- Cord cutting could accelerate in the US if football season doesn’t kick off in the fall as planned, an April 10 report by UBS analysts said.
- The pay-TV industry is already expected to take a hit from a recession, as people exiting the coronavirus lockdown look for ways to trim their household budgets.
- A delay to the upcoming NFL and college football seasons, which are staples of the annual TV calendar, could also drive people away from traditional-TV packages.
- “A severe recession and lack of live sports in the fall could create a perfect storm for cord cutting,” the analysts wrote.
- Media companies that rely heavily on traditional TV models would hurt most, regardless of how much sports they broadcast, as would companies that draw significant shares of their sports viewership from football.
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The TV industry is very ready for football.
Media companies like Disney, NBCUniversal, and Fox that rely on live sports for TV-network revenues have been hurting since March, when many major sports went on hiatus. There’s a chance that NBA, MLB, and other games could return in the summer and throw the TV industry a life line. But it’s the fall football season that could shape the industry’s ultimate recovery and long-term survival, according to analysts at UBS.
A delay to the upcoming NFL and college football seasons could drive more people away from pay TV and further hinder media companies that rely on the traditional ecosystem for revenue, John Hodulik and other UBS analysts wrote in an April 10 report.
US TV viewership has risen in recent weeks thanks to cable news and influx of people who are spending more time at home. But the UBS analysts wrote that a recession could exacerbate cord-cutting.
Already, bars, restaurants, casinos, and other commercial businesses that UBS estimates comprise about 5% of total TV subscriptions are likely revisiting their packages, the report said.
UBS economists also expect the US unemployment rate to reach 14.7% this summer. People may look to shed their TV bills as they trim their household budgets, given that the price of conventional TV services has grown faster than the consumer-price index over the past 10 years, the report said.
Any delay to the upcoming football seasons, which are a staple of the US TV industry, would give viewers less reason to keep their costly TV bundles.
“A severe recession and lack of live sports in the fall could create a perfect storm for cord cutting,” the analysts wrote. “A timely return of the NFL and college football – which account for nearly half of all sports viewership – will be key in providing stability to the multichannel bundle.”
Media isn’t the only US industry looking to the upcoming NFL season for recovery. The legal sports-betting industry, which has been derailed the lack of live sports, is planning a resurgence around football season, as Business Insider previously reported.
So far, the NFL has not announced delays to its upcoming season. It proceeded with the NFL draft virtually. And the schedule for the 2020 NFL season is due out on May 9. But, as we learned from the abrupt shut down of the NBA and NCAA college basketball seasons, that could change at a moment’s notice due to the threat of coronavirus.
And college football faces even greater risk, according to the analysts.
“The outlook for college football is less clear given the de-centralized nature of college athletics, the coordination required across schools and conferences, and their amateur status (i.e. it’s much harder to quarantine unpaid players),” the note said. “As such we believe there is meaningfully more risk to the college football season than to the NFL.”
The media companies most dependent on traditional TV models would suffer most if a delay in the football season and a recession accelerate cord cutting further, UBS wrote. That includes Fox, ViacomCBS, Discovery, and AMC Network, the latter two of which don’t broadcast many or any live sports. TV networks generate most of their revenue from carriage fees and advertising. If more people drop channels or pay-TV packages, TV networks won’t be able to command the same rates from distributors and advertising demand will also fall.
Media companies that draw significant share of their sports viewership from football would, of course, be at risk, too. ViacomCBS gets 71% of its sports viewership from football — the most of any TV-network group— followed by Fox at 60%, and Disney at 44%.
Here’s the breakdown of sports-viewership in 2019 from UBS:
For more about how the coronavirus pandemic is affecting media, see our coverage on BI Prime:
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- 40 advertising execs who manage $90 billion in spending describe how they’re shifting their 2020 budgets in a new report. Here are 4 key takeaways for the TV industry: Connected-TV platforms like Roku and Hulu are expected to see the biggest gains in TV advertising, and Disney is the best-positioned cable-network group.
- The key factors analysts are watching at 5 major media companies including Disney and Fox to help determine whether their stock will keep falling or rebound: Combined, Disney, Fox, ViacomCBS, Discovery, and AMC Networks lost $92 billion in market value since the last market high on February 19, largely thanks to Disney.
- Why analysts say Disney and Discovery are the media giants most threatened by the coronavirus, but Comcast could fare better: Companies that generate significant shares of their revenue from theme parks, films, and advertising are most sensitive to the pandemic and the economic downturn it could ignite.