As Streaming Wars Heat Up, Disney Bans Netflix Ads From Its Channels

As it prepares to launch a new streaming service for its considerable film and television assets, Disney is throwing some sharp elbows at some of its biggest competitors in the space – most notably Netflix. According to WSJ, the House of Mouse has banned Netflix from running advertisements across Disney’s TV channels, the latest sign that the so-called “streaming wars” are heating up.

Disney is one of several companies launching a new streaming service to try and compete with industry leader Netflix, as well as Hulu, Amazon, HBO, Showtime etc. The entertainment conglomerate has decided to price its service at just $7.99 (at the monthly rate; subscribers can also opt to pay an annual fee of $69.99). That’s compared with Netflix’s Standard package, which costs $13 a month and allows users to stream content simultaneously on two different devices. The plan virtually guarantees that the service won’t be profitable for “at least five years,” as the company prioritizes growth over short-term profits.

Disney, Comcast and AT&T are planning to spend hundreds of millions of dollars to advertise their new streaming services. According to WSJ, Comcast is planning to spend $100 million on advertising for its new ‘Peacock’ streaming service (that advertising blitz has already started).

Here’s an example:

[youtube https://www.youtube.com/watch?v=yw03iKedKfE]

But Disney is ensuring that Netflix won’t be able to participate in the advertising bukkake – at least not on the channels that Disney controls. The company owns two cable TV channels: ABC and the Disney Channel. Per WSJ, the company sent an edict to staffers at both channels warning that it wouldn’t sell air time to any of its rival streaming services. Later, the company reversed course and decided that the ban would only apply to Netflix, the streaming market leader.

In a statement, Disney said the streaming market has evolved “with many more entrants looking to advertise in traditional television, and across our portfolio of networks.” It added that it lifted its initial blanket ban “to reflect the comprehensive business relationships we have with many of these companies.”

Last month, Disney CEO Bob Iger resigned from Apple’s board after the consumer-tech giant announced that it would launch a streaming service of its own. Curiously, Iger waited until after Apple’s latest product announcement to formalize his departure. Meanwhile, earlier this week, Michael Olson, a senior research analyst at Piper Jaffray, said Netflix subscribers won’t be tempted by Disney and Apple. Both services are preparing to launch over the next six weeks.

Piper Jaffray: Netflix subscribers won’t be tempted by Apple, Disney from CNBC.

Per WSJ, Disney’s Netflix ad ban is a “significant shift” in the streaming wars.

In the TV industry, it isn’t unusual for TV networks to reject ads from direct rivals, especially if they include the specific time and date when a competing program will air. But broadcasters have generally allowed streaming services such as Netflix and Amazon Prime Video to advertise, even when it became clear they were luring away viewers.

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

Disney, whose $6.99-per-month Disney+ service launches in November, decided it wasn’t interested in playing home to Netflix ads any longer. Netflix spent $99.2 million on U.S. TV ads during 2018, with some 13% going to Disney-owned entertainment networks, according to estimates from ad-measurement firm iSpot.TV.

Even as some analysts dismiss the potential impact of these new challengers, Netflix has a serious problem: The streaming giant has been reliant on licensing popular content produced by rivals like NBC. Though Netflix has plowed billions into original content, these shows and movies are responsible for not even one-third of subscribers’ viewing time. Both of the most popular shows on Netflix – ‘the Office’ and ‘Friends’ – will soon be pulled and migrate to streaming services run by the shows’ owners.

In a desperate gambit to compensate for these losses, Netflix recently paid an undisclosed-but-probably-massive sum for the five-year streaming rights to ‘Seinfeld’, beginning in 2021.

Netflix recently warned that being frozen out of advertising channels could impact its business: “If the available marketing channels are curtailed, our ability to attract new members may be adversely affected,” the company said in the ‘risk factors’ section of its annual report. Netflix has raised its advertising spending by a considerable margin over the past few years, adding subscribers and new shows at a rapid clip. The streaming giant now boasts some 60 million domestic subscribers, and 91.5 million international subscribers.

Furthermore, is this the first sign that the new entrants in the streaming space are planning to team up and do everything in their power to hurt Netflix? Judging by Disney’s decision to allow other rivals to continue advertising on its platforms, we wouldn’t be surprised if some of Disney’s other rivals opt for a similar strategy.