Disney just shook up its $2 billion ad business as it prepares to battle Apple, Netflix, and Amazon for streaming audiences
- This week, Disney awarded its advertising business to rival holding companies Omnicom and Publicis after a five-month review.
- Omnicom retained movie studios and most media properties in the U.S. while Publicis won parks and Disney+.
- A knowledgeable source said Disney would spend about $375 million to promote Disney+.
- The outcome shows Disney plans to further wall itself off from rivals Netflix, Apple, and Amazon ahead of next month's launches of Disney+ and Apple TV+.
- Disney is moving toward a data-driven, direct-to-consumer marketing strategy focused on subscriptions.
- Sources close to the review also said cost savings and data were the driving factors in the review.
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The Walt Disney Company has shifted its marketing strategy as it gears up to battle Netflix, Amazon, and Apple for streaming viewers.
This week, the company announced next month's launch of Disney+ by listing every original show and movie that will be available on the streaming service in a long Twitter thread. It also awarded its advertising business to holding company rivals Omnicom and Publicis Groupe after a five-month review.
These developments followed heated disputes between Disney and its chief streaming rivals. Earlier this month, The Wall Street Journal reported that Disney banned ads for Netflix on its properties and resisted Amazon's attempts to sell ad space on Disney-branded Fire TV apps.
Disney's most important product moving forward will be digital subscriptions
The review shows Disney is pushing into performance-based marketing and selling subscriptions directly to consumers because it sees them as the future of its media business, people involved in the review told Business Insider.
During August's Q3 earnings call, Disney CEO and chairman Robert Iger called Disney+ "the most important product that the company has launched ... certainly during my tenure in the job."
Iger acknowledged that Disney+ would lag far behind Netflix in terms of original content but said it would rely on the strength of brands like Star Wars, Marvel, and Pixar.
In the review, Publicis won responsibility for marketing parks and Disney+ in the U.S. while Omnicom retained Disney's film studio work and traditional media outlets including the Disney Channel, ABC, FX, and Nat Geo. ESPN will stay with Publicis, which also won the entirety of work in Latin America, Asia, and the region comprising Europe, the Middle East, and Africa.
Two people close to the review said one key reason Disney awarded the Disney+ advertising to Publicis is because Apple, its big streaming rival, has a more than 30-year relationship with Omnicom. Another source said fellow holding company WPP also sat out the global review due to a potential conflict with client Comcast and only pitched in India, where it retained Disney's business. (Publicis agency Spark Foundry counts Comcast-owned NBCUniversal as a client.)
Source: Disney to spend about $375 million to promote Disney+
In another sign of Disney's attempts to distance itself from rivals, Iger last month stepped down from Apple's board of directors, the same day Tim Cook announced that Apple's own streaming service would premiere in November, which is two weeks before Disney+ is set to go live.
A party with direct knowledge of Disney's marketing budget said the company would spend about $375 million to promote Disney+ in the next 12 months. By contrast, Disney parks spends just under $600 million on marketing annually.
Multiple parties confirmed that Disney's in-house team manages just under half of that $600 million, including programmatic and digital buys. But Publicis could play an advisory role. Its CEO Arthur Sadoun said in an internal memo that Epsilon, the data firm it acquired earlier this year for $4.4 billion, played a key role in the review along with media agency Zenith.
One person familiar with the review said Disney, like most major marketers, has shifted to the performance-based marketing embraced by smaller DTC brands. Sources also said saving money was Disney's top concern.
This was not surprising since in March, Disney acquired 21st Century Fox Inc., in a deal that involved specific cost savings promises. Bloomberg reported at the time that these cuts would lead to "thousands of firings in the film and TV business."
Disney wants to consolidate media operations around the world
Two other sources said Disney was also interested in the holding companies' ability to coordinate their operations globally. One company said the pitch involved 400 employees in eight offices across four continents.
Spokespeople for Omnicom and Publicis deferred to the client for comment. Consultancy Medialink, which oversaw the review, declined to comment, as did WPP.
Disney did not respond to multiple requests for comment.
International research company Comvergence placed Disney's annual paid media spend at around $1.5 billion, while two other sources involved in the review said it was closer to $2.2 billion.
Intelligence firm Kantar Media said Disney's 2018 U.S. marketing budget is made up of $668 million on feature films, $258 million on media networks such as ABC and ESPN, $188 million on DTC, $153 million on parks, and $27 million on consumer products. These numbers do not include the addition of 21st Century Fox properties.