The economic impact of Covid-19 on the TV industry

The economic impact of Covid-19