COVID-19’s Impact on Streaming: It’s Complicated

One of the logical conclusions to draw about the impact of COVID-19 (also known as the coronavirus) is that the extra time people are spending at home will result in a boom for home entertainment. There are already strong signals that this is happening, with TV ratings up, TV news viewing up and Netflix doing so well that it has had to agree to reduce streams in Europe from HD to SD to reduce strain on the broadband networks. So, the natural assumption would be that music streaming would see a bump too. The consensus is that there isn’t a consensus (see here, here and here). The data is mixed. There are signs of uplift, and there are signs of decline.

What is going on? The answer lies in how you view the trends. This is not a dynamic that can be understood properly by observing macro trends; instead it requires micro-trend analysis. It turns out that COVID-19 is creating different entertainment responses not just across different countries, but among different segments of consumers within countries.

Cultural impact

The first factor to consider is the work and entertainment culture of a country. Take the example of Italy, which has seen a fall in streams. Italy is a very formal work culture, which means that listening to music in many workplaces is a big no-no. The commute was therefore the one part of the workday that workers got to stream. The commute has, of course, disappeared with COVID-19. You might think that freed from the constraints of a strict workplace, work-from-home (WFH) workers would listen to music during the day. Some might – but there are other factors at play:

  • Streaming is still relatively nascent in Italy, so behavior patterns are not well established. It is just not as natural for people to stream at home as it is in markets where people have been streaming for longer. Many still have home stereos they use at home.
  • Italy has a big linear TV culture, so WFH workers are more likely to have the TV on in the background than in many other countries.
  • People want to keep in touch with the latest news developments so are likely to have radio or TV news on in the background.

All these factors interplay and affect different people differently, but the combined effect in Italy is to have caused a streaming dip. Once crisis-fatigue kicks in people will consume news less and, if the outbreak persists long enough, TV broadcasters will start stuffing the schedules with re-runs because the supply of new shows will dry up due to the disruptions to filming and production. Italy may be down now, but it will pick up – though maybe not fully until everyone is commuting to work again.

Passion points

In other, more established streaming markets, labels we have been speaking to have seen an uplift in streams. Even in these markets, however, the macro picture obscures a much more complex micro picture. The key factor at play is passion points. We all have things that we love doing and, given more time in the day, we will fill it doing those things. If you are a music subscriber who is also a gaming aficionado then you are more likely to spend your newfound commute time on your console or gaming PC. This could actually mean a reduction in streaming if you were already listening to music in the workplace.

If the COVID-19 pandemic persists for months, then the other challenge labels will face is gaps in their frontline release schedules due to studios being closed down. It may well pay to shift some of the frontline marketing budget into catalogue marketing – not just for the classic gems, but also to boost still-popular two-to-five year old tracks that may technically be catalogue by industry definitions, but to consumers are just tracks they still like. Meanwhile, if COVID-19 causes long-term economic dislocation, streaming services will start having to fight churn rates as consumers trim their spending. Some bold thinking will need to be done around retention tactics, such as a three-month payment holiday for subscribers that try to cancel. Whether labels would be willing to fund such promotions is another issue entirely, but the key question is how much are those billing relationships worth?

The MIDiA team has been busy working on recession impact research for six months now, so we already have a library of data and reports to help our clients plan their way through these unprecedented times. In addition, during this period we will be creating regular COVID-19 reports. We will be publishing a major 5,000 word report on COVID-19’s impact on all media industries to our clients later today. In addition, we want to support the wider business and creative communities in their efforts to get through what is an unnerving and uncertain time in so many ways. Hence, we will also be creating a free-to-access version of the report to be released this coming Monday. Watch this space for more details on how to get it.

Stay well and healthy.

How Coronavirus Will Affect the Entertainment Industries

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:

  1. Younger people are normally the first to lose their jobs and millennials make up the lion’s share of music subscribers
  2. 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.