Ampere Analysis has modelled the potential impact of COVID-19 on Pay TV operators and it points to accelerated cord-cutting in the long-term in favour of lower cost subscription OTT products. The analyst firm reckons that an economic hit of anything worse than -0.5% below normal growth would hurt operators, probably 1-2 years after the initial economic shock (with the lag based on separate analysis of recessions).
Minus 0.5% is the most conservative estimate for economic damage taken from 2013 World Bank modelling of the economic impact of past virus outbreaks including the 1918 Spanish Flu, 1968 Hong Kong Flu and SARS in 2003. That modelling showed GDP changes of -0.5% to -5% of normal growth levels.
“Contract periods, bundling and inertia will offer Pay TV operators some degree of protection from immediate economic impact,” say Richard Broughton, Research Director and Callum Sillars, Analyst, at Ampere Analysis.
The company is forecasting a mild negative impact on the advertising market if we see GDP growth of -1% below pre-COVID projections. That would mean buyers delaying or cutting spending, and net growth in global TV revenue flat as a consequence. Pre-COVID projections were for marginal growth in global TV revenues.
“Broadcasting groups such as ITV in the UK have already indicated cut-backs in advertising spend, but under mild negative economic impacts, much of this spend would return,” the authors say. “However, if global growth slows further, the global TV advertising market will tip into decline as increasing numbers of advertisers seek to manage costs.”
Online advertising, a high growth segment, is expected to remain in growth under the most severe scenario considered by Ampere Analysis, which goes to -5% of pre-COVID GDP growth expectations. Growth of online advertising will still slow, however.
Spare a thought for cinemas, though. The analyst note points out that quarantine measures have had an immediate effect on box office ticket sales in a number of markets worldwide. As you can read in a separate COVID-19 story here, there are predictions that movies will be moved earlier into the first Pay TV windows or directly into SVOD stores.
The upside, of course, is that consumers are already showing signs of increased media consumption behaviour, as noted by Ampere Analysis. And separately to their note, UK broadcaster ITV saw a 39% spike in the audience for its flagship live family Saturday night show, ‘Ant & Dec’s Saturday Night Takeaway’ compared to the series average. The viewing peak of 11.1 million was the highest on any channel since the fireworks on BBC One on New Year’s Eve 2019.