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The Upfront charade

Big Linear Lies: This week's Upfronts, the annual gathering in which the old-guard linear television networks present their slate of programming to advertisers, offers an important window into the media-marketing ecosystem and its ability to make money and project confidence even as the rug is being pulled out from under it.

• In recent months, Disney chief Bob Iger has called direct-to-consumer streaming the company's "number one" strategic priority, while his deputy Kevin Mayer has said their investment in DTC represents "a fundamental shift in the marketplace."

• Those remarks reflect a truth understood by all media executives: ratings for linear television are going down while subscriptions for direct-to-consumer services are going up. That is why Disney, Comcast, AT&T and Apple are launching DTC services.

• Nevertheless, every May, these same executives fly to New York and act like it's 1985, hosting expensive parties and presentations for advertisers (Disney's was yesterday) in order to sell them on the value of the linear networks.

• The rub is that not only do the advertisers buy that pitch, but they pay more to advertise to fewer viewers. That's because as the ratings go down, there are fewer advertising units. Fewer units means higher prices.

• The additional rub is that the advertisers know this and can't do anything about it. As Jimmy Kimmel told advertisers at last year's Disney upfront, “Our ratings are going down and our prices are going up. Too bad. Eat it!”

• Kimmel this year: "You obviously have a lot of choices for how and where to throw your money away. We hope you throw your money away on us. This clusterf--- of networks we've assembled will do anything to get your dollars."

The big picture: "There is a frantic attempt to reposition dying or declining linear networks as parts of a bigger content ecosystem — but everyone knows the underlying reality: it’s almost time for last waltz on the Titanic," one television executive tells me. "The ship won’t sink for years, but everyone understands these are the final voyages of the damned."

• In fact, after Disney's Upfront yesterday, Iger told the MoffettNathanson Summit that while Disney was "not purposely trying to do anything to damage the bundle," they're "prepared to pivot in a new direction."

The big question: What happens to all the advertising? Because as Vanity Fair's Joe Pompeo notes, "subscription-based streaming television (for the most part) isn’t in the business of advertising at all."

Bonus: Highlights from Kimmel, yesterday:

• "Apple is making shows now, too. They have Apple TV+. And none of these services have commercials. This is getting bad. I mean, by the end of the year 34 percent of homes won’t even have traditional ad-based TV. But the good news is if you look under your seats, you’ll find a cyanide capsule."

• "Rita Ferro," the head of Disney ad sales, "said the future of TV is TV. Even Sarah Huckabee Sanders is like, 'What the f--- kind of horses--- is that?'"

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Bob Iger takes Hulu

Moving the Market: Bob Iger has reached a deal to take "full operational control" of Hulu from Brian Roberts, clearing the way for both Disney and Comcast to go full-throttle into the Hollywood streaming wars.

It's the end of an era:

• For the last decade, Disney, Comcast, 21st Century Fox and AT&T used Hulu (a joint venture) to test the waters of direct-to-consumer streaming, while Netflix dove in and rewrote the rules of television.

• Today, Disney (which now owns Fox), Comcast and AT&T believe they must all launch their own DTC services to compete with Netflix, with one another, and with tech giants like Amazon and Apple.

• Disney will now use Hulu to wage that war, stocking it with adult-oriented content while using Disney+ to target families and ESPN+ to target sports fans. Eventually, all three will be bundled together.

• Comcast/NBCUniversal reportedly plans to launch its own DTC service in 2020. Two years later it can start pulling its shows from Hulu and make that content exclusive to its own platform, per the agreement.

The big picture: America's media giants are building walls around their intellectual property to solidify their position in an increasingly competitive marketplace. While some companies will continue to license their content to rivals, the ideal outcome for all is one in which consumers subscribe directly.

What's next: The bundle wars.

• Some company — most likely Apple or Amazon — will eventually have to figure out how to bundle all of these streaming services together so that consumers don't have to subscribe to 5 or 8 or 10 different services in order to get all of their shows.

