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Businesses are facing difficulties in reaching customers who are increasingly self-isolating during the coronavirus pandemic. Anthony Okolie speaks with Andriy Yastreb, Telecom and Media Analyst, TD Asset Management, about why the streaming industry seems to be thriving.
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[MUSIC PLAYING]
- Hello, and welcome to MoneyTalk's COVID-19 daily bulletin for Thursday, April 16. My name is Anthony Okolie. In a few minutes, I'll be speaking with Andriy Yastreb, Telecom and Media Analyst with TD Asset Management, about the impact COVID-19 is having on the streaming and media industry. But first, a quick wrap of today's market news.
[MUSIC PLAYING]
More than five million Americans filed for unemployment benefits last week, bringing the number of job losses to 22 million during the COVID-19 outbreak, wiping out all the job gains since the 2008 financial crisis. Meanwhile, President Trump is expected to announce guidelines to reopen the US economy, claiming the country has passed the peak of new coronavirus cases. In Europe, Germany will begin to gradually reopen its economy next week after a month in partial lockdown. However, social distancing measures such as bans on gatherings of more than two people will remain in place indefinitely.
More COVID fallout for the airline industry. WestJet has announced it is laying off 1,700 pilots. Meanwhile, United Airlines plans to cut its travel schedule by 90% in May and expects similar cuts for June. The company warned that travel demand is now essentially at zero and shows no sign of improving in the near term.
Finally, Amazon said that it is working toward regular testing of all its employees for the COVID-19 virus, including those who aren't showing any symptoms.
[MUSIC PLAYING]
And that's a wrap of today's market news. As promised, my conversation with Andriy Yastreb on the impact COVID-19 is having on the media and streaming industry.
[MUSIC PLAYING]
Andriy, we've seen some big changes to consumer behavior doing this COVID-19 lockdown. Now, not all companies can thrive in this new business. But streaming seems to be doing very well. Why is that?
- Hi, Anthony. Thank you for having me. People want to be entertained, even in this lockdown environment. And with no movie theaters and with no live sports on TV, streaming is one of the few areas that actually benefit in this unusual environment.
If you look at the data, Comcast has reported that on its network, streaming usage is up about 38%. And in Europe, we've seen reports that in some countries like Poland, for example, usage of Netflix has doubled since lockdown begun.
- Now, what about traditional media? What's been the impact to their business?
- Well, overall viewership of traditional TV is also up. But there are some changes in the consumption patterns during the day. So during the day as people are locked in in their houses, they watch more TV in the middle of the day. And viewership there is up to double digits. But in the evening, viewership is not as high. And we continue to see declines. But currently, that's mostly driven by the fact that there's no live sports TV on.
One area that is benefiting right now is news. And TV news viewership is up about 50%. But what's interesting about that is that some advertisers, big brands-- they're concerned about putting their ads next to news, given how negative the news flow has been recently with all the COVID data and economic data points as well.
- And can you expand? What's happening in the advertising market?
- Yes, so typically in a recession scenario, advertising is more sensitive to economic activity. And advertising spending declines more than GDP itself. So we probably should expect that advertising in Q2 will decline more than GDP. But we don't know how exactly how bad it will be in the short term. So for example, travel and hotels accounted to approximately 10% of total advertising dollars before the crisis. And now they've declined to pretty much zero.
If you add other sectors that are impacted as well, such as retail, and restaurants, and a lot of other companies, we probably should expect advertising spending to decline by 30% to 40%.
- And has the impact differed between TV versus digital advertising?
- Yes, the impact has been different. And one thing that helps TV in the short term is that TV has some long term advertising contracts, unlike digital. So in the short term, big brands like Coca-Cola and McDonald's continue to run their ads on TV. And it helps TV ecosystem.
On the other hand, digital advertising platforms like Google and Facebook-- they were particularly strong in doing local and targeted advertising. So they have more exposure to small and medium businesses and to kind of mom and pop businesses, local bars and restaurants. A lot of those businesses are shut down. So in the short term, we'll see digital advertising to be impacted more.
But despite this, I think the long term trend of market share shift from TV to digital will continue. And at some point later on, we'll see a shift in the impact when digital will start to pick up a little bit, but TV might be impacted more. And if you think about TV, there's no live sports. And we don't know when it will come back.
Olympics has been postponed. And it was expected to be a big driver for advertising over the summer. And right now, Hollywood has stopped production of all content, essentially. So as we move into the fall season, all those TV shows that were supposed to premiere in September for the full season, they're not done yet. And it's possible that they will not be done in time for the season. So TV industry might see an issue with content and lack of content to show.
- So given all these challenges with the content and advertising in the media industry, what's your investment strategy going forward?
- I would say that, given the high degree of uncertainty, investors should focus on high quality businesses. And high quality media I would say that is defined as having strong content idea having strong distribution platform, and having exposure to streaming. And then also having recognizable brands. And in this environment of heightened uncertainty and economy entering recession, obviously strong balance sheets and strong liquidity positions matter as well.
So in summary, I think this crisis presents a once in a decade opportunity to buy high quality businesses on sale.
- Andriy, thank you very much for your time.
- Thank you, Anthony.
[MUSIC PLAYING]
- And thank you for joining us. My name is Anthony Okolie. Please join us again soon. And stay safe.
[MUSIC PLAYING]
- Hello, and welcome to MoneyTalk's COVID-19 daily bulletin for Thursday, April 16. My name is Anthony Okolie. In a few minutes, I'll be speaking with Andriy Yastreb, Telecom and Media Analyst with TD Asset Management, about the impact COVID-19 is having on the streaming and media industry. But first, a quick wrap of today's market news.
[MUSIC PLAYING]
More than five million Americans filed for unemployment benefits last week, bringing the number of job losses to 22 million during the COVID-19 outbreak, wiping out all the job gains since the 2008 financial crisis. Meanwhile, President Trump is expected to announce guidelines to reopen the US economy, claiming the country has passed the peak of new coronavirus cases. In Europe, Germany will begin to gradually reopen its economy next week after a month in partial lockdown. However, social distancing measures such as bans on gatherings of more than two people will remain in place indefinitely.
More COVID fallout for the airline industry. WestJet has announced it is laying off 1,700 pilots. Meanwhile, United Airlines plans to cut its travel schedule by 90% in May and expects similar cuts for June. The company warned that travel demand is now essentially at zero and shows no sign of improving in the near term.
Finally, Amazon said that it is working toward regular testing of all its employees for the COVID-19 virus, including those who aren't showing any symptoms.
[MUSIC PLAYING]
And that's a wrap of today's market news. As promised, my conversation with Andriy Yastreb on the impact COVID-19 is having on the media and streaming industry.
[MUSIC PLAYING]
Andriy, we've seen some big changes to consumer behavior doing this COVID-19 lockdown. Now, not all companies can thrive in this new business. But streaming seems to be doing very well. Why is that?
- Hi, Anthony. Thank you for having me. People want to be entertained, even in this lockdown environment. And with no movie theaters and with no live sports on TV, streaming is one of the few areas that actually benefit in this unusual environment.
If you look at the data, Comcast has reported that on its network, streaming usage is up about 38%. And in Europe, we've seen reports that in some countries like Poland, for example, usage of Netflix has doubled since lockdown begun.
- Now, what about traditional media? What's been the impact to their business?
- Well, overall viewership of traditional TV is also up. But there are some changes in the consumption patterns during the day. So during the day as people are locked in in their houses, they watch more TV in the middle of the day. And viewership there is up to double digits. But in the evening, viewership is not as high. And we continue to see declines. But currently, that's mostly driven by the fact that there's no live sports TV on.
One area that is benefiting right now is news. And TV news viewership is up about 50%. But what's interesting about that is that some advertisers, big brands-- they're concerned about putting their ads next to news, given how negative the news flow has been recently with all the COVID data and economic data points as well.
- And can you expand? What's happening in the advertising market?
- Yes, so typically in a recession scenario, advertising is more sensitive to economic activity. And advertising spending declines more than GDP itself. So we probably should expect that advertising in Q2 will decline more than GDP. But we don't know how exactly how bad it will be in the short term. So for example, travel and hotels accounted to approximately 10% of total advertising dollars before the crisis. And now they've declined to pretty much zero.
If you add other sectors that are impacted as well, such as retail, and restaurants, and a lot of other companies, we probably should expect advertising spending to decline by 30% to 40%.
- And has the impact differed between TV versus digital advertising?
- Yes, the impact has been different. And one thing that helps TV in the short term is that TV has some long term advertising contracts, unlike digital. So in the short term, big brands like Coca-Cola and McDonald's continue to run their ads on TV. And it helps TV ecosystem.
On the other hand, digital advertising platforms like Google and Facebook-- they were particularly strong in doing local and targeted advertising. So they have more exposure to small and medium businesses and to kind of mom and pop businesses, local bars and restaurants. A lot of those businesses are shut down. So in the short term, we'll see digital advertising to be impacted more.
But despite this, I think the long term trend of market share shift from TV to digital will continue. And at some point later on, we'll see a shift in the impact when digital will start to pick up a little bit, but TV might be impacted more. And if you think about TV, there's no live sports. And we don't know when it will come back.
Olympics has been postponed. And it was expected to be a big driver for advertising over the summer. And right now, Hollywood has stopped production of all content, essentially. So as we move into the fall season, all those TV shows that were supposed to premiere in September for the full season, they're not done yet. And it's possible that they will not be done in time for the season. So TV industry might see an issue with content and lack of content to show.
- So given all these challenges with the content and advertising in the media industry, what's your investment strategy going forward?
- I would say that, given the high degree of uncertainty, investors should focus on high quality businesses. And high quality media I would say that is defined as having strong content idea having strong distribution platform, and having exposure to streaming. And then also having recognizable brands. And in this environment of heightened uncertainty and economy entering recession, obviously strong balance sheets and strong liquidity positions matter as well.
So in summary, I think this crisis presents a once in a decade opportunity to buy high quality businesses on sale.
- Andriy, thank you very much for your time.
- Thank you, Anthony.
[MUSIC PLAYING]
- And thank you for joining us. My name is Anthony Okolie. Please join us again soon. And stay safe.
[MUSIC PLAYING]
