The impact of COVID-19 saw the total value of Pay TV in Q2 shrink by 4.3% to $53.6 billion versus the same period in 2019.
VIP’s definition of the Pay-TV market includes total revenues for cable, satellite, fiber optic and online TV providers, as well as revenues from advertising, affiliate or subscription fees and content licensing for broadcast and cable networks.
The decline set back the gains Pay TV made in Q2 2019, which saw revenues $2.1 billion greater than in 2018. Declines were seen across all three major areas, with cable TV down by 4.9% (-$945m), Pay-TV service providers down 4.8% (-$1.2b) and broadcast TV dropping by 2.3% (-$271m).
Breaking apart the revenue sources for cable and broadcast*, advertising was directly responsible for declines across the networks. The toll coronavirus took on advertising was reported by TV companies as -$3.1 billion, a decline of 26.8% in spend versus last year.
[*Note: VIP is unable to split apart revenues across the periods by network type, as not all companies report the figures separately.]
In contrast to the travails of the ad industry, the amount of revenue generated from affiliate or subscription fees the networks charge Pay-TV operators for carrying their channels actually increased by 5.4% to $15.995 billion.
Revenues from content licensing, usually combined with the mysteriously termed “other” in quarterly reports, also increased, up 27.4% to $5.15 billion. This was aided by the launch of HBO Max and Peacock, as AT&T and Comcast saw increases in licensing cross-company. ViacomCBS also benefited from HBO Max, pocketing a cool half billion dollars for the “South Park” library in Q2.
Taking a deeper look at the impact of the virus on advertising, only one company, Nexstar, saw an increase in Q2, and this was due to acquiring Tribune’s broadcast and cable networks in Q3 2019 (as in, their performance is not reflected in last year’s Q2).
AT&T and Disney saw the steepest declines in advertising revenue, due in part to the suspension of the NBA and MLB seasons across the period. The majority of companies saw declines of between 25% and 30%, but AMC bucked that trend, seeing a only -3% versus the previous year.
Carriage fees tell a different story. VIP’s disdain for the long-term strategy of charging fewer and fewer consumers more and more to keep watching has been noted, but most TV firms are opting to keep up the pace of increases. Operators of broadcast networks saw increases across the board, but it is interesting to note that most cable networks saw declines. Perhaps the cutting numbers are growing too high and the attempts to paper over the cracks are now hastening ever-increasing departures from the Pay-TV ecosystem.
Networks are hoping the country gets back to normal pretty quick so that ad spend may return and overall revenues pick up. The decline in carriage fees suggests, however, that for cable in the immediacy, and broadcast in the longer view, attempts at short-term gains instead of demonstrating strategic long-term plans to combat the popularity of newer viewing formats are finally coming home to roost.