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.
- 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%)
- 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
- 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
- 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
- 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