Legacy TV enlists AI to figure out a show’s emotional vibe and add commercials that fit the mood

Picture this: You’re watching a tearjerker television show in which the chiseled hero dies saving a family of kittens from a house fire. Then come the commercials—a very on-the-mark pitch from the local pet adoption center and another for fire insurance.

This ad utopia, at least from a marketer’s perspective, is possible thanks to artificial intelligence being adopted by television companies. AI figures out the emotional vibe in a show or movie and then automatically inserts commercials aligned with that feeling.

It’s just one of the many ways that legacy TV, whose business is under assault from streaming, is using AI to compete with the likes of Netflix and Amazon Prime Video, which now show ads to some users.

“Anything that enables them to convince advertisers that their platforms are still a good place to reach a wide cross-section of consumers—and enables advertisers to look for efficiency in the same way they have been trained to on digital platforms—is good for them,” said Kate Scott-Dawkins, global president of business intelligence at media buyer GroupM.

Legacy broadcasters including NBCUniversal, Disney, and Warner Bros. Discovery are walking a tightrope. Once the alphas of advertising, their traditional television offerings were the only way for marketers to connect their brands to shows driving the cultural zeitgeist while reaching a mass audience.

Then Google, Meta, and other digital media arrived and offered the ability to target individual consumers online, attracting significant spending from television. Now streaming is also starting to steal ad dollars from traditional TV.

In some cases, the winners and losers are difficult to differentiate. Since streaming platforms and linear TV channels are sometimes owned by the same parent company (Paramount Global owns both streamer Paramount+ and television channel CBS, for example), revenue from both businesses can end up in the same place.

Still, that leaves legacy media companies stuck in a balancing act of growing their streaming businesses without killing their linear ones. They must go where consumers are moving—to streaming—without abandoning the big money that advertisers are still willing to pay for premium TV like sports and news.

Streamers like Netflix and Amazon Prime Video, which have introduced lower-priced subscription tiers that come with commercials, don’t face the same problem because they don’t have to worry about growth on streaming cannibalizing other parts of their businesses.

NBCUniversal wants to know what you like to watch

Last month, NBCUniversal announced a push to use AI to divide its audiences into different categories. The technology scans shows to determine the behaviors and emotions featured in specific episodes of a larger series that are shown through both streaming and linear television. The AI helps place ads that align with the mood while also slicing and dicing the data collected to help NBCUniversal better learn what individual households like to watch. Ultimately, those households are placed in one of 300 buckets based on their viewing habits. The company can then let marketers target only the groups they think are most receptive to their products, chief data officer John Lee told Fortune at a press briefing last month.

For example, a household may frequently watch shows that are heavy on family values, like drama series This Is Us and sitcom Extended Family. NBCUniversal can then tell advertisers which specific users like such content, and advertisers can show those viewers an ad with the same underlying message or create a new one for that purpose. They can also insert the ad into specific episodes that display those values.

In the future, generative AI may also be able to help marketers quickly create ads with specific emotional ties to appear for each of the hundreds of audience segments, Lee said. 

The general pitch NBCUniversal is making to advertisers is that they can now target viewers with far more precision, as Google and Facebook parent Meta have been able to do for years. It’s a big change from the past, when TV companies could merely promise marketers that their commercials would be shown during a show that is popular with a particular demographic.

In January, NBCUniversal introduced another new tool that helps marketers find their target audiences across both streaming properties and traditional television. Called One Platform Total Audience, or OPTA, the tool can take an advertiser’s budget and information about the audience they want to reach, and determine exactly where ads should go to reach that audience—whether it be The Tonight Show Starring Jimmy Fallon on cable or Love Island on Peacock.

OPTA taps into NBCUniversal’s first-party data and additional data from the advertiser, as well as machine learning and predictive analytics, to create the media plan.

“We are really positioning ourselves to not only look at the future of streaming, but of television, which includes streaming and traditional television,” Karen Kovacs, NBCUniversal’s president of client partnerships and national offices in the ad sales division, told Fortune. “The future isn’t either/or. It is both.”

Disney wants to make magic with AI 

As for Disney, it premiered an AI product in February for reading the emotion of content, called Disney’s Magic Words. While NBCUniversal’s AI identifies the mood of an episode, Disney’s reads it at the scene level. This capability lets marketers place ads based on the mood of what a viewer saw within the past few minutes. An ad for a restaurant, for example, might appear just after the characters eat a meal, or a dramatic ad for a car could follow an action-packed car chase.

“This will be the first time we are taking moments from content and trying to match them into advertising opportunities,” said Alex Combs, Disney’s vice president of ad product development.

“Traditionally, you’ve seen companies look at context at a much more aggregate level—a show or a channel, comedies or dramas,” he told Fortune. “That’s had some value in the past, but when you dig into it deeper, there’s a lot of moments within those series. The more precise we can get, the more we can drive relevancy.”

Disney’s Magic Words only applies to content on Disney+ and Hulu, not its television channels like ABC and ESPN. Meanwhile, NBCUniversal’s AI scans content across all its linear and streaming properties including MSNBC, E!, and Peacock.

Disney also recently expanded its in-house marketplace for selling programmatic ads—or automatically placed ads—to make sales on Disney+ and Hulu easier for media buyers. By doing this, Disney can be “prime-positioned and fully ready to go” on streaming if its linear business ever stops producing profits, said Joe Araujo, who manages programmatic buying for Dallas-based agency Media Culture.

‘A leg up’

These AI tools may give legacy media a leg up on the pure streamers, because it’s still early days for advertising on Netflix and Amazon Prime Video, according to Geoffrey Calabrese, chief investment officer of the North American division of Omnicom Media Group.

But dominant search and social media players still have the advantage, said GroupM’s Scott-Dawkins: “Companies like Google and Meta are much further along. They’ve been using AI in their ad platforms for a very long time.” Google’s AI can pull text from within a website and rewrite the website’s headline to appear more similar to a user’s search query, for example. While Meta uses AI to predict the kinds of ads a user is interested in, it also offers AI tools to help marketers create images and write text for ads.

Still, Scott-Dawkins said, advertisers want choices: “The fact that there are companies outside of Meta and Google that can offer great targeting and great attribution is better for advertisers in terms of choice and competition and innovation.”

How much Warner Bros. Discovery uses AI in its advertising operations is unclear. It declined to comment.

But Warner Bros., the studio behind Harry Potter and Barbie, has publicly disclosed that it works with ad measurement companies employing AI, including LoopMe and Pilotly, to determine the effectiveness of campaigns. It also uses marketing tech company the Trade Desk to provide better-targeted commercials using AI. Still, Warner Bros. hasn’t announced any proprietary AI tools for advertisers. Based on public statements from its ad team, the company appears to have focused instead in recent years on launching the ad tier for Max, its streaming platform that replaced HBO Max in 2023.

Paramount Global similarly uses technology from the Trade Desk, but it hasn’t disclosed any AI tools it has developed for advertisers. It did not respond to requests for comment.

Fox, meanwhile, has been scanning the context of its shows and providing that data to advertisers in real time so they can place relevant ads for two years, though it declined to be interviewed for this story. For its local television business, Fox last year partnered with video creation company Waymark to let advertisers in 17 local markets use AI to produce commercials.

Generative AI isn’t dominating the advertising space yet, but there is room for huge industry impact in the coming years, experts said. Companies are beginning to digitally add brand images into videos after they have been filmed, which could change how studios make product placement deals. A video-generation tool could also change the background of a car commercial, for example, to reflect the city skyline where the ad is being shown.

“You’re still advertising a car,” Scott-Dawkins said. “But technology lets you take it a step further.”

Correction, April 3, 2024: A previous version of this article misstated the chronology of Disney in-house marketplace for selling programmatic ads. It was recently expanded, and not recently launched.

This story was originally featured on Fortune.com