Will the midterms save streaming?

It’s been a rocky year for the streaming industry. Netflix stumbled, and it had to acknowledge that it’s facing a significant subscriber slowdown. Ad-supported streaming is still growing, but brands and marketers are cutting back, which has severely impacted companies like Roku. And Warner Bros. Discovery did a U-turn on many of its streaming initiatives, killing projects like “Batgirl” in the process.

The good news: Ad-supported streamers are about to get a big break, thanks to the midterms. Political campaigns are expected to spend a whopping $1.2 billion on political advertising on streaming services, and some insiders told me they’re already seeing spending way ahead of where it was just two years ago.

• Basis Technologies, an ad and marketing software company, is seeing a 15x increase in the money spent on streaming ads during the first six months of this year, compared to the same time span in 2020.
• “Connected TV is really the big story in political advertising this year,” Grace Briscoe, SVP of client development at Basis Technologies, told me during a recent interview.
• Ad network DSPolitical, which primarily works with Democratic and progressive campaigns, has seen connected TV ad budgets swell to 20% compared to mid-single-digit spending just two years ago.
• “It's becoming a very big thing,” DSPolitical CTO and managing partner Mark Jablonowski told me.

Spending more money on streaming ads makes a lot of sense for political campaigns. Not only did streaming surpass other forms of TV viewing for the first time ever in July, it’s also really the only way to reach younger audiences.

• “Anywhere from 1 in 3 millennials to as many as half of Gen Z adults report they no longer have linear television services,” I was told by Samba TV SVP Dallas Lawrence. “These voters are 100% unreachable by traditional TV campaigns.”
• At the same time, campaigns are finding it easier to adapt to streaming than some prior technological shifts.
• “You have a 60-something white guy [who is] both the candidate and the campaign manager,” Briscoe told me. “Ten years ago, when I was trying to explain digital advertising to these guys, they didn't get it. This makes more sense in their own personal media habits. It’s still a TV ad on a TV screen.”

But will the cash influx be enough to help streamers recover? Major media execs did call out the impact election money will have on their streaming services during recent earnings calls, with NBCUniversal CEO Jeff Shell saying it would contribute to “some pretty strong results from Peacock in the coming fall.”

• Chicken Soup for the Soul Entertainment CEO Bill Rouhana recently told me that political ads will “more than make up” for any cutbacks from advertisers. “Through November, I think we’re pretty safe,” Rouhana said.
• Roku CEO Anthony Wood, on the other hand, wasn’t all that optimistic about the impact political ads will have on his company’s business.
• Wood called political advertising “an important vertical,” but also acknowledged that his company simply doesn’t have enough ad inventory to sell to fully benefit from heavily contested races.
• “Even though we have a lot of scale in a particular market, we'll reach caps fairly quickly,” Wood told investors in July.

The big unknown: Netflix and Disney. Both companies are scheduled to launch ad-supported tiers for their respective streaming services before the end of the year, and both could theoretically provide many millions of additional eyeballs to political advertisers — if not for this election, then for 2024, when streaming spending is likely going to be even higher.

• A Disney spokesperson told me that the company won’t accept any political ads “at launch,” but I wouldn’t be surprised if the company changed its tune on that front in time for the next presidential election.
• Netflix hasn’t said yet whether it will accept political advertising; a Netflix spokesperson declined to comment.
• “Should Netflix and Disney+ allow campaign spending, it will kick off a land grab unlike anything we have seen in more than a generation of political TV advertising,” Lawrence told me.

You can read my full report on political advertisers cutting the cord on Protocol.com.

— Janko Roettgers

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Overheard

“We saw challenges on the horizon, and hedged our bets accordingly, but still got punched in the face hard by 2022’s new economic reality.” —Snap founder and CEO Evan Spiegel addressed employees in an internal memo following the company’s recent massive layoffs. In the memo, Spiegel committed to developing future versions of the company’s Spectacles AR glasses and revealed that Snap has been building out an enterprise AR unit to license its tech to other companies.

“We are very serious about entertainment. We are in it for the long haul … we want to build the best selection of streaming content.” — Amazon CEO Andy Jassy sang Prime Video’s praises during a fireside chat with Kara Swisher at this week’s Code conference. Jassy has good reason to be bullish: The company’s “Lord of the Rings” series has been a big hit with viewers.

In other news

Netflix cuts costs, starts hiring junior staffers. Cost-cutting measures reportedly include reigning in cloud computing expenses, killing some homegrown production software and hiring junior staff — a big departure for a company that used to only recruit experienced employees.

Sony throws shade at Microsoft’s Call of Duty concession. Sony exec Jim Ryan told Gamesindustry.biz that Microsoft’s pledge to release Call of Duty on PlayStation for three years after its current agreement was “inadequate on many levels.”

VR hardware startup Varjo raises $40 million. The company, which makes high-resolution headsets for enterprise use, has raised around $150 million to date.

TikTok parent makes deep cuts to its gaming unit. ByteDance has reportedly laid off hundreds of employees in its nascent gaming division, according to a report this week from the South China Morning Post.

Google will announce its 1080p Chromecast next month. The new dongle, which we first reported on in January, will cost about 40% less than the company’s existing 4K version.

The owner of Regal Cinemas just filed for bankruptcy. Cineworld is said to be the second-biggest theater chain in the world; the company plans to reemerge from bankruptcy early next year.

A historic indie studio shuts down. Vodeo Games, the developer of indie game Beast Breaker and the first North American studio to unionize, said on Wednesday it was shutting down due to a lack of funding.

Gulf states want Netflix to censor its service. Countries including Saudi Arabia, the United Arab Emirates, Bahrain, Oman, Qatar and Kuwait want Netflix to remove “offensive” content.

One more thing

Apple unveiled its new iPhones and watches yesterday, alongside a refreshed version of its AirPods Pro wireless earbuds that now personalize spatial audio based on a 3D scan of your ear. Which is pretty neat, but not the innovation that many had been waiting for: AR and VR enthusiasts everywhere had hoped that the company would give us at least a sneak peek at its still-unannounced mixed reality headset.

The anticipation was so high that more than one AR aficionadomistook the closing bumper of Apple’s keynote video for a teaser for future mixed reality products. In reality, it was just a clever plug for “Severance,” an Apple TV+-exclusive dystopian sci-fi show.

Come to think of it, “Severance” may be a perfect metaphor for the secrecy under which Apple is developing its AR and VR hardware. No one really knows what the company is working on, when it will get released or how much it will cost. For now, anyway. One day, we’ll just walk through that door, and accept our new Apple Reality. I just hope the waffle party will be optional.

— Janko Roettgers

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