The coronavirus is a global pandemic. Regardless of what its actual infection and mortality rates might be, it is already having seismic impacts on stock markets and consumer behaviour – the result of which might be to tip the global economy into recession. It is also creating the largest home working experiment in history. Even if coronavirus doesn’t tip us into recession, the next few months will see major disruption of consumer behaviour patterns with major implications for the entertainment industries. However, to introduce an element of calm into the hysteria, coronavirus appears to be following the s-curve (scroll down to chart). So although the data we are currently looking at is two weeks out of date (ie factoring in the incubation period) the early signs are that it tops out as a small minority of the population).
In Q4 2019 MIDiA fielded questions to consumers about how they would change their leisure and entertainment spending if a recession took place and they had to reduce their overall expenditure. The full findings of this exclusive research will soon be published in a MIDiA report: Recession Impact | Cocooning Will Protect Entertainment Spend (the latest in our series of Recession Impact reports). Here are a few highlights and how they relate to the current coronavirus spread.
In the last economic downturn, consumers cocooned, opting to stay in more in order to save money. The signs are that this pattern will be replicated if another recession comes, particularly so because of public concerns about health risks in public places. When we asked consumers which three types of leisure and entertainment spend they expected to cut back on most, going out and eating out were by the far the two most widely-cited options. Live music was also widely cited among concert goers but less so than going out and eating out, with around two thirds of concert goers not planning to stop going to gigs – cancellations allowing. The difference between now and the last economic downturn is that digital content services have boomed, so consumers now have much better home entertainment options than they used to. Cocooning is therefore an even more appealing prospect. Indeed, there are probably already many people looking forward to binge watching themselves through a few virtual boxsets.
Crucially, streaming looks to be relatively well placed. Just over a fifth of consumers expect to have to cancel a video subscription and the same goes for music. However, the impact on music would be more pronounced due to the majority of music subscribers only having one music subscription. So, a consumer cancelling a music subscription means a lost subscriber. But with more than half of video subscribers having more than one video subscription, a cancelled video subscription would most often simply mean one less subscription in the market rather than a lost subscriber.
Of course, when push comes to shove, consumers may find themselves cutting back more dramatically, with streaming music particularly vulnerable because:
- Younger people are normally the first to lose their jobs and millennials make up the lion’s share of music subscribers
- Downgrading to a free tier still leaves the consumer with a decent music experience, and that’s without even considering the role of YouTube
Across both music and video, a long-term recession – if it happens – would see a growing role for ad-supported. YouTube looks best placed to prosper, not least because Spotify has not had the best of times growing its ad business. Pandora may also benefit, as may the likes of Peacock in video.
In short, whether it be subscriptions or ad-supported, coronavirus may actually benefit streaming business models, especially video. If a recession comes then entertainment spend will be hit, but significantly less so than leisure. These are worrying times, but at least we’ll be able to binge watch our way through them.