Insight

Media companies: Managing through market disruption and beyond

Responding to shifting market dynamics from COVID-19 impacts.

Per Edin

Per Edin

Principal, TMT Strategy, KPMG US

+1 408-367-6080

Michelle Wroan

Michelle Wroan

Office Managing Partner, Los Angeles, KPMG US

+1 213-955-8657

COVID-19 has caused a rapid, unprecedented impact to the media industry driven by a dramatic shift in consumption. This has created business continuity uncertainty. As media companies look to stabilize and re-emerge, they should use a three phased approach focused on: Resilience, Recovery and the New Reality.

  1. Media stocks lost nearly 40% of their market cap, from peak to trough, between February and April. Broadcasters and live entertainment players have fared worst (down ~48 – 50%), while online, audio and gaming players have fared best (down ~32 – 35%)
  2. Streaming and TV viewership are spiking, with streaming minutes up 85% from 2019 in early March. Leading streaming players are adding subscribers at an accelerated pace, at least temporarily. Cord cutting, however, could worsen, given headwinds of potential recession, sports cancellations and news fatigue
  3. Increased digital viewership is harder to monetize due to declines in ad spending and halted content production. Ad spend could potentially drop ~30 – 40% this year and some spend is likely to shift toward digital channels. Most production has been paused and sports and live programming postponed
  4. Live events have stopped with unclear timing around possible return. Social distancing measures have caused 20,000+ cancellations or postponements of large-scale events and closure of venue-based businesses. Regulations and protocols will vary by state and drive uncertainty around timing and speed of return
  5. Going forward, media companies will need to seek new opportunities for growth, in addition to managing cost. In prior recessions, those that addressed both growth and cost in a balanced manner outperformed others ~2x on sales & EBITDA CAGRs

What are the core stages and activities of response planning?

Response planning such as shift to streaming, redesigned live events, digital advertising acceleration, market consolidation, adjusted content monetization should address 3 distinct stages, that may overlap.

Resilience

Resilience: Rapid mobilization and stress testing

  • Safeguard employees/assets
  • Assess impact to revenue/payments
  • Protect customers and manage churn
  • Control use of cash
  • Stress test the business

Recovery

Recovery: Improve performance under new conditions

  • Adapt go-to-market to customer/partner needs & conditions
  • Take steps to reduce cost as appropriate
  • Manage working capital and debt
  • Re-prioritize capital investments
  • Evolve risk and compliance controls

New reality

New reality: Capture value from pervasive changes

  • Shift talent/capital towards growth
  • Adapt offers to new sources of demand
  • Innovate new capabilities and solutions
  • Enter adjacent markets to capture additional value
  • Take advantage of M&A opportunities