Kate Bulkley, Media Analyst.

Covid-19 poses unprecedented challenge to TV

By Kate Bulkley

Broadcast News

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For Broadcast April 24, 2020

The route to recovery is unchartered and only innovation will guide broadcasters through the choppy waters ahead, says Kate Bulkley


The revamping of broadcasting schedules and production plans both continue to evolve apace as the Covid-19 lockdown lengthens, but the negative impact on the bottom line of broadcasting businesses is already massive and could be, in some cases, terminal.

For commercially-funded TV broadcasters there is the added irony that even as TV viewing has gone up with people in lock-down at home, advertising money has dried up as marketers worry about how their sales will fare in a locked-down world.

On 8 April, Channel 4 forecasted Britain’s TV ad market will be down in excess of 50% through May. Later, an Enders Analysis report on the impact of Covid-19 deferred any forecasting at all, saying we are in “exceptional times” where the guideposts from previous global financial challenges such as the Dotcom bubble bursting at the turn of the millennium are not relevant.

No wonder ITV has pulled its guidance and has as well suspended its dividend.

This was not supposed to happen. When ITV and other broadcasters, including ProSiebenSat1 and RTL in Germany, all added in-house production to their businesses, the thinking was that this was a ‘recession cushion’ – a second revenue stream not dependent on the market fluctuations of advertising spend.

It looked a sound plan. The market liked the diversification strategy and the new revenue levers that were being added and even the cost of buying indies was considered acceptable if they had a good library and a pipeline of hit properties.

The idea was simply to build in-house production units that could feed your own channels and could sell ideas to others, including the growing band of streaming services hungry for new programmes to fill their binge-prone services. What was not to like?

However, the strategy didn’t factor in the double whammy of today’s reality – where there is both a fall in advertising spend and the ability to make programmes at volume under lockdown guidelines.

Sales houses and broadcasters are looking to attract what advertising they can by slashing rate cards, eliminating late-booking fees and shortening advance-booking deadlines, as well as offering ‘sweeteners’ for new advertising.

That strategy only looks at one side of the problem and is not sustainable long term. On the production side, delaying commissions and encouraging creative thinking around shows made in lockdown are all good but they will only go so far to safeguard the existing business.

Sir Martin Sorrell, former chief executive of WPP, one of the world’s five biggest advertising and marketing companies, said last week that perhaps the biggest problem going forward is that the Covid-19 recovery will have an odd shape.

Unlike past recessions where the recuperation has been more or less shaped like a hockey stick, with a rise from a low basis to an upward curve – where the steepness depends on the speed of the recovery, the Covid-19 ‘recovery’ curve will likely look very different.

“Delaying commissions and encouraging creative thinking around shows made in lockdown are all good but they will only go so far to safeguard the existing business”

Sorrell, now chief executive of start-up digital advertising company S4Capital, expects this recovery to be “W-shaped”. He expects Q2 of this year to be “a bloodbath”, with 2021 getting better before the curve dips again and again, as new virus outbreaks occur.

So what will happen to broadcasting, given a recovery that very probably will not be the increasing curve into the positive territory of old? Will there be some casualties? Possibly.

Clearly the onus is on the broadcasters to ramp up their plans to meet the changes in landscape that was well underway before Covid-19.

These pressures from digital platforms and advertising- and subscription-based streaming services will likely be accelerated in the wake of Covid-19.

Sorrell predicts “a steady loss of share” for the broadcasters. He does have an axe to grind in that his new firm is ‘digital-first’ but the writing on the wall is clear – at a moment when there’s limited distribution and lowered demand, the future for commercial broadcasters must be about stepping up faster to create advertising opportunities that can stand toe to toe with the ones being offered by the likes of Facebook and Google.

The future is about bringing the power of TV reach together with the targeting and personalisation at which the digital platforms excel.

Putting traditional TV strengths together with digital tools should create a better solution for marketers and give them a reason to pay a premium to return to a small screen.

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