• by Wayne Friedman , March 26, 2020

Second-quarter TV advertising dollars for the April through June period could see a massive 40% decline in business, with lesser drops in the proceeding quarterly periods, according to one media analyst.

Bernstein Research estimates a “base case” scenario -- one where first-quarter 2020 will see a 10% decline in TV advertising, a 40% drop in the second quarter, a 15% pullback in the third quarter, and a 5% loss in the fourth quarter.

Todd Juenger, media analyst at Bernstein Research, says 2021 could see a 75% recovery of the TV advertising dollars lost in 2020. In a worse-case scenario, 2021 would only recover 20% of 2020’s decline in TV advertising dollars “given a prolonged recovery scenario as well as accelerated cord-cutting.”

“The underlying assumption is that advertisers will learn to live without TV and replace with more efficient/effective methods -- mostly digital. Much like what happened to print media in the last U.S. recession.”

Cord-cutting will accelerate in second and third quarters due to COVID-19 issues with consumers who are under pressure to cut costs. Juenger says this is will be “primarily driven from no sports” programming, which will lead to many cancellations at virtual pay TV distributors of networks.

The best-case scenario is that a 50% loss in business will be regained in the fourth quarter, when sports and the economy overall recover. The worst-case scenario is that the pay TV marketplace continues to decline with a 2021 recession causing cord-cutting to fall at annual rate of 9%.

“We have learned that COVID-19 is most dangerous to the population of people who are older and have preexisting underlying medical conditions. We believe that analogy also applies to media stocks.”

He adds: “Shareholders of stocks like Viacom, Discovery, and AMC Networks own underlying assets that rely almost entirely on an old business model with both severe adverse structural forces and cyclical risk, as well as the preexisting condition of overly extended balance sheets.”