Warner Bros. Discovery uses scale as upfront negotiating tool after merger

Warner Bros. Discovery is taking what buyers characterize as an aggressive stance in early upfront negotiations, pushing advertisers to buy a large swath of inventory from the newly merged company's media assets in order to access its premier content. But the company is asking for a pretty penny in exchange for access to its newly combined portfolio, according to multiple media buyers familiar with the pitch, who say the company is using its scale post-merger as a negotiating tool. "I think the way I would put it is they are trying to position their scale across their portfolio—and get a premium for it—and repackage what they typically sell and charge more for it just because they're bigger," according to one media buyer who spoke on condition of anonymity. The former Discovery has long positioned itself as a competitor to broadcast rivals through its so-called ”premiere” package. Launched in 2018 after Discovery gobbled up Scripps Networks, the package initially offered marketers first-appearance positions during commercial breaks on premiere episodes of 30 of its biggest titles at higher CPMs, or the cost to reach a 1,000 viewers, than they’d traditionally pay for standard schedules. In return, Discovery promised “broadcast-equal reach and scale” and access to millennial viewers and mobile audiences. At the time, the package was priced between broadcast and cable prime, said Discovery ad boss Jon Steinlauf, who is now chief U.S. advertising sales officer of Warner Bros. Discovery. The new premiere package will include its recently acquired Turner Sports and other Warner Bros. properties, but with steep increases over what buyers paid for Warner Bros. or Discovery separately a year ago, according to multiple media buyers. From a scale perspective, some price increases are arguably to be expected—the company's portfolio now comprises a far more diverse collection of programming than either company had at this time last year.Read more upfront news from Ad Age Asked about premiere pricing during Ad Age’s TV Pivot event, Steinlauf noted that the package now includes news, sports, entertainment and some syndication, adding that the company views the package as “a full-fledged competitor for the top tier of TV buying.” With the new package, Discovery’s leading 30 shows will still be included, and the company will add all of Turner Sports, top CNN originals and specials, All Elite Wrestling, as well as additional programming. But Warner Bros. Discovery wants advertisers to opt into the package, in addition to whatever properties they decide to purchase at standard rates, according to people familiar with negotiations. Programming included in the package will be first-run episodes that exceed a commercial rating in the three days after a program airs of at least 1 million total viewers, according to a person familiar with the situation. It is estimated the company will have approximately 500 episodes each quarter that deliver more than 1 million viewers, the person said. A second buyer who had been in conversations with Warner Bros. Discovery executives ahead of the company’s upfront said the messaging from CEO David Zaslav—who is hands-on with the ad sales operations of the new company, as he similarly had been running Discovery, sources told Ad Age—was, essentially, “You’re gonna have to buy his crap to get his good stuff.” Unlike other media companies, which are expected to be flexible on pricing in linear TV in exchange for more digital dollars, Warner Bros. Discovery is pricing well above what the companies were sold at individually, sources said. “They’re just looking for a premium CPM for stuff that we’re paying an already fairly expensive cable CPM for,” the first buyer said. While the company is offering some flexibility with what can be added to the premiere package based on advertiser needs, this buyer said, “It's still just a mix of units from their schedule.” “Everybody is looking for volume on their streaming products and their digital products,” the buyer continued. “In exchange for volume, they're willing to price very, very, very reasonably. In some cases, they're willing to do a price rollback if you can give them the volume. Warner Bros. Discovery, on the other hand, is looking for a 15% to 25% increase in CPMs. It's not even in the realm of the marketplace.” Still, Disney, which is bringing an ad-supported tier of its Disney+ platform to the marketplace during the upfront, is looking for premium pricing for inventory on the service, with some buyers saying it is looking for a CPM around $50. This tops other streaming platforms, including pricing for Hulu. "We are selling Disney+ as a standalone versus the rest of our entertainment products, and that's because it is a much more reduced ad load and we're starting slow," Rita Ferro, president of advertising sales at Disney, told Ad Age during its TV Pivot event. "So that absolutely is the case that we will be selling it at a premium to what we're selling Hulu today, for example." Warner Bros. Discovery declined to comment on exact pricing given the sensitive nature of ongoing negotiations. Warner Bros. Discovery enters this year’s marketplace with two streamers to sell in Discovery+ and HBO Max. Steinlauf previously told Ad Age the two services will be sold separately this year—both with unique audiences for whom advertisers may prefer one over the other—though the services are eventually expected to be combined into a singular super-streamer. “There's a real battle going on amongst the advertisers to gain access to the 40 million homes in America that have opted out of cable,” said Steinlauf. “Because in many cases, the heads of the household are under 40. So there's a battle going on to try to penetrate those non-cable households to get new viewers, to extend reach and to get younger viewers. We like our hand having this duo of sister services between HBO Max and Discovery+.” Don’t miss the latest news. Sign up for Ad Age newsletters here.

Warner Bros. Discovery uses its newfound scale as upfront negotiating tool

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