Warner Bros. Discovery’s ad sales chief on selling the new Max, state of CNN and future of ad targeting

Just a month before the 2022 upfront, Discovery and WarnerMedia closed their merger to create what is now Warner Bros. Discovery. Jon Steinlauf, WBD’s chief U.S. ad sales officer, said that although the company had enough time to put on its Madison Square Garden upfronts show and dive into negotiations, “during the regulatory approvals we had no access to each other’s ad sales data…it really wasn’t enough time.” A year later, this year’s negotiations are expected to more closely resemble what it could only allude to last year, in many ways epitomized by its revamped streamer Max. The platform, which launches the week after the TV upfronts on May 23, serves viewers a combination of Warner Bros. and Discovery content as a catch-all library for any interest, and with opportunities for advertisers the pre-merger platform had avoided. Upfronts and NewFronts blog Tracking the latest TV and digital ad pitches Read more here This year, Warner Bros. Discovery began offering marketers the opportunity to advertise against HBO originals for the first time through pre-roll ads. The sponsorship positions are purchased per show and Steinlauf said the inventory that started with “The Last of Us” and “Succession” have expanded to older shows including “Game of Thrones” and “Curb Your Enthusiasm,” totaling 15 advertisers so far. The opportunity costs advertisers a 15% to 20% premium when packaged with typical HBO Max buys, starting at $50 CPMs (the cost per 1,000 viewers) according to multiple agency sources. Warner Bros. Discovery's first-quarter results included an unexpected $50 million profit in streaming, where Wall Street had predicted a loss. Ad revenue rose 27% in that direct-to-consumer segment but declined in linear TV. The company posted an overall net loss of $1.1 billion. Ad Age spoke with Steinlauf to discuss how Warner Bros. Discovery is shifting its strategy and approaching media’s measurement puzzle. The conversation has been edited for clarity and length. In conversations you’re having with advertisers, what’s bubbling up to the top as the common themes or issues going into upfront negotiations? Targeting. Sometimes targeting gets combined with advanced advertising, which gets combined with currency. All of those are important topics, but at the very core of that is really targeting. Advertisers really are saying better data, better targeting, better technology. Another important area going into this market is diversity, equity and inclusion, and we’ve built an entire portfolio of sponsorships around DE&I. We finished a series recently, sponsored by Unilever, that we did on OWN and Hulu together with a competitor—Disney and WBD worked together on a six-episode series called “The Hair Tales.” It was about African American women and prejudices against African American women because of their hair. You mentioned advanced advertising and targeting, and I’m curious as those capabilities level out with digital platforms such as TikTok and YouTube and competition in streaming grows, how do you think about keeping that competitive edge? They all have value. TikTok tends to be on the younger end of it. As an advertiser looking at demographics, the strength of traditional TV is probably 35-plus with some exceptions, sports being one. [Digital platforms] are good at targeting; they have good data. Talking about targeted advertising, I think that it’s really finding the different components on a broad menu. [Related: TikTok holds a private event during the NewFronts] Investing in these other forms of video is traditionally a bit cheaper than TV. What are you hearing on the ground around the economy? CPM is not necessarily the be-all-end-all. It’s really incremental reach that for many advertisers takes prominence in their planning. And I support that—I don't think everything comes down to CPM. It comes down to can you reach people that are not watching some of your other networks on your buy. We look at that within the WBD portfolio: Max, Discovery+, Adult Swim, wrestling. We look at some of these properties that have these really loyal fan bases that may not watch a lot of the other things that we do and we try to use that as a way to drive more incremental reach. On the side of Warner Bros. Discovery, how is the economy impacting your upfront goals or strategy? It’s no secret that it’s been a difficult year. You see the quarterly earnings reports and our position going into the new year is that the upfront provides flexibility. If an advertiser has a history of participating in the upfront, we’ve worked through these three, four years of uncertainty. We’ve worked through these years giving our advertisers the ability to change on the fly. Maybe they want to move money from property to property. In some cases, cancellation options come into play maybe to a degree that they hadn’t in the past. But we work with our advertisers in partnership in the upfront market. It’s where we plan on selling at least 50% to 60% of our commercial time on the annual cycle, and we don’t see that changing much