• Apple is already positioning itself for this future. On Monday, it launched a new Apple TV app that gives users access to more than 150 video services and the ability to subscribe directly to HBO, Showtime and other channels.

• And yet.... it's not clear that a company like Disney, which is just freeing itself from dependence on competitors, is going to want to get into business with a new intermediary like Apple when it has enough original content to thrive on its own.

⚔ Rally the Market ⚔

Speaking of Disney, Bob Iger has revealed that Game of Thrones showrunners David Benioff and D.B. Weiss will direct the first post-Skywalker Star Wars film, which is slated for 2022.

• Speaking of Game of Thrones, Variety's Daniel D'Addario thinks Masie Williams deserves an Emmy.

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Sundar Pichai seeks shoppers

Big in Mountain View, big on Madison Avenue: Google has unveiled a new suite of products meant to target online shoppers and the marketers trying to reach them, encroaching on Amazon's claim to online retail.

• The big picture: Google and Amazon are "heading for a collision," NYT's Daisuke Wakabayashi and Karen Weise report. Google is moving into Amazon’s core business while Amazon makes gains in digital advertising.

What's next:

• Google will now allow shoppers to make purchases directly through Google services like search and YouTube.

• Google will also give advertisers new features like gallery ads, which feature multiple images, to help them target mobile users.

Sign of the times: Oliver Heckmann, Google's VP of engineering for travel and shopping, tells Reuters that they want to meet demand from users who shop in spurts while watching TV or sitting in the bathroom.

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Facebook preps for ad change

Big in Menlo Park, big on Madison Avenue: "Facebook is preparing advertisers for the 'clear history' tool that will let people erase their personal data from the social network," AdAge's Garrett Sloane reports:

• The feature "will allow users to delete data that the social network gathers from websites and apps outside of Facebook, and no longer use that data for advertising."

• "Some of Facebook’s most popular marketing technology like the Facebook Pixel and Custom Audiences could be rendered useless if a person erases their tracks."

The big picture: "The entire digital advertising industry is rethinking its history of collecting information on everyone’s whereabouts online for the purposes of serving highly targeted messages."

• "Google just last week announced that Chrome would have new anti-tracking features... following Apple’s stricter anti-tracking policies on Safari."

Market Links

• Mark Zuckerberg imposes livestream restrictions (NBC News)

• Lachlan Murdoch dismisses the Fox News ad boycotts (THR)

• Richard MacWilliams seeks a Salon fire sale (NYPost)

• Bob Iger extends Jimmy Kimmel for three years (Variety)

• Howard Stern explains how he found empathy (NPR)

Mike Stobe/Getty

Jimmy Pitaro bets on gambling

Talk of the Strip: Jimmy Pitaro has partnered with Caesars Entertainment to build an ESPN studio at the LINQ Hotel and Casino in Las Vegas, making ESPN the latest network to move on sports gambling.

• The ESPN studio will serve as the hub for sports gambling shows and features across ESPN's platforms, while Caesars will provide ESPN with betting odds and other data.

The big picture: "Sports media is betting big on sports gambling," CNN's Frank Pallotta reports:

• Turner has an agreement with Caesars Entertainment "to develop gaming content and build a Bleacher Report branded studio [at] Caesars Palace."

• Fox Sports is partnering with the Star Group gambling service "to create a new app that will allow users in states where gambling is legal to place wagers on the outcomes of sporting events."

What's next: To date, Fox is the only big media company that's actually facilitating sports betting. Bob Iger has said he doesn't see ESPN "getting involved in the business of sports gambling... by facilitating gambling." But all that could change as sports betting goes legal across the country.

What next: Speaking of sports odds, it looks increasingly likely that Ja Morant may wind up with the New York Knicks.

• My bet is that he winds up being a greater asset for them than Zion Williamson does for New Orleans.

See you tomorrow.