO/Max content, for now. What will happen to our largest Canadian streamer if and when they lose that high-quality, premium inventory?

Besides being a streaming play, Netflix now has 100 years of back catalogue storytelling that could open the door to extensions to merchandise, theme parks and more.

Do recognize that Netflix has just 15-17% of its subscribers adopting the ad-supported option. I would imagine that this “new Netflix” will have a higher monthly cost, and more households will gravitate to an ad-supported option, which is at least one positive outcome for the industry.

What about the impact on Cineplex /movie theatres, given Netflix’s policy of limiting weeks in the theatre?

Lastly, do note that this is not a done deal as regulatory and consumer backlash and the ‘Trump’ card can all impact the final outcome.

Now that the world’s most valuable IP (Harry Potter, DC, Game of Thrones) is sitting behind Netflix’s walls, are you confident we will get the unified measurement and transparency we need, or are we walking into a trap where we pay premium rates for 'trust me' metrics?

Bruce - Netflix has underdelivered to the advertising community in transparency ( everything from subscriber numbers, ad-supported households, to audiences by show), consistent relationships, and inventory clarity- this deal will not necessarily address these issues unless the advertising community raises its voice now.

The “ new Netflix” has the control, content reach, distribution and concentration to take a position that disadvantages media buyers, ultimately giving us another Google, Meta powerhouse and the possibility of similar attitudes.

Taking a more positive forecast, the flipside is Netflix collaborating with the advertising community to create something unique, innovative, transparent, and data-driven.

As a buyer, are you willing to pay a significant premium to keep that environment pristine, or would you prefer they open the floodgates to ensure we have enough supply to keep costs efficient?

Bruce - We do believe that premium, quality content delivers stronger engagement, attention, and positive impact on brand reputation – but there is a limit to acceptable premium costs. The limited commercial load is a positive for both the viewer and for commercial impact, and we would hope it is maintained. A better option to an increased commercial load is to drive innovation – new ad formats, VR, story integrations, extensions to contests/ promotions and live experiences.

As the ‘new Netflix” ad-supported household numbers increase, we will have more inventory. Consumers are already tired (extended financially) and find the current landscape confusing/complex, so a super-powered Netflix with a digestible ad-supported monthly rate would be a winner.

UPDATE:

Bruce - Paramount's hostile bid shows that nothing is settled in this high-stakes, industry-shaking consolidation/poker game.

Paramount's scenario adds cable/networks to the studio and streaming Netflix vision.

The Ellisons have the advantage of being "Trump-friendly," which gives Paramount an advantage, and Larry Ellison also has a potential stake in and TikTok sale to a U.S. group.

Let's see what next week brings!

Devon - Consolidation continues in media. Whether among local OOH platforms, global holding companies, or the future owner of Warner Bros., it is clear that there is a vision of scale to strengthen operations and increase revenue. Scale has many advantages, but comes with some tradeoffs for the market. Whoever ends up buying Warner Bros. will have rights to an incredibly impressive catalogue. Content quality is what drives viewership, and ad rates, of course, too. 

Regardless of who wins, though, I am concerned about the view experience and advertiser impact that comes from needing to provide a positive ROI on such a massive transaction. From the viewer's perspective, ad load rates on CTV have already doubled, and consumer sentiment continues to question why they continue to see more ads. Having a limited, but premium experience is important for consumers and brands, too. Brands want to reach audiences at scale, but not at the cost of too-high frequency, which can result in a negative consumer opinion of a brand.

Premium content will, and should come at a premium price. Consolidation at this level does have some cause for concern about overall rates and will be important to monitor changes when the transaction completes and into 2027.