this year. We’re going to try and drive growth in terms of volume. We also see CNN being in a year of growth because of the election cycle coming up. We announced Charles Barkley and Gayle King for CNN on Wednesday nights in the fall. Chris Licht is working on other high profile announcements for primetime on CNN. We reported last year that in negotiations, Warner Bros. Discovery was a later holdout in closing the upfront and advertisers said you were particularly aggressive in pricing. Do you think that the same approach to negotiations will yield success? We’re not going to have the same approach. We're going to present our portfolio now that we really understand our portfolio fully and understand the history of our relationships on both the legacy Warner side and the legacy Discovery side with our advertisers. There’s no question that we may have left some money on the table last year in the upfront. There’s no question that we probably went a little later than we should have and it didn't go as smoothly. If you look across the six or seven holding companies that represent, say, 90% of our upfront volume, there were some wins and losses. I’m willing to admit the fact that we did not get every holding company to come to terms on what we felt was really a mutually agreeable basis. [This year,] we think we have a win-win scenario in place where we can present this portfolio to advertisers in a way that will drive more interest. WBD announced it would use Comscore, VideoAmp and Nielsen as currency in this year’s upfront. How are you approaching conversations with advertisers around measurement? We’re an equity partner in OpenAP, and we support the standards that [the Joint Industry Committee hosted by OpenAP] is trying to implement because advertisers want consistent standards. They don’t want to have different currencies with different audience segments across six different network groups. They’re looking for us to unify and I think as an industry we’re trying to unify, but it takes patience. You know, I’m a supporter of big data. Nielsen is trying to get there. VideoAmp already has a 40 million home subscriber base for ratings, as does Comscore. There are others in my seat in this business that are saying we need to be patient, slow it down, get one more year of the [smaller dataset]. I’m just looking for accuracy and stability. I see these numbers coming in day-by-day and it’s hard to understand how they fluctuate so much. [Related: Nielsen's absence felt at inaugural JIC event] Media measurement blog Tracking TV, social and digital updates Click here What is the key that we’re missing to get to where you’re saying you want measurement to be? I think your typical advertiser, let’s take a pharmaceutical company—they have a lot of targeted advertisers by disease groups, and they want to reach 20 million people and only 20 million people, but they want to be on linear TV. They don’t want to just be on streaming TV. So we have VideoAmp. They may say, “We need to work with VideoAmp data because they’re so much bigger. If you can sell us VideoAmp, we’ll carve out two or three of these prescription drugs that may represent 20% of our spending, and we’ll go all in on VideoAmp.” This is a process where the agency systems have to be geared up to be able to buy and pay and post on a VideoAmp target and we have to do the same. It’s not just you flip a switch and now everybody goes from Nielsen to something else. There’s a lot of work to be done and Nielsen is part of that evolution. Changing currency in a $60 billion industry overnight is really hard to do, so it takes patience. But I feel we’re making progress, and I feel that we will have a more stable, more accurate 40 million home sample base to sell from within the next year. And I think that’s exciting. What is the value of the upfront? If the question is about the week of May 15, when all these five or six companies are going to be doing expensive shows, I think that’s a celebration of what we all do for a living. And I think that if the clients continue to fly to New York for those three days, and they want to make that investment of their time and money to come in, then we’re going to continue to show our upcoming content and opportunities and thoughts about the industry. We appreciate that kind of support because it’s an industry that is a very important part of media. In terms of why [advertisers] buy in the upfront, the number one reason is because they are protecting legacy CPM bases. So if they decide to sit out a year and not buy, come ‘24-’25 and the market heats up and supply is tight, they don’t automatically skip a year and get a guarantee that they get to get their legacy CPM base back that may have a 10% or 20% advantage versus the market. So they don’t want to let go of that and I don’t think they should. I think they’re smart to stick with it and get the option and flexibility and sponsorships that they want. Check out the latest Ad Age events and award programs

Warner Bros. Discovery’s ad sales chief on selling the new Max, state of CNN and future of ad targeting

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