Back to IndieWire

Analysts Warn TV Viewership Increases Won’t Stop Financial Hit from Coronavirus

Linear television could also face significant consequences if consumers begin cord cutting while budgeting during the pandemic.

The logo for CBS appears above a trading post on the floor of the New York Stock Exchange, . CBS is suing its controlling shareholder as part of its long-running attempt to avoid a combination with ViacomCBS National Amusements Lawsuit, New York, USA - 17 May 2018

The logo for CBS appears above a trading post on the floor of the New York Stock Exchange.

Richard Drew/AP/Shutterstock

Television news ratings are expected to surge during the coronavirus, but analysts warn that increased viewership won’t necessarily help mainstream companies avoid taking significant financial hits during the ongoing pandemic.

A new Nielsen analysis noted that consumers’ media consumption tends to rise nearly 60 percent during broadly disruptive events. News networks are likely to see a particularly sharp uptick in viewers as more information-hungry Americans begin to work from home, socially distance themselves, self-quarantine, and otherwise stay indoors. Normally, large increases in viewership could equate to more favorable advertising rates, but the destabilizing consequences of the coronavirus, which is continuing to damage the global economy, means that the boosts won’t necessarily provide a safety net for mainstream media networks, according to Brad Gastwirth, Wedbush Securities’ chief technology strategist.

“The problem is, what will people who advertise sporting events, concerts, cars, and product launches be advertising now?” Gastwirth said in an interview. “Intuitively, it would make sense to raise ad rates because people will be home watching TV, but networks won’t be able to garner ad rates increases because ad markets are down. Car dealerships won’t pay more for ads because car sales will be down because of the impact. The coronavirus is good for TV viewership but if networks don’t get paid more it doesn’t matter financially.”

Linear television could also take a significant hit if consumers begin cord cutting while budgeting during the pandemic, especially given that many major live sporting events — a key factor in linear television’s relevance — have been indefinitely postponed. For entertainment companies such as Disney, which owns ABC and ESPN and also has significant investments in theme parks and cruise lines that have temporarily shut down, the financial ramifications of the pandemic could be especially severe.

Television executives are not discussing the situation; Representatives at CNN, MSNBC, ABC, CBS News, ESPN, and Fox News did not return requests for comment.

Regardless, there’s little doubt that the coronavirus will have a significantly negative impact on live sports and the networks that air them. The NBA, NHL, MLS, and NCAA have been suspended play, while the MLB Opening Day has been pushed back until at least May (IndieWire is keeping track of all entertainment industry-related events and productions that have been disrupted by the coronavirus here).

Portland Trail Blazers guard CJ McCollum pushes the ball upcourt against the Sacramento Kings during the first half of an NBA basketball game in Portland, OrePistons Trail Blazers Basketball, Portland, USA - 07 Mar 2020

Portland Trail Blazers guard CJ McCollum.

Steve Dipaola/AP/Shutterstock

It is unclear how long the aforementioned leagues’ suspensions will last for, which makes it difficult to determine how television networks and their advertising partners will respond, according to Dave Heger, a senior equity analyst at Edward Jones. However, Heger added that there’s little doubt that pay TV will hurt from the dearth of live sports content.

“It’s good timing for ratings going into Upfronts but that is offset by not getting sports viewership, which is one of the main reasons people are sticking around for pay TV,” Heger said in an interview. “A lot of time companies would give advertisers another spot. It depends if they push the sports seasons back and delay games, but if they cancel the games there may need to be negotiations or tradeoffs where advertisers pick up alternate timeframes here or there. We don’t even know how long the season suspensions will go on.”

Still, Heger noted that live sporting events have high production costs, and their delays or cancellations could mean that the overall revenue losses may not be as drastic as anticipated.

Reuters, citing a research note from MoffettNathanson analyst Michael Nathanson, reported that the coronavirus pandemic will likely cause companies to begin cutting their marketing budgets, which could cause the ad industry to see up to $26 billion in revenue losses. The instability is happening during the especially critical Upfront season, a series of annual events where major advertisers meet with TV networks to hash out big-money deals. The major networks have already canceled their physical Upfront events, and though most have already made plans to host virtual events instead, it is nonetheless unclear how severely the lack of in-person Upfront meetings will impact the industry.

That said, the advertising cutbacks could be moot for networks, as there is still a limited (and therefore valuable) supply of advertising space on TV networks, according to Michael Levine, a senior analyst at Pivotal Research Group. He added that television networks will be disincentivized from strong-arming advertisers with increased ad rates because they will not want to burn their relationships after the pandemic ends.

“If I were an advertiser and were to cancel TV advertising plans now, I wouldn’t be able to buy back in,” Levine said in an interview. “If networks burn you, advertisers won’t forget that after the coronavirus ends. But if I pull the plug on Google or ratchet online advertising down, there’s no consequence because I could come back.”

While analysts agree that the coronavirus pandemic will have economic consequences for all industries, its ongoing nature means that it is impossible to determine the severity of the financial fallout, including whether it causes a full recession.

Sign Up: Stay on top of the latest breaking film and TV news! Sign up for our Email Newsletters here.

This Article is related to: Television and tagged , ,

Get The Latest IndieWire Alerts And Newsletters Delivered Directly To Your Inbox