Connected TV To Advance Mightily, Once Hulu Ownership Sorted
Charles Dickens opened his best selling novel, A Tale Of Two Cities, with perhaps the most famous literary sentence of the 19th Century: “It was the best of times, it was the worst of times…” I have been thinking about the book, and its famous opening a lot lately. As I travel the country talking to clients about omnichannel advertising in general and Connected TV in particular, people have begun to ask about the “promise’ of Connect TV. When I ask why they are asking about that, they say that Wall Street doesn’t seem to be, squarely, behind the opportunity, and Wall Street has a good track record when it comes to picking winners and losers.
I smile, now, when I hear the comment, which is my way of, tacitly, acknowledging that Wall Street does have a way of picking winners and losers, and the 'market' does seem to be down on the category, but then I spring into presentation mode. I say, it is true that NetFlix is trading well off its highs, and it’s, also, true that Roku's stock is not doing great, trading where it was priced in 2018.
But I urge clients not to let what is happening on Wall Street effect their beliefs in, and commitment to, the Connected TV market. I underscore how exciting the technology is, and I remind clients how it is moving the needle for them from a business perspective.
In my opinion, the Connected TV category is in a state of 'malaise' where Wall Street is concerned, for one reason and one reason only -- because the ownership of Hulu has yet to be sorted out. Yes, every company has micro issues it is dealing with. Yes, the category has macro issues it is dealing with. But, what company will own Hulu this time next year -- The Walt Disney Company or Comcast -- is the question that has forced all other questions to the back burner. While most believe Hulu will become part of the Disney organization in the months ahead, there is a chance that Disney will opt to sell its stake in the company to Comcast or to some other corporation. Are the chances of this happening slim? Yes! Are the chances of this happening zero? No!
With Disney’s stock under extreme pressure, and with Bob Iger challenged to craft a (CEO) succession plan, anything is possible when it comes to the ownership of Hulu. [And things got even more interesting/complicated this past week when Disney CFO Christine McCarthy stepped down after 20 years with the company.] Regardless of all the posturing from Comcast and Disney — regardless of all the banter and optics — Disney and Comcast both want Hulu and they are wrangling over one thing: money. What is Hulu worth? The selling party wants Hulu to have a market value as high as possible, while the buying party wants Hulu to have a market value as low as possible. A third-party, an arbitrator, may ultimately have to make the decision for the two companies. And that won’t be easy.
So here we are, all biding time, waiting for one of the most consequential business relationships of our time to unwind. And as we wait, the stocks of all companies in the Connected TV sector are getting pounded. Not just Disney and Comcast, but Paramount Global, Roku, Warner Bros Discovery, Lions Gate, and others.
It seems people who invested in the Connected TV business learned, first hand, the meaning of the term “dead money.” But, neither Iger nor Comcast topper Brian Roberts are fans of dead money, so the Hulu situation could resolve itself earlier than people think. And once, Hulu ownership is sorted, all questions that were moved to the back burner will be brought forward and addressed.
The pressure Wall Street has put on Connected TV stocks, in no way, tamps down on the promise of Connected TV. The opportunity is huge for brand and performance advertisers alike. It is particularly exciting for those advertisers who are looking to brand, within a performance-oriented channel, on a regional or local level.
As Dickens wrote, it was the best of times, it was the worst of times.