Strong revenues are becoming more of an anomaly in 2020, given disruptions across all industries as the coronavirus (COVID-19) pandemic continues to unfold. Yet despite the competitive landscape, local television stations and broadcasting networks in the United States continue to position themselves for a strong 2020, with projected revenues of $37 billion. This momentum is largely due to a significant spike in viewership (as many Americans have been ordered to shelter in place because of the pandemic), political advertisements and retransmission revenues.
The number of confirmed COVID-19 cases in the United States is now more than double the number reported in China. People are anxious, and many are tuning into local broadcasting as their preferred news source for updates. The four major broadcasters have seen the largest live TV viewership increases during the daytime and early fringe hours (from 4 p.m. to 7:30 p.m.), up 31.3% and 35.2% respectively between March 16 and 20 of this year compared to the same period in 2019, according to analytics company Comscore.
Comscore also indicated a 73.4% increase in live TV viewing across seven cable news networks during that same time period, including a massive 102.6% increase during daytime. Live TV viewing on financial news networks also saw a 95% increase overall, and daytime children’s programming viewing was up nearly 31%. The spike in viewership could be a ripe opportunity for TV broadcasters to review advertising agreements to ensure they are optimizing ad revenues.
This year’s presidential race has drawn greater attention and increased viewership across a range of video and programming channels. While competition for political advertising revenue is fierce, particularly among social media and streaming platforms, presidential campaigns continue to spend heavily on traditional print and local TV broadcasting. Political ads are projected to increase to about $3 billion, up 15% compared to the last presidential election in 2016, according to Comscore. Large broadcasters such as Sinclair Broadcast Group, Nexstar Media Group and Gray Television are anticipated to capture much of the revenue.
Retransmission revenue continues to be a bright spot for broadcasters as 2020 progresses. While core revenue sources such as local and national advertisement stagnate, retransmission and digital revenues continue to grow. Retransmission fees are received for the rebroadcast of local TV signals to cable, satellite and streaming platforms, and have topped $10 billion annually with a yearly compounded growth rate of 15%.
Streaming is faring well, but saturation is setting in
The trend of consumers cutting the cord and moving from cable to streaming platforms is not new, but it is accelerating even more rapidly as more Americans are ordered by state or local entities to stay home as the pandemic continues. The projected drop in pay-TV subscribers in 2020 prior to COVID-19 was roughly 6%, but we anticipate this number to increase. In addition, 25% of U.S. broadband households are using antennas to watch local broadcasting channels, according to market research firm Parks Associates. That figure is up from 15% last year.
In 2019 fourth quarter results, AT&T reported a net loss of nearly 1.2 million video subscribers for the year, while Comcast lost nearly 733,000. The streaming market continues to capture more users due to its affordability and on-demand programming, and is expected to increase in subscribers by more than 20% in 2020, according to Bloomberg. Last year in particular was pivotal for streaming, as Disney and Apple released their own platforms.
However, with additional platforms expected to launch in 2020, the streaming industry could become more saturated and complicated for the end user. With so many options, the array of competitors can cause confusion. For example, consumers are having to choose from various over-the-top devices, such as Amazon’s Fire TV, Apple TV, Roku and Google Chromecast, along with virtual multichannel video programming distributors (vMVPDs) such as AT&T Now, YouTube TV, Hulu and Sling TV just to watch live TV.
Subscription fees have also increased, as vMVPDs face difficult times keeping subscription costs low with all of the necessary carriage, retransmission and licensing fees. For instance, YouTube TV recently said it would cancel its agreement with Fox Regional Sports Networks and Yankee Entertainment and Sports Network on Feb. 29 in a dispute over fees. Rising subscription costs have resulted in significant decline within video subscribers. For example, AT&T Now recently lost 713,000, or nearly a third of its subscribers, due to rising costs.
What to expect for TV and streaming in the near future
While bright spots remain in the future for TV broadcasting and streaming, the global broadcasting TV sector is underperforming the S&P 500. There may be more opportunities for retransmission revenue negotiations, but the broadcasting industry needs to consider how to build more leverage to charge fees. Political ad campaigns will provide a short lift, but provides only temporary relief as a whole.
The coronavirus pandemic has brought even more uncertainty to TV broadcasting, especially with the 2020 Summer Olympics in Japan being postponed. Broadcasting revenue relies heavily upon major sporting events such as the Olympics and sports leagues such as the NBA, MLB, NHL and NFL to bring in more core advertising.
NBCUniversal, the exclusive broadcasting partner for the Olympics, was on track to sell $1.2 billion in ad revenue, and it’s now unclear how much of this can be deferred if and when the games take place in 2021. The suspension of the current NBA season has created nearly a $1.6 billion impact in ad revenues which will be spread across ESPN, TNT and ABC.
However, as the coronavirus pandemic continues to escalate within the U.S. and mandated quarantines come into effect, we can expect gains in broadcasting and streaming similar to what China experienced, as companies such as Tencent and Alibaba saw spikes in consumption.