The global economic effects of the COVID-19 pandemic are already taking shape, as markets crash and countries take emergency action to respond.
As global habits shift to accommodate the new realities of the outbreak, consumer spending also looks likely to plummet, and the impacts could have far-reaching effects on the media, sports and entertainment industries.
Here are four ways the novel coronavirus could affect these industries in the coming months.
The response to the COVID-19 pandemic requires global cooperation between governments, international organizations and the business community, which is central to the World Economic Forum’s mission as an international organization for public-private cooperation.
Since its launch on March 11, the Forum COVID Action Platform brought together 1,667 stakeholders from 1,106 companies and organizations to mitigate the risk and impact of the unprecedented global health emergency that is COVID-19.
The platform is created with the support of the World Health Organization and is open to all companies and industry groups, as well as other stakeholders, aiming to integrate and inform joint action.
As an organization, the Forum has a proven track record of supporting efforts to contain disease outbreaks. In 2017, during our annual meeting, the Coalition for Epidemic Preparedness Innovations (CEPI) was launched – bringing together experts from government, business, health, academia and civil society to accelerate vaccine development. CEPI is currently supporting the race to develop a vaccine against this strand of the coronavirus.
Significant shortfall in event revenue
Postponed or canceled events could result in reduced revenue for event organizers as well as the media that broadcast them. Cable television companies depend in part on advertising, which means that any decline in revenue will impact profitability.
The professional sports industry is already very touched. In the United States, the National Basketball Association (NBA) and the National Hockey League (NHL) have both suspended their seasons indefinitely. Major League Baseball (MLB) and Major League Soccer (MLS) have delayed or suspended their seasons for (initially) 2-4 weeks and Professional Golfers’ Association (PGA) tour events have been canceled. In Europe, many football matches are played without spectators and the leagues begin to act. The Premier League looks set to suspend its season, as Serie A in Italy and La Liga have done in Spain, among other places in Europe.
Additionally, this summer is set to see the UEFA Euro 2020 football tournament and the Tokyo Olympics and Paralympics, events shown to millions around the world. These are not easily replaced in a broadcaster’s programming schedule. At the time of this writing, the governor of Tokyo, which will host the Olympics, said the the event will occur, although some changes need to be made.
But should things change, their postponement or cancellation could disrupt not only scheduled coverage, but also publicity arrangements, sponsorship deals and promotional events. According to The New York Times, in 1980, when the United States boycotted the Moscow Olympics, broadcaster NBC still lost $34 million despite having insurance.
Less spending outside the home
It is expected that restrictions on movement and large gatherings will be in place for some time. This will result in lower spending on media strategies and advertisements targeting consumers outside of their home.
Many countries have already introduced limits on social gatherings of large numbers of people. This has led to a drop in attendance at entertainment centers like cinemas as well as restaurants and bars. For example, in Italy, which has recorded more than 9,000 confirmed cases of coronavirus, the government order closings of cinemas, theaters and restaurants and telling restaurants and shops to ensure that their customers stay at least one meter apart.
It is valued that the epidemic could cause $5 billion in losses to the global film industry. In one case, given the global upheaval in cinemas, the makers of the new James Bond movie, No time to die, postponed its release date from March 31 to November.
Additionally, declining spending on entertainment outside the home may impact brands trying to reach consumers through outdoor media like radio and billboards.
Image: eMarketer.com
Increase in online media consumption
As more people stay at home, self-isolation and quarantine measures could increase media consumption at home. This can lead to increased use of entertainment services such as video on demand and games.
In China, after the country implemented nationwide isolation measures, average weekly app downloads in the first two weeks of February jumped 40% compared to the average for China. set of 2019, according to the FinancialTimes. During the same month, weekly game downloads on Apple devices increased by 80% compared to 2019. China Nielsen Data during the coronavirus outbreak shows that traditional media also received a boost in consumption – TV viewership increased after the Lunar New Year, when it normally sees a decline.
Image: App Annie via FT
Consumers seeking information about the coronavirus may increase news consumption, but for many news companies this could be a double-edged sword. On the one hand, online subscription media could benefit if they can convince people stuck at home to pay for access to coverage. On the other hand, ad-supported publishers may encounter new challenges.
Brands often use keywords to place advertising online, and to avoid certain associations, negative words are frequently excluded. In February, the “coronavirus” became the second most common word on blocklists for publishers, which means that important, in-demand and socially relevant stories do not generate the higher incomes of which they are capable.
Lower ad spend
Big brands might decide to cut ad spend as supply chain issues or sales cuts affect their products. For example, consumer packaged goods or manufacturing-related businesses might reduce their advertising spend if there are inventory issues due to constraints in their supply chains, not wanting to risk marketing products that are not available. A survey of brands in China end of February showed that 7% had stopped advertising altogether and 14% had moved their spending budgets offline to spending online. Industry sources predict that China’s advertising growth rates will drop from 7% – projected before the pandemic – to 3.9%.
Consumers can also reduce their spending on non-essential items, which could impact how brands allocate ad spend across their product portfolio. Brick-and-mortar retailers are expected to suffer a drop in sales. According to HBR, the most nimble companies can redeploy new sales channels to fill the gaps – a beauty company in China achieved 200% year-over-year sales growth after hiring online influencers to put their products online.
COVID-19 transformation map
Image: World Economic Forum
What does this mean in the long term?
It’s hard to say what the long-term impacts of the coronavirus will be on the media industry because no one knows exactly when things will return to normal. The extent of the disruption will likely depend on the type of content media companies produce and distribute.
In the information industry, for example, many companies have used live events as a diversification strategy to offset the decline in printing revenue. Many of them might not be able to absorb the hit to their bottom line if large-scale events are canceled indefinitely. How will this affect our new diets?
The film, television and video industries can only maintain their production if their physical operations are maintained. Already, films and shows shot in China, South Korea and Hong Kong faced delays; on-site content produced in Italy has been completely discontinued. Would you still subscribe to Netflix if it couldn’t add new shows to its library?
Even media giants are not immune: “ecosystem” companies that use media to drive revenue to other parts of their business will also face disruption. Disney announced it will close each of its theme parks globally, as well as suspending its cruise lines until at least the end of March. Disney may be one of the best-known content producers on the planet, but 34% of its revenue comes from theme parks and another 8% from consumer products.
Finally, if sports stadiums are forced to close their doors permanently, they could lose their appeal to the benefit of broadcasters. Would these competitions be as good or as popular without the live atmosphere created by the fans?
Ultimately, the most important thing for the media and entertainment industry is to help slow the spread of the virus and to keep people informed about what they need to do to stay safe. With any luck, these disruptions will only be temporary. Beyond that, the industry is in uncharted waters.
