Netflix, Microsoft And The Rapidly Blurring Lines Between Media And Tech

The announcement this week that Netflix has selected Microsoft as their new advertising technology and business partner helped further blur the line between the media and technology businesses. It recalls the famous tagline for Certs mints. Is it a breath mint? Is it a candy mint? Why Netflix and Microsoft are two – two – two industries in one!

It’s hardly new news that media and tech are symbiotic business partners. Google
GOOG
announced its purchase of YouTube in 2006 and remains the largest platform for video watching in the world. Netflix has always defined itself as a tech company in which the customer’s access to its content is shaped by its all-knowing algorithm, yet it serves as one of the most powerful creative forces in Hollywood. And when 80-90% of revenues for Google and Facebook are advertising, the notion that those companies are somehow not in the media business has long been pretty silly.

No matter how long the media-tech dance has gone on, several announcements in the last few weeks have brought this marriage to the forefront once again.

Netflix-Microsoft Advertising Marriage

There certainly hasn’t been a media-tech announcement in recent weeks with a bigger potential dollar impact, and it certainly brings the greatest potential for media and tech collaboration. Of course, what r triggered this is Netflix’s recent announcement that it needed to create a lower-priced partially ad-supported tier. The imperative to target the right audiences for advertisers, deliver the right ads to them and provide legitimate transparency into who is watching what when and how much draws Netflix right into the heart of the traditional media publisher business.

With Netflix reaching roughly 1 billion users on the planet today and the average user watching over 3 hours of its content every day, the amount of new advertising inventory potentially coming into the market is staggering. If anywhere near 50% of their 220 million subscribers choose an ad-supported option, the video ad business will never be the same. So you can understand the allure for every tech as well as traditional media company to get into this game. In fact, it has been reported that Comcast’s
CMCSA
Freewheel was one of the finalists for Netflix in addition to Google.

By choosing Microsoft, Netflix goes with one of historic stalwarts of the tech sector. But this was hardly core tech from the hallowed ground of Redmond. The tech Microsoft will largely rely upon came from the advertising tech sector, originally from a company called AppNexus. That company in turn was purchased by AT&T
T
, which renamed it Xandr (after Alexander Graham Bell, get it?). Of course, as with so much of its foray into the media world, AT&T didn’t really know how to turn this ad platform into a business, and it will be Microsoft’s job to do that. And for a Microsoft that post-Activision acquisition stands as one of the pillars of the gaming business, the possibilities of linking audiences, subscribers and advertisers across gaming, motion pictures, and TV looks like an alluring future. So…it’s a media company, right?

Disney’s Ad Tech Partnership with The Trade Desk

Disney has been ahead of its media brethren in embracing technology change for some time. Disney didn’t create Hulu, but it was a very early investor there with Fox and NBCUniversal almost at inception in 2007. It invested in then acquired the former BAM Tech, the streaming tech platform created originally by Major League Baseball. Disney then used that tech as the foundation of its launch of Disney+.

Disney isn’t alone among media companies in integrating new ad technology into its core ad business. NBCU, Paramount and Fox have recently been expanding their own ad tech partnership solutions as well. The promise of this deal between Disney and The Trade Desk – it’s execution of course is still to come – is to provide advertisers a unified means of targeting audiences across Disney’s 100 million TV household IDs, 160 million connected TV IDs and 190 million device IDs. These types of solutions are only possible through the marriage of broad-based media content and tech. Of course, for advertisers the true media-tech payoff will be when these partnerships go across media properties.

Apple

AAPL
TV+’s Major League Soccer Streaming Deal

I’ve been hearing that soccer will take over the U.S. sports scene for roughly my entire adult life. I’m not breaking any news here – it still hasn’t. But look at the youthful demographics of who follows the World Cup even at the draw stage – are you listening MLB? There are rabid and rapidly growing fan bases for MLS from Seattle to Kansas City to Columbus. And now we have a $2.5 billion deal from Apple TV+ to be the exclusive streaming home for all MLS games for the next 10 years. Whereas most streaming options for live sports are still an afterthought to massive live linear TV rights deals, this one places linear TV very much on the back burner.

Apple is hardly in this game just to sell a lot of 30-second spots. In fact, there are fewer commercial breaks in soccer than any other sport (God bless it for that). What will be intriguing to watch is how a tech first, customer experience-driven Apple may use live sports content in new ways to reach non-traditional sports fans and shape expectations around live sports broadcasts. It’s a greenfield opportunity for two challenger brands – MLS in sports and Apple TV+ in streaming.

All these innovative partnerships will demand creativity from both sides of the house from media content and customer experience to expansive and innovative uses of data and mobile devices. For those tasked with making this all work, it’s time to pop a Certs – or maybe a Tums.