Signal 20.04: A look back on the Warburton era at Seven, Netflix keeps growing, "brand safety" is fundamentally broken

The biggest story this week is Seven CEO James Warburton stepping down. We take a look at his 5 year innings. Netflix Q1 results show a business that continues to rise and rise. And brand safety takes another wrong turn as platform DoubleVerify rates Twitter a 99.9% for brand safety whilst at the same time its client Hyundai pulls its Twitter ads due to running adjacent to pro-N*zi content. Is it time we abandon the flawed, CPM revenue driven brand safety model altogether?

ONE: Warburton bids farwell

What’s new: Seven CEO James Warburton officially left the post this week after announcing he was stepping down last year. Warburton rejoined Seven in 2019 after a very successful first innings at the network as Chief Sales Officer in the 00's and early 10's and his almost 5 years have seen him navigate significant challenges. He inherited a network that had started to feel the impacts of inaction under the prior CEO and immediately delivered a strong go-to market in the tail of 2019 that demonstrates a future focus.

He managed to retain the majority of Seven's sales team - which in my view has always been exceptionally led by Kurt Burnette and his team - and re-established Seven as a business looking to evolve. COVID impacted Seven in multiple ways - including huge disruption to their 2020 Olympics plans both in broadcast and sponsorship - but they recovered and delivered an exceptional experience in 2021. Warburton retained the AFL, Supercars and cricket and generated mutual value in the process for both league and broadcaster. He sold off Pacific Magazines to Bauer. He also oversaw a reduced debt load from ~$550m to $257m.

With the cards he was dealt in my view Warburton did a strong job.

Why it matters: The knock on Warburton is that he didn't deliver a premium paid streaming initiative for Seven, but the reality is it wasn't from a lack of trying. By the time he entered the seat in 2019 the streaming wars were in their final battles. All meaningful streaming products were established in Australia or imminent (Disney entered in late 2019 but the seeds were sowed much earlier), with Warburton ultimately left only with NBCU as a potential partner. At that time most of NBCU's content was tied up, and once COVID hit it wouldn't have been prudent to invest a tonne of capital in trying to spin up a local version of Peacock from a standing start whilst trying to balance a COVID crisis and significant Olympic challenges. The failure of Seven on SVOD sits squarely on the shoulders of Worner and Stokes, not Warburton. They are the ones who decided to not join in on Stan (which was an exceptionally executed business from day one), and they were the ones that sat idle in the mid 10's when the streaming battle was there to be won.

Marketer implication?: I always felt Warburton was one of us - an advertising guy - in a leadership role. He had run UM, and he'd run marketing for Hyundai. You could talk to him about how to connect with consumers, and he had always prioritised marketing investment and leadership at APN and Seven. Kurt Burnette is well served to take this role as the connector with marketers and I hope in future we see him get the chance to lead a media business. My hope for Warburton is he moves to the Private Equity side and can use his experience and value to reinvent existing businesses and also look to combine some.

TWO: Netflix Q1 revenue up 14.8%, subscribers up 16%

What’s new: Netflix released its results this week and they continue to grow at an impressive clip. Revenue was up 14.8% and subscribers up 16%. The strongest region for growth was EMEA, with 2.9m new subscriber net additions in the last 3 months. Netflix also reported high demand for UK produced programming, especially 'Fool me Once' and 'The Gentleman' which delivered 98m and 61m views respectively. Netflix also announced that from Q1 2025 it will report only on revenue and not subscriber volume.

Why it matters: Netflix for the quarter added 9.1m new subscribers, and demonstrated strong double digit + momentum in all regions. It continues to generate hits (Griselda, Fool Me Once, Damsel, American Nightmare) across multiple formats (premium drama, reality, film) and is gushing free cash flow every quarter. The question ultimately is who is going to catch them?

Marketer implication?: Netflix is saying the ads tier is up 65% quarter on quarter and that in advertising markets 40% of new signups are to the ad tier. Based on back of envelope math based on net new, that would likely imply the ad tier is adding between 2.5-3.5m subscribers per quarter on new additions, potentially more depending on the volume of non ad subscribers trading down to the ad tier. The other interesting bit was Netflix displaying data that showed in the US, in March 2024, Netflix accounted for 8.1% of all TV viewing, with streaming total accounting for 38.5%.

THREE: Hyundai puts the brakes on Twitter due to brand safety issues

What’s new: There is an interesting debate that has broken out around Twitter and brand safety. A few months back, DoubleVerify, a business that purports to be in the business of "brand safety" rated Twitter around a 70% for brand safety. It then revised its rating just this week to an astounding 99.9% and was forced to admit it was misrepresenting the brand safety rating for the last 4 months. Then yesterday Hyundai, allegedly a DoubleVerify client, paused its advertising on Twitter when its ads were running against pro-N*zi content.

Why it matters: It's been a very tough few weeks for these brand safety businesses and there's been significant scrutiny over their business model which ultimately sees them paid by both advertiser and publisher, raising a conflict around how they can adequately represent the interests of both. It is also tough from the outside-in to see how Twitter is rated a 99.9% for brand safety. Not just due to the proliferation of P*SSY IN BIO posts, significant porn and misinformation, but for how it allowed blatantly racist, harmful and incorrect content and takes to both inflame and distribute post the Bondi Junction tragedy. If the brand safety arbiter believes an environment that fosters hate, division and the worst of society is 99.9% brand safe, maybe we need a new arbiter.

Marketer implication?: Brand safety platforms have been used predominantly by agencies for years, and the pricing model is lucrative (CPM) and at scale it's a very profitable business. The bigger question for marketers is whether the outsourced technology one-sized "brand safety" model is suitable in 2024 and whether it was ever really particularly suitable and worthy of investment. Brand safety in my view is more a consequence of common sense and brand suitability, that ultimately can be best approached with considered decisions and understanding what environments on the whole can bring in terms of net value to a brand. The multi-billion dollar brand safety industry seems like a massive fail in terms of protecting brands, which are still as exposed as they ever have been but now they're also short billions of dollars they could use to build their brands.