Home Analysis The impact of coronavirus on the television and wider media industry

The impact of coronavirus on the television and wider media industry

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The full story is below. Here is a quick summary…

 What Covid-19 could mean for television and media:

  • Short-term rise in broadcast TV and SVOD viewing. Nielsen predicts 60% higher ratings
  • Negative longer-term impact, assuming an economic downturn, with impact on advertiser confidence and discretionary media spend
  • New streaming services (like HBO Max , Peacock and Quibi) could benefit from an unexpectedly high demand at launch
  • There is a danger that media that can be cut back most easily will be the first to hurt in a recession (so there is still some danger for streamers)
  • Cinema releases could be postponed, premiered on streaming services or made available in the Pay TV rental window earlier
  • Esports could attract new fans from among ordinary sports viewers, with the value of esports rights climbing
  • A boost to game streaming sites like Amazon Twitch and YouTube Gaming, and more paying subscribers for this category
  • Growth in user-generated channels and content creators, driven by young audiences who are stuck at home due to school closures.

What media and technology companies are doing right now:

  • Netflix and YouTube have agreed to reduce video bit rates in Europe.
  • Sky has paused sports fees due to the loss of live content
  • Sky Deutschland is making some content available free for a month
  • Canal+ is putting some of its pay content in the clear
  • BBC will schedule more shows related to education, fitness, religion and cooking, including a virtual church service experience
  • Some brands are reallocating spend from linear TV to OTT, where money was originally destined for sports
  • Hollywood production has ground to a halt, with California in lockdown
  • JP Morgan has cut its European media sector ‘earnings by share’ forecast by 15% in 2020, and 8% in 2021
  • Esports firms are taking their live tournaments online, where they began, in one of the easiest moves of all
  • Some traditional sports federations are turning to virtual simulations, including NASCAR.

The full story….

The Covid-19 epidemic is likely to result in a dramatic surge in viewing as audiences crave news from TV and some light relief. U.S. ratings agency Nielsen predicts that ‘staying in home’ could lead to a massive 60% increase in the amount of content watched.

Nielsen modelled this figure on how consumers’ media habits changed during the major snowstorm of January 2016 and Hurricane Harvey in August 2017. When a two-foot snowfall hit the New York area, TV usage that Saturday rose 45% from the previous Saturday and was 49% higher than the next Saturday after the blizzard. During Harvey, total TV use rose 56% from the preceding period and was 40% higher than the period following the storm.

“Short-term, viewing of broadcast TV and usage of SVOD services may rise if people stay at home, but it would be simplistic to say that this is ‘good’ for the TV industry,” says Richard Broughton, Research Director at Ampere Analysis. “Any underlying economic weakness triggered by the effects of coronavirus on business and trade, alongside consumer spending patterns on goods and services, will have a negative impact on both advertiser confidence and consumer discretionary media spend.”

He also points to historic economic downturns to show that the portions of media spend which suffered the most were those which consumers could cut back most easily.

“In the last recession, this was cinema, DVD/BD [Blu-ray disc], and industry ad-spend. Pay TV was hit later, and less badly. So, we might see a short-term gain in subscription OTT before any serious social or economic damage has occurred, but the mid-term performance of the sector is likely to be more tightly linked to the overall impact of coronavirus on the economy – and thus health/jobs/personal finances.”

Netflix and YouTube alleviate traffic

Anticipating Internet-buckling demand for OTT video with more people at home – and simply to keep everyone’s communication channels open – the EU asked Google and Netflix to dial back their bit rates. Both complied, with Netflix reducing its traffic on European networks by 25% for at least the next month. Subscribers with the premium 4K UHD service may be the only ones to experience a dip in service quality as a result. All YouTube videos will now play in SD by default for viewers in the EU.

According to The Guardian, initial fears about broadband capacity rested on the rise in remote working, which led to speculation that residential broadband networks would not be able to cope. But in practice, daytime peaks have risen, while still remaining well below a typical evening peak.

Pay TV opens up

A number of the continent’s Pay TV broadcasters are widening access to their services or pausing subscriptions.

Comcast-owned Sky, for example, is giving customers a breather on its sports subscriptions, given that there’s effectively zero live (traditional) sport to watch. The F1 calendar, a staple of Sky Sports’ schedule, has been halted until at least Azerbaijan GP on June 5. Sky Deutschland is unlocking its Sky Cinema and Sky Entertainment packages, including Sky Box sets for all customers for one month.

With France in lockdown, Canal+ is putting some of its content in the clear (available to non-subscribers with a compatible set-top box). Channels usually reserved for particular packages, like cinema, are also being made available to every Canal+ subscriber.

Globally, the stage is set for new streamer launches including HBO Max and Peacock, all of which can expect to witness short term surges in subscription. And into the fray comes short-form streamer Quibi, which will offer a 90-day free promotional offer to entice users. The platform may well have done this anyway in order to build profile, but the crisis-induced demand for content could see it take-off faster than even backer Jeffrey Katzenberg had dreamed.

Unlike HBO, Disney and NBCU, Quibi’s offer includes episodic drama and comedy but it also features daily news bulletins, including coverage from CTV News owned by Canadian telco Bell.

Broadcasters streamline

Broadcasters including the UK’s BBC and TV, and NDR and RTL in Germany, are cancelling live audience shows or airing them ‘behind closed doors’, with the BBC’s political flagship current affairs programme, Question Time, one casualty. The BBC is also focussing more of its programmes on the outbreak and offering more content about education, fitness, religion and recipes for those stuck at home – fulfilling its longstanding role as ‘Auntie’ to the nation in a time of need.

“We are already seeing new ideas coming through which might provide innovative new ways of producing TV in these uniquely challenging times,” said BBC Director General, Tony Hall.

This includes: a ‘virtual church service’ on Sunday mornings across local radio in England; a new iPlayer experience for children; the return to iPlayer of shows including Spooks and The Missing, which were presumably earmarked for the pay service BritBox.

Meanwhile, the UK government has categorised broadcast news journalists for radio and TV as ‘key workers’, which means their children can continue to attend ‘school’ when those institutions shut to other children.

Newsnight and The Andrew Marr Show will remain on air but operated by fewer technical staff.

Advertising tumbles

Usually, a captive TV audience means consumers are more attentive to brand messages – which may still be the case now. But longer term, ad revenues are expected to tumble.

ITV became one of the first to raise the alarm when it forecast a slump in future advertising revenues of at least 10% for April, with travel companies deferring their advertising campaigns. (Read the full story here at our sister publication, Mediatel News).

ITV also has rights to the UEFA Euro 2020 football championships (which has been postponed a year), which would further weigh on revenues. The share prices of major advertising agency groups WPP, Interpublic, Omnicom and Publicis Groupe have all hit multi-year lows.

Some brands are reallocating spend from linear to OTT, particularly in cases where sponsors had planned to advertise in live sports events. According to video ad serving platform SpotX, online ad inventory has increased 16%, although travel and hospitality brands have heavily reduced or completely halted their spend.

Falling ad revenues will, of course, mean that broadcasters have less money to spend on content – threatening to curtail production activity around the world.

Hollywood production has ground to a halt. The state of California is in lockdown and studios are either postponing the release of tentpoles or planning to premiere them on streaming services. NBCUniversal, for example, is to offer titles including The Invisible Man and Emma to rent through the Sky Store, far earlier than it would normally following theatrical release.

There are genuine fears for the future of cinema as a distribution outlet. ‘Will coronavirus be the final nail in the coffin for the mass cinematic experience? Will Netflix and the other streamers manage total domination over the next few months?’ asked director and producer Kevin Macdonald in the UK’s Guardian newspaper.

JP Morgan is cutting its European media sector ‘earnings by share’ forecast by 15% in 2020, and 8% in 2021.

In a note to analysts and investors the bank said, “Broadcasters, Outdoor and Agencies see 2020 cuts of 25-35% while Internet, publishing and entertainment are more resilient.”

Live sport goes virtual

Not all live sport is shut down. The esports community are taking their tournaments online to continue competitions, which traditional sports are simply unable to do. “Esports now has an opportunity to build its presence among sports fans that ordinarily would be consuming other content,” notes Conrad Wiacek, Head of Analysis and Consulting at Sportcal, part of GlobalData.

“The esports sector also has a great opportunity in the media rights space. With the sporting calendar decimated, broadcasters will be looking for content to fill their schedules. While a boom in media rights for esports was expected, the coronavirus outbreak may see the value of these rights jump significantly.”

Traditional sports are also turning to virtual simulations. Rather than run behind closed doors, NASCAR is launching an invitational esports series to fill the void. The series begins this weekend at the virtual Homestead-Miami circuit with participation of reigning NASCAR Cup Series champ Kyle Busch. Welsh cyclist Geraint Thomas has taken to racing amateurs on virtual platforms such as Zwift. Zwift plans to add to its events such as the Tour of Watopia with new events in light of demand.

Futuresource Consulting expects a boost in viewing of game streaming sites Amazon Twitch, YouTube Gaming and Microsoft Mixer. Twitch viewership has seen a 12% year-on-year increase compared with March 2019, the analyst reports, with a rapid growth in viewers in the last two weeks. Crucially, however, there has also been an increase in the number of paying subscribers (who pay $5 per month for additional channel and social features), of which Amazon takes a significant cut.

There has also been an increase in the number of channels and content creators, with the young audience stuck at home due to school closures using the platform to interact with the outside world.

 

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Even moderate GDP growth reductions will hurt Pay TV 18 months down the line, says Ampere Analysis


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