How Much Will SVODs Benefit From Coronavirus' Stay-Home Dynamic?

Given this week’s alarming coronavirus developments, and that it’s hard to think about much else, I figure it’s only natural to address it from some business perspective in this week’s column.

The most obvious question relating to advanced TV, or OTT at any rate, is whether subscription-based video services stand to benefit or lose as a result of much of the population presumably staying home as much as possible for weeks or months.

In some respects, it does seem like a no-brainer. It makes perfect sense that those who are lucky enough to have the financial wherewithal to weather this crisis comfortably, but are staying home for precautionary or self-sequestering reasons, are likely to keep existing SVODs and perhaps add more.

Many of those people will be white-collar workers who can perform their jobs from home (as long as their employers remain able to pay them).

Seems to me Disney+ can’t help but be a major beneficiary, at least in the short term, given that many kids — possibly millions — could be home for at least some time due to school closures. And parents suddenly working from home full-time will be desperate for ways to occupy their cabin-fevered offspring.



Under those circumstances, paying $6.99 for a month of Disney+ — or $12.99 to get Disney+, Hulu and ESPN+, for that matter — could be considered almost a survival necessity. That is, an investment in staying sane and helping you keep your job.

“If people are sitting at home, can’t go to the movies, and all you have to do is hit one button and it’s a tenth of the price of cable, why would this be bad for subscriber growth?,” LightShed analyst Rich Greenfield noted to CNBC.

Indeed, Greenfield believes that “all the streamers will benefit.”

Could be. Many think that the circumstances are particularly propitious for the new services to debut between now and May —NBC Universal’s Peacock, HBO Max and Quibi — as well as for Disney+ and the also recently launched Apple TV+.

Similarly, Magna won’t publish its Q1 advertising forecast until March 20, but the analysis currently on its site predicts that “the big winners in a self or mandated quarantine scenario will be the streaming services, as it is ideal for binge viewing, and the influx of new services means there is more content on offer than ever.”

Further, “With connected TV activity already on the rise, we could see an additional acceleration of 8%-10% among adults in the event of a severe outbreak,” the agency predicts. 

And though there isn’t a whole lot of solid evidence to go on yet, according to Apptopia, combined mobile app sessions of popular video streaming apps in China had been on the decline, but shot up again after the population was consigned to home by the coronavirus crisis. 

And yet… While an upsurge in at-home time will undoubtedly drive more streaming, and perhaps paid subscription growth, for a time, might we not be underestimating the offsetting impacts of the pandemic’s economic fallout? 

Much as none of us wants to think about this, some economists are already saying the U.S. is now headed into a recession. 

The severity and length are question marks, but experts quoted in The New York Times believe that the economic impacts of the virus could be more severe in the U.S. than in China — and China’s scenario is not good. One of many indicators: eMarketer just slashed its global advertising spending projection by $20 billion, largely based on expected cutbacks in China. 

A struggling U.S. economy, with both low-paying and well-paying jobs on the decline, would shrink the overall prospect pool of those able to pay for all kinds of discretionary items — even small monthly amounts for streaming services, never mind $100+ for cable TV packages. And that goes for international markets, as well, which represent the greatest opportunities for significant growth for big, existing SVODs like Netflix. 

Though released only days ago, the widely covered, widely disputed arguments of Needham & Co. analyst Laura Martin — who projects that Netflix’s subscriber growth will slow further as a result of this pandemic — may have been written off too quickly, before the full severity and implications of this incredibly badly managed outbreak had sunk in.

The past few days’ health and financial shocks appear to have gone a long way toward bursting the denial bubble.

Martin’s key argument — which is precisely that point about streaming subscriptions being a dispensable luxury if people are out of work or struggling harder than ever to get by — applies to basically all SVODs.

She also points out that ad-free services obviously wouldn't see any offsetting ad-revenue benefit even if existing subscribers spend more hours watching their content.

I hope the warnings of a potentially serious recession turn out to be dead wrong, and that the virus does indeed drive a boom in new SVOD subscribers.

But streaming-wise, my bet is that the long-term beneficiaries of this crisis will be the free, ad-supported services.

Although advertising spending will decline to one degree or another in a recession, more of the available dollars are likely to shift to AVODs — particularly if they can produce the inventory and scale to attract bigger brands.

Not to mention the additional dollars that may flow in part to AVODs in the short term, with sponsorships and campaigns around sports and other live events now in limbo.

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