Hard Numbers: Calculating Big Media’s COVID Crunch

Hard Numbers: Calculating Big Media's COVID Crunch
Cheyne Gateley/VIP

Third-quarter earnings season is drawing to a close, and while a recovery is underway across the media industry, the ongoing pandemic is still taking a bite out of the pocketbooks of some of the biggest names in the space.  

Q3 financial results across the board were largely better than expected, but that’s because expectations were low headed into earnings season. COVID is still raging around the world, with the U.S. seeing a troubling surge of cases over recent weeks.  

Top lines were under pressure. Telecom behemoth AT&T reported Q3 total revenue was down 5%, or $2.2 billion, from a year ago and totaled $42 billionAT&T CFO John Stephens explained that the revenue decline included an estimated $2.8 billion of lost or deferred revenue from COVID and foreign exchange pressures.  

In addition, Discovery saw its free cash flow fall 11% “largely due to COVID-related weakness to revenue and OBIDA,” CFO Gunnar Wiedenfels said on the earnings call Nov. 5. Furthermore, even while overall advertising spend saw a rather decent rebound following a brutal second quarter, Discovery cited the COVID-19 pandemic as a reason for the 8% year-over-year ad revenue decline during Q3.

The companies that run theme parks took the largest hits during the quarter, as operations remain limited and in some cases are halted altogether. Last week, media powerhouse Disney mentioned that COVID was major drag on the company’s finances during its fiscal fourth quarter 

Our financial results continued to reflect significant impacts from COVID-19, which we estimate adversely impacted segment operating income in Q4 by $3.1 billion,” Disney CFO Christine McCarthy said on the company’s earnings call.  

The segment that houses theme parks was the most severely affected, with an adverse impact of $2.4 billion in Q4. Media Networks operating income took a $500 million blow as a result of the pandemic. 

Meanwhile, Disney rival Comcast mentioned COVID 21 times during its earnings conference call. CEO Brian Roberts noted that some of Comcast’s businesses are recovering at a healthy pace; however, theme parks are having a tough time. 

NBCUniversal’s adjusted EBITDA tumbled nearly 39% during Q3 to $1.3 billion. But Roberts said excluding theme parks, NBCUniversal EBITDA would have grown by 9% year-over-year. 

While the belief is largely that COVID-induced financial damage will be temporary, there is still significant lack of visibility into the future. And even when there’s a vaccine and life returns to normal, the cultural shifts might be here to stay.  

The challenge for these media companies in the current environment is that while the direct-to-consumer strategy shift is ever important for the future, the businesses are still nascent and a long way away from delivering a healthy profit.  

Many investors and analysts have given companies a free pass for 2020 because of the unforeseen circumstances caused by COVID. But all eyes will be on Q4 and the first half of 2021 for a clear picture on how the media companies are actually financially positioned for the future.