A widespread coronavirus outbreak could have a short-term negative effect on ad-supported TV, Moody’s Investors Service said Wednesday -- mainly due to a broader economic pullback -- while a longer period of quarantine could actually help viewership numbers.
So far there have been more than 120,000 reported cases of coronavirus COVID-19 worldwide, with about 4,400 deaths so far. In the U.S., about 1,000 people have tested positive for the illness, with 32 deaths.
In a research report Wednesday, Moody’s said a widespread outbreak of the coronavirus in the U.S. could have a brief negative effect on ad-supported TV, with advertising sales impacted by the scarcity of consumer goods.
“If the virus spreads widely in the US, economic contraction and short supply of consumer products and durables is likely and would last through to the end of the outbreak, which could be more than one quarter,” Moody’s SVP Neil Begley wrote in the report. “The effect on US media companies’ advertising revenue would be significant. Yet, because of the nature of the disruption, we believe the duration could be short — unlike the longer consumer-led recession during and following the 2008-2009 financial crisis.”
Begley added that cable and broadcast networks; broadcast station owners; sports leagues, teams and regional sports networks; and internet advertising companies would all be affected by a broader coronavirus outbreak. So would pay TV service providers, but to a lesser extent.
According to Moody's should the spread of the virus require more people to self-quarantine, it could have a positive effect on TV viewership.
“Pay-TV and streaming services may benefit from higher engagement and increased subscriptions as people remain at home,” Begley wrote. “That, together with political advertising ahead of the Presidential election, may partially offset the reduction in demand for ads.”
According to Moody’s more than two-thirds of ad-spending comes from areas that are at risk to see declines due to the outbreak, including retail and auto,travel and tourism, consumer products, restaurants, and theatrical films. Less vulnerable sectors - some that actually could see increased ad spending -- include telecom, financial services, insurance, political, pharma and media and home entertainment.
Moody’s added that even if ad sales do decline, broadcasters and cable networks are partially shielded by affiliate fees they are paid by distributors.