Does the consolidation of traditional media spell the end of the ad as we know it?

Does the consolidation of traditional media spell the end of the ad as we know it?

The prospect of Disney acquiring 21st Century Fox would not mean a radical change in the short-term for advertisers, but long-term change is inevitable, writes MC&C's managing director.

The news on Tuesday that Disney had been in talks to acquire 21st Century Fox brought flashbacks of that doomed Time Warner/AOL merger nearly two decades back.

Two already-huge media entities coming together to dominate and engulf the media landscape based on new and as yet unproven revenue streams. It all seemed like such a clever idea at the time.  

The dotcom bubble bursting was what essentially sank the Warner deal (although culture clashes, a tanking economy and a general sense of doom wasn’t immaterial) along with an almost suicidal lack of foresight about digital trends. Ad revenues vanished, and broadband providers sped ahead of AOL’s lumbering dial-up offering.

Skidding back to the present and all talk of the Disney deal is that it’s going to create a subscription media behemoth to challenge Netflix and Amazon. Which begs the question, what about the advertisers? As we know, neither of the latter carry advertising and show no signs of starting to. Are we about to see the end of advertising as we know it?

And how is this relevant to the Warner deal? In an article about it, Fortune claimed the heart of the deal’s failure was down to both parties having only ‘transient advantage’. In other words, at the time of the deal, both entities had something that gave the other a boost in the market - but only briefly.

What the deal ignored was that there were any number of challengers waiting in the wings that were about to leapfrog Warner and AOL, leaving that advantage quickly spent and both companies at a dead end.

In the case of Disney’s proposed acquisition, on the surface that you have three companies looking lustfully at two wildly popular challenger brands and wondering if they should be getting some of that action. What’s concerning is that, in doing so, Disney might be lusting after what could well be only a transient advantage for Netflix and Amazon.

Neither of the latter platforms has seen fit to release any figures. Do we really know what success looks like in the premium subscriber world? It costs a pretty penny to on-board subscribers and now that the early adopters have finished rushing to join, it’s not getting any cheaper.

So the two most pressing questions are: is the ad-free, subscription model about to take over and if so, does that mean it’s the end of ads as we know it? Or could it be that the headline-grabbing Netflix and Amazon model is nothing but another transient advantage, media land’s Emperor’s New Clothes?

The short answer to both is: No…. but in reality, change will come. Eventually.

It’s unlikely Disney, Fox or Sky will lose their current ad formats for the foreseeable future – five years out at least. And more to the point, will Netflix and Amazon stay ad-free forever? Only time will tell.

So, if the landscape above doesn’t look set to change dramatically over the next five years, did media land just get worked up over nothing?

Not quite. With an acquisition of this size, change is inevitable, the only question is how fast. Consolidation is never a happy state for the ad industry. The enemy of competition, it reduces price flexibility, innovation and, to a degree, creativity. Fragmentation is the advertiser’s friend.

Advertising opportunities won’t disappear, but they will evolve. With platforms getting more involved in production but also wanting to deliver increasingly ad-light experiences, we may well see more product placement, sponsorship and branded content.

But we’ll still be looking for the relevance and contextuality that makes a good ad great. And those opportunities will still be there.

Advertisers should always be anticipating change and thinking of alternative ways to connect with consumers. They may not have to think about it today but in this industry, we always have to be prepared to change.

Mark Jackson is managing director at MC&C


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