It surfaced last week that Netflix is refunding advertisers after it fell short on guaranteed commercial deliveries for its new discounted partially ad-supported tier.
This should strike dread in the hearts of Disney executives -- Netflix failed to meet inventory guarantees because it doesn't have enough users for its $6.99-a-month Basic with Ads tier. And this shortfall came despite the fact that Netflix launched Basic with Ads with no major distribution problems back in early November.
Disney surprised the market earlier this month when it was revealed at the last minute that its own new partially ad-supported "Basic" tier does not have support on the No. 1 U.S. connected TV device platform, Roku.
Neither company has commented, but Disney execs have quietly mumbled that they'll bring the $7.99-a-month tier to Roku when they get a "fair" ad revenue split.
Roku, meanwhile, publicly publishes its monetization guidelines. Under these rules, "the channel sets up its own ad server and must send 30% of inventory to Roku. Roku retains 100% of revenue from this inventory (but is under no obligation to fill it). The publisher fully controls the remaining 70%, and keeps 100% of the revenue associated with its share of inventory.”
The consequences for a less than smooth launch of Disney Plus Basic loom large for newly restored Disney CEO Bob Iger, who is under pressure from the board and investors to show that Disney's impressive streaming scale can be monetized. Disney notably incurred a $1.38 billion EBITDA loss of direct-to-consumer services in Q3.
For its part, Roku could use any revenue infusion it can get at this point, with its stock now valued at a quarter of what it was at the beginning of this year ... when it was already halved from its July 2021 zenith.
Roku ended the third quarter of 2021 with its ad sales growing at a clip of around 81%. It finished the latest Q3 expanding at only 15%.
With its own EBITDA losses doubling sequentially in the third quarter, and the cyclical winds of the advertising market blowing recessionary cold, participating in the largesse of Disney Plus Basic certainly might help Roku, at least a little. ■
