The arrival of the coronavirus COVID-19 is likely to have complex effects on the media market. Quarantine measures have had an immediate effect on box office ticket sales in a number of markets worldwide, and consumers in quarantine zones have shown early signs of increased media consumption behaviour. However, the longer-term impacts of the outbreak on entertainment companies will be related to the scale of overall economic damage which results from the pandemic. Institutions such as the UN and IMF have already warned of the potential of a global downturn.
At this stage, the likely scale of the impact is still uncertain. However, the World Bank modelled out a series of scenarios in 2013 based on past outbreaks including the 1918 Spanish Flu, 1968 Hong Kong Flu, 2003 SARS and others, indicating negative impacts on global GDP ranging from between -0.5% and -5% below normal growth levels.
Based on the effects seen following the financial crisis, Ampere is modelling out the likely impact on global TV and advertising sectors under a selection of scenarios within this range. Under a scenario of GDP growth of just one percentage point below current projections, we would expect to see mild negative impacts on the advertising market as some media buyers delay or cut spending, with net growth in global TV revenue flat as a consequence (compared to marginal growth in current projections). 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.
However, in cases of global growth slowing further, the global TV advertising market will tip into decline as increasing numbers of advertisers seek to manage costs. Other sectors will see different effects. The online advertising market, as a higher growth segment, will slow, but is likely to remain in growth under all but the most severe scenarios. The scale of decline in the global pay TV market would be accentuated under all scenarios, as consumers accelerate cord-cutting of expensive cable TV and satellite TV contracts, in favour of lower cost subscription OTT products; however, much of this effect is likely to be felt one to two years after the initial economic shock, based on analysis of prior recessionary periods, with contract periods, bundling and inertia offering pay TV operators some degree of protection from immediate economic impact. While these sectors are likely to see a negative impact, other forms of in-home entertainment have the potential to capitalise on the resulting changing economics and behavioural patterns.
Ampere will be publishing a more comprehensive report outlining its findings in the coming days.