Advertising revenue reductions have hurt Europe’s commercial broadcasters badly during 2020.
But Europe is not alone in suffering from the fallout of the coronavirus pandemic; the US is seeing broadcasting-related layoffs in record numbers. AMC Networks has trimmed 10% of staff, with NBCUniversal and ViacomCBS also tightening their belts. Disney’s 32,000 layoffs are more related to its theme parks, but its broadcasting channels are also impacted.
The World Advertising Research Centre (WARC) is blunt. In its Dec 1st report it says that global ad-spend will fall 10.2% in 2020 (to some $557bn) and significantly worse than WARC had forecast at the beginning of the year.
Indeed, it is a near-miracle that Europe’s broadcasters have managed the ad-downturn so well and still succeeded in delivering solid ratings and even much-delayed Covid-sanitised drama and variety shows. Covid hit sports events and other high-profile viewer attractions which did little to help the bottom line. Add in the near-total absence of holiday, air travel and similar advertising and it’s a wonder that some broadcasters have managed to stay on air.
Ad revenue declines
- Spain: Q3 ad-revenues down -45%
- Pro7 ad-revenues crash -38%
- RTL reports -11.8% revenue fall
- TF1 suffers -9.7% impact
- Mediaset Italy -16.9% ad-collapse
- Mediaset Spain revenues fall -40%
The performance of each of these major players reflects the country-specific industry dynamics but 2020 has been a year where most players faced the same dramatic realities: Covid, Covid and Covid.
But it has been tough. Each and every broadcaster has tightened its belt. Capital investment has been postponed or cancelled as cost-reductions kicked in.
Broadcasters are also increasingly looking to cooperate across borders in an attempt to create ratings winners but at affordable costs. Bringing I’m a Celebrity, Get Me Out of Here to Wales not only saved a ton of production cash but did no harm to ratings and delivered viewing records for ITV (Episode 1 delivering 14.3 million viewers, the highest since the 2018 FIFA World Cup semi-final between England and Croatia).
Nevertheless, advertising is seen as recovering a little as Q4/2020 got underway. ITV overall fall for 2020 is likely to be around -11.2% which is terrible but not as catastrophic as initially expected.
Germany’s broadcasting giant ProSeiben-Sat1 had a “torrid year”, said investment bank Berenberg, with Q2/2020 ad-revenues evaporating by -38%. But there was a recovery in Q3 (to just a -6% fall compared with 2019). The broadcaster sold off some non-core assets in order to keep its head above water and devoted some of its advertising inventory to sister-businesses where there was a prospect of some revenue sharing on sales.
Silvio Berlusconi-backed Mediaset businesses in Italy and Spain both suffered terribly in early 2020 and were not helped by the collapse of tourism-related income and advertising.
For Mediaset Spain, Berenberg in November says: “With lockdowns returning in parts of Madrid, the direction of travel is not positive but we are hopeful of more moderate [full year] declines compared to Q2. Our forecast that the Spanish TV advertising market will be down by 19% for the full year is broadly unchanged.”
Deutsche Bank, in its November analysis of European broadcasting, despite saying that Q4’s broadcasting prospects across Europe were “murky” was also more hopeful of a Q4 recovery and saying: “We think there is less reason to believe this round of lockdowns would be as negative to ad revenue as the last one. We therefore model for -8% declines in Q4 on average.”
Deutsche Bank’s thoughts are fair: “Firstly, most markets with lockdowns have a time limit in place which hopefully implies that December would be a relatively normal month, leading to mobility around Christmas and encouraging more spending.
“Secondly, advertisers are behaving differently as they are aware of the drill and are more likely to target the way consumers intend to spend this holiday season a bit differently (encouraging more online purchasing for instance). We also think there is pent up spending that consumers may deploy during the Christmas month which advertisers might be eager to tap. Lastly, TV viewing has still stayed elevated, making this medium more attractive during this crisis vs. other forms of media such as out-of-home.”
Most of these broadcasters have diversified, some quite considerably.
ITV Studios is a well-regarded spin-off. RTL Group owns production giant Fremantle. Pro7/Sat1 has also invested in content production with Red Arrow Studios. But if productions are delayed then revenues are inevitably impacted.
ITV Studios’ non-UK activity, for example, saw revenue declines of an expected – and thumping - 24% for 2020. Deutsche Bank summarised the position, saying: “We forecast ITV external Studio revenue could decline by 24% to £198m, impacted by the suspension of content production activities in most territories as a fallout of social restrictions, which invariably delayed the completion of ongoing projects during Q3. Hence, the delivery of new and existing projects has been pushed forward to either Q4 or early 2021.”
Deutsche Bank adds that an improved ITV programming slate with the broadcast of new shows (initially held back to leverage a favourable advertising environment) coupled with the airing of six weekly episodes of long-running popular shows (Emmerdale and Coronation Street) would be supportive in driving higher audience share/ advertising.
The advertising/revenue position in Italy saw the Italian TV advertising market rise 15% in July and 20% in August, after having declined by nearly 35% in Q2, benefitting from higher catch-up and new advertising money coming into television.
Luxembourg-based RTL Group saw early-to-mid 2020 ad-downturns in all its key markets (Germany, France and the Netherlands) and seems to have recovered somewhat in Q3 and appear to be more or less benign for Q4 (ad-revenues expected to be down -4%). RTL’s Fremantle division was badly hurt by production shut-downs (-27% revenue decline in Q2) but recovery is underway. By Q4 Fremantle’s comprehensive output is back to 80% of normal during Q4 with live production of The Price is Right back on air with Covid-safe transmissions.
Germany’s other broadcasting powerhouse Pro7/Sat1 saw a -19% ad-decline in July, but up 4% in August and then down -5% in September. This yo-yo means it’s tough for forecasters to predict early 2020 positions for Pro7/Sat1 while Covid is still around. One result is that Pro7 has cut its programming budget for 2020 in an attempt to balance costs vs revenues.
ITV, despite all the uncertainties of Covid and UK unemployment threats, is expecting a recovery for 2021.
Deutsche Bank’s summary could equally apply to much of the rest of Europe: “We forecast that the strong momentum would continue in 2021 as ITV is well-positioned to deliver group revenue growth of +12% and net earnings growth of 16% in 2021 led by a strong programming slate (Love Island, Euro 2021 and the FA Cup) which would drive higher advertising income. We also expect a steady recovery in ITV Studio revenues led by continued traction for original content and global format/distribution coming from OTT-based SVOD providers, pay-TV operators and FTA broadcasters.”
And for every one of Europe’s commercial broadcasters the Covid-vaccine news in November came like Manna from Heaven. Berenberg Bank summed up the position, but also cautioned, saying: “Assuming a Covid-19 vaccine results in more normal consumer behaviour, ad-spend should benefit. Nevertheless, we expect consumers – released from their homes – to reduce TV consumption and for the medium’s share gain in 2020 to reverse in 2021 as ad-budgets shift back to media like out-of-home, radio and cinema. We forecast growth of 6.3% in 2021 [European TV] advertising.”
By any measure, and for viewers as well as the broadcasters, 2021 has to be better. Holiday advertising will return, and retail shopping will again help drive advertising. The industry hopes so.