Ad giant WPP pulls dividend, buyback and outlook as clients cut spending
Fallout from the coronavirus outbreak has been more rapid than from the 2008 economic crash, sending different sectors reeling more quickly and leaving many companies with zero revenue and no reason to spend on marketing. Companies like WPP, the world’s biggest advertising company, have felt the hit and are struggling. WPP has pulled its dividend and share buyback and withdrawn its 2020 guidance.
It’s not alone, as 90% of US ad execs say coronavirus pandemic disrupts campaign plans Who are the 10% NOT seeing an impact?!?) & OTT news viewing surges
And we’re not talking a minor disruption. Nearly 70% said COVID-19 has had a major impact, (this was a survey taken in mid-March… things obviously have worsened in the weeks since then.) Nearly an equal number said 2021 ad spend likely will also be reduced.
The bottom line: The impact of COVID-19 is rippling through the industry. Despite more content being watched, less product is being purchased, creating a conundrum for marketers and a revenue shortfall for content distribution companies. Add to that the gradual shutdown of the content creation industry – studios are closed, sound stages are empty and post-production houses are slowly running out of work.
There is an upside.
In the US, the first three weeks of March saw total estimated streaming minutes hit 400 billion, an 85% bump from a year ago, Nielsen said.
Live news streaming also has seen big increases. Preliminary numbers from Brightcove’s Q1 2020 Global Video Index show streamed news has seen even bigger gains. Where overall streaming numbers increased nearly 2X, streaming news numbers were up more than 3X through March 15 compared to a year ago; specifically, January was up 4.5X, February 4X and March 3.25X over the previous year.
March 13, the day President Trump declared a national health emergency, was the biggest single-day for streamed news consumption in the quarter.
What’s that mean?
News content distributors, especially newspapers and magazines, should be looking to launch or expand their streaming channels to respond to the COVID-19 crisis because users increasingly are turning to streaming, especially on smartphones, to keep up with breaking and developing news. News programming also is an excellent replacement for canceled sports for brands looking to stay in front of consumers… as long as they can tolerate the grim news.
People are most likely to be streaming Netflix during the pandemic
Bad news for Quibi, Peacock, and HBO Max? Maybe so. A March 27-29 poll showed more consumers signed up for a streaming service than they had in Q1 a year ago. About 35% said Netflix was their platform watched most often, 10% said Hulu and 9% said Amazon Prime.
The bottom line: Even with massive unemployment, Americans continue to take SVOD services. The share of adults making less than $50,000 who took an SVOD service in Q1 rose to 33%, up from 26% earlier this month.
The data also shows services set to launch this spring aren’t attracting subscriber interest from most consumers… yet. BUT, as the flood of original content becomes a trickle because of studio shutdowns, consumers will look for streaming alternatives like Quibi, HBO Max et al. While intuitively it may seem a risky time to roll out a streaming service, the new reality of social distancing won’t go away overnight and new SVOD services with niche and other original content will be appealing to consumers.
Anyone who’s looked to ESPN during the COVID-19 outbreak for entertainment will see hours of programming related to old UFC bouts, and an increase in the amount of shoulder content that’s trying to fill the void left by canceled live sports.
ESPN is taking a significant hit. Viewership is down 50% from a year ago between March 12-25.
It’s not alone.
Without live events, unique viewership at Golf Channel is down from 5.23 million in the week beginning March 9 to 3.19 million the following week. By way of comparison, the same week last year recorded 5.25 million unique viewers.
The bottom line: Sports viewers will come back to TV.
But the problems that have chased fans away from nearly every venue over the past five years aren’t going away, and they’ll only be exacerbated by concerns about COVID-19 for months, even after the games resume.
How will teams replace the revenue they normally get from tickets, concessions, and merchandise?
Will they all survive? The COVID-19 epidemic already has claimed one league, USA Rugby, which announced it was filing for bankruptcy protection.
Will others be hurt as badly by zero attendance AND the need to make-good on rights deals?
Eventually, networks will look to get their money back for the rights to games never played, to offset the lost revenue from ads that have canceled.
So, look for a lot of new rights deals and, especially for digital rights that are up for grabs by traditional players and newcomers.
Leagues and teams (like networks) will be looking to add more incremental revenue streams, streams that will include more niche content from sports teams looking to restock their cash reserves. That’s a huge opportunity for streaming.
WarnerMedia sets Ex-Hulu boss & Amazon exec Jason Kilar as CEO
Jason Kilar – Hulu’s CEO through its birth and infancy – will lead AT&T’s WarnerMedia nameplates including HBO, CNN and the Warner Bros. movie studio. Kilar takes over for longtime AT&T exec John Stankey, who famously told HBO staffers at a town hall following its acquisition by the telco that they needed to up their content creation to go head-to-head with Netflix in terms of volume.
Kilar is no stranger to his own controversy, sending a memo to his then bosses –that included Comcast, Disney and Time Warner – advising that linear TV was dead and streaming was the way of the future.
Shortly after that memo, he left Hulu to launch and lead streaming service, Vessel.
The bottom line: If anyone can expand HBO Max internationally to the extent AT&T is hoping (demanding), and shepherd the other streaming services AT&T has acquired, it’s Kilar.
He’s already focusing on making sure the technology is up to snuff – which really is key to any streaming deployment – and knows that the international market is one that’s ripe for the biggest growth.
Stay tuned… and stay well.