Weekend Thought: Nothin' To Lose

Greetings on a foggy Saturday morning.

Quick thought today.

Something popped into my head and I’d thought I’d share it with you.

Weekend Thought

Great piece from the WSJ this morning on the Charter / Disney dispute.

I have another newsletter cooking about this, but the last line of the article struck me:

MoffettNathanson analyst Craig Moffett said he doesn’t think Charter is bluffing about exiting the video business. “The truth is, they don’t make very much money on video,” he said.

“It’s hard to negotiate with a counterparty that has nothing to lose.”

I think about this a lot when it comes to negotiating in advertising.

In 2023, there are plenty of popular media companies whose primary business is not advertising.

Here are a few:

New York Times: ~25% of their revenue comes from advertising. Subscriptions make up ~60%. In 2008, those numbers were basically flipped.

Spotify: ~10-15% of their revenue comes from advertising. Which means 85-90% comes from subscriptions.

Netflix: Only 2% of their subscribers are currently on their ad tier. I believe their CEO recently called their ad tier’s revenue contribution “not consequential.”

The list goes on, but you get the point.

It used to be that media companies’ businesses revolved around advertising as their primary source of revenue.

But now, for major modern media companies, with premium content, their business revolves around people cutting them checks, not advertisers.

And it’s a good thing to keep in mind when you, as a marketer, negotiate ad rates with them.

You might not like the rate they’ve given you.

But they don’t need to lower it for you.

If you walk away, they can make up the revenue difference somewhere else.

In fact, their rates are high because they don’t have to beg, borrow, and steal their way to every dollar.

New York Times doesn’t have to bend over backwards for your ad dollars. It’s the New York Times with 10 million subscribers, god damnit!

Bloomberg doesn’t have to bend over backwards for your ad dollars. They cut off programmatic advertising as a statement towards that. If you walk, they’ll just make it up by selling more terminals.

Netflix doesn’t have to beg you to run on their ad tier. There’s a line of big brand advertisers trying to get a flashy press release.

Accepting your ad dollars at a decreased rate would just a bad precedent, and / or turn off the subscribers they are trying harder to gain.

In fact, the platforms most ripe for negotiation, are non-negotiable.

Google and Meta make up the majority of their revenue from advertising.

You know who handles those negotiations? An algorithm.

So what should you do when negotiating with modern media companies, that have nothing to lose when it comes to ad negotiations?

Three things:

• Redefine value. It might not be a lower rate, but it might be something else you can negotiate that’s important to you, your client, or your company. A creative first-to-market opportunity that can be a joint case study, increased (impartial) measurement to fill in the gaps of your martech stack, etc.

• Invest in their investments. If Spotify is gung-ho about podcasts, and see it as the future of their business, they’ll be more likely to cut you pricing slack there so they can show other advertisers how much their podcast ad business is growing. And, they may be more likely to showcase these podcasts “organically” within their app, to spread its reach and pay off for the advertisers who commit.

• Find the plucky upstarts. Just like modern media companies are thriving in new ways, there are new companies springing up who are exciting, vibrant, and hungry for ad dollars. I met with one yesterday called Jomboy Media who are very cool. If you do your homework, you can find the up and coming all-stars who need those ad dollars to survive and thrive, and you’ll be grandfathered into these exceptional rates down the line.

So, when you negotiate a media or marketing deal, realize who has nothing to lose.

Instead, realize what you and they have to gain.

Stay thinkin,
Danny

(P.S. Paying attention on who has “nothing to lose” goes not only for media partners, but also agencies who receive kickbacks or deals from these media partners, or have long-term deals in place that prevent further negotiation. Stay thinkin and investigatin!)