The financial news wire Dow Jones reported Disney has ordered its entertainment division to stop airing Netflix ads and not allow the Sunnyvale-based company to purchase additional ad inventory on ABC-owned channels, including the broadcast network and eight local channels, as well as cable networks operated by Disney, including its young adult-focused channel Freeform and sports channel ESPN.
The edict is a softer one Disney executives deployed company wide earlier this year in which it ordered employees working within its marketing, advertising and sales division to not accept ad sales for any streaming products, including those operated by Amazon and Google. Disney eventually reached compromises with many of those services; Netflix was the sole company left in the cold.
Netflix spent nearly $2 billion in ad spending last year to promote its streaming service and original programming. Most of that ad spending has been on television, according to data from an industry researcher.
Netflix, one of the earliest entrants in the streaming TV industry, is considered something of a gold standard that other companies, including Disney, seek to replicate and eventually beat with their own offerings.
In its early days, Netflix’s streaming strategy heavily relied on licensed content — including content from Disney (first through a licensing agreement with broadcaster Starz!, which had first run rights to Disney movies, then later through a deal with Disney directly). Over the last few years, Netflix has lessened its dependency on licensed content in favor of first-run programming — something it calls “original programming” — through which it can better set and control distribution terms.
As Netflix has increased its original content library and decreased its dependency on licensed content, licensors and studios have sought to spin off their own streaming offerings — something critics have said could lead to a “siloing” effect where monthly costs could creep close, or even exceed, that of cable or satellite TV.
Disney is investing heavily in its own streaming service: It purchased elements of 21st Century Fox, including its film library and movie studios, largely to increase its own library of content for the forthcoming Disney+ service. At launch, the service will have movies and TV shows from Marvel, Lucasfilm, National Geographic, Pixar and Fox, including all seasons of the animated sitcom The Simpsons.
Disney is entering a crowded market of streaming services and seeks to undercut many of them by offering Disney+ for around $7 a month. It is also slated to launch a streaming “bundle” that couples Disney+, ESPN+ and an ad-supported version of Hulu for around $12 a month.