What results from Disney, Fox, Paramount and others reveal about the state of advertising

Over the past few weeks, the major media conglomerates have reported their quarterly earnings, offering a glimpse into the state of advertising—particularly TV/streaming advertising—amidst challenging macroeconomic conditions.

Presentations from Disney, Fox, Paramount and NBCUniversal, plus a particularly buzzy one from Warner Bros. Discovery, may have set off the sirens for many on Wall Street, but “advertising conditions are not as bad as the dominant narratives would suggest and the second-quarter data has validated that view,” said Brian Wieser, global president of business intelligence at GroupM.

“It’s not to say that economic conditions are ideal, because they’re clearly not, but they’re far from as bad as I think most people in the industry think much of Wall Street thinks,” added Wieser, who noted that while growth in ad revenue among TV networks has slowed, that deceleration still shows growth, not a decline.

Here’s what marketers need to know about the financial state of the major media companies:

Disney

The Mouse House reported overall growth in its third-quarter revenue from a year earlier, due in large part to a 70% bump in its parks and experiences category over last summer—from $4 billion to $7 billion—as travelers put pandemic concerns further in the rearview.

Disney’s Media and Entertainment segment showed modest growth year over year, thanks to the addition of 14 million Disney+ subscribers and the strength of live sports, which is the only TV category for which the company reported growth in ad revenue. Its linear channels, including ABC and ESPN, saw just over $7 billion in revenue, while its digital platforms—Disney+, Hulu and ESPN+—drew in $5 billion, which was offset by over $1 billion in operating costs via higher spending on programming across all three streamers. 

Combined, Disney+, ESPN+ and Hulu now boast 221.1 million paid subscribers—sure to become a bragging right for the company given that Netflix reported a drop to 220 million subscribers last month. Disney also announced new pricing for its streamers with the advent of Disney+’s ad-supported tier, launching in December.

Addressing higher expenses as Disney expands its programming scope across streaming, specifically Disney+, Christine McCarthy, the company’s senior executive VP and chief financial officer, said on an investor call, “This is a peak year of losses, which includes those costs. But also we expect as we go into developing our full slate that [in] the next quarter you will see a similar increase year-over-year that you saw this quarter.”

Paul Verna, principal analyst at Insider Intelligence, told Ad Age via email that “Investors will breathe a sigh of relief” over Disney’s latest quarterly earnings. “The company significantly exceeded expectations on the all-important metric of Disney+ subscribers,” he said, adding the streamer’s numbers “will be seen as an indicator of the health of the market, especially after lackluster subscriber figures from Netflix and Comcast.”

Fox

Even as some advertisers have tightened their TV budgets over the past months, Fox reported an overall 7% year-over-year rise in ad revenue from $982 million to just over $1 billion. The company attributes its heightened ad performance to political advertising leading up to this year’s midterm elections as well as the strength of Fox News.

“These results validate the strategy we embarked on three years ago—to focus on live news and sports while investing in high-growth digital initiatives to create a platform for ongoing growth,” wrote Fox Executive Chair and CEO Lachlan Murdoch in a letter to investors, later adding in the company’s call with investors that the scatter market—i.e., short-term ad buys—is generally quiet for Fox each summer quarter. (Across the linear TV marketplace, ad buys in the scatter market were down 15% in the second quarter from the same period last year, according to data from Standard Media Index, a higher decline from the first quarter of 2022, which showed a 7% drop compared to the year-earlier period.)

“We actually don’t have a lot of scatter avails,” Murdoch added. “But scatter pricing is up in the low double digits, which is good to see.”

Murdoch also noted that Fox’s local stations have been benefitting in particular from both political campaign advertising and the recovery of the automotive category from supply-chain disruptions during the pandemic. Sports betting revenue at the local level, though, was softer this quarter as the category increasingly sees a shift to national ad spend as more markets solidify legislation around gambling.

During the call, Murdoch also noted that over the one-year period in which Fox began investing into Tubi after acquiring the FAST platform in 2020, it has generated 45% revenue growth, prompting Fox to predict that Tubi will generate $1 billion in revenue “in the next couple of years.”

“There was some buzz today about HBO Max, and we are going to start doing less series,” said David Zaslav, CEO of Warner Bros. Discovery, during its investor call. “Our strategy is to embrace and support and drive the incredible success that HBO Max is having.”

The company outlined various restructuring, cost-saving and content-paring plans as HBO Max and Discovery+ become one product next summer.

Although Warner Bros. Discovery reported an overall 1% decrease in revenue, it still saw growth in advertising revenue. The company pointed to the strength of sports as well as ad-supported subscriptions on HBO Max and Discovery+, announcing that HBO Max would follow Discovery+ in adopting its successful “ad-lite” offering in addition to the regular ad-supported tier to expand options for subscribers.

“The narrative on [Warner Bros. Discovery] was very negative because, well, frankly they brought down all their estimates for the broader business,” said Wieser, referring to the company dropping its expected 2023 profit from $14 billion to $12 billion. “There are a lot of challenges that they’re currently facing, but their advertising business, on a global level and foreign exchange basis, was up 5%.”

Paramount

Paramount revealed that its TV business remained stable year-over-year, though the overall company saw a 6% decline in ad revenue.

Notably, the company saw signficant growth in the first year of its streamer, Paramount+, as well as its FAST platform, Pluto TV.

Despite losses across its streaming subscribership due to pulling out of Russia amidst the Russia-Ukraine war, Paramount grew Paramount+ subscribership to over 43 million, an increase of 4.9 million, and Pluto TV reported 70 million monthly active users. Across the company’s DTC platforms, ad revenue rose 25% year-over-year.

NBCUniversal

The Comcast-owned company said its second-quarter media revenue rose 3.6% to $5.3 billion. The company reported a decline in ad revenue of just over 1% for its TV business, partially due to fewer sporting events versus the same quarter last year.

NBCUniversal’s streaming service, Peacock, set off alarm bells for reporting stagnant subscriber counts as well as $467 million in losses. During Comcast’s investor call, Michael Cavanagh, the company’s CFO, predicted the streamer would account for approximately $2.5 billion in losses as its programming slate ramps up in the second half of the year.

Overall, NBCU put a positive spin on the company’s prospects. “As far as advertising in general, our business—linear and Peacock—we’re one of the largest advertisers out there, over $10 billion of advertising,” said Jeffrey Shell, CEO of NBCUniversal, on the call. “So, people coming in at the levels that are coming in—we don’t expect it to have any material impact on what we sell and how we do it. If anything, our scale gives us an increasing advantage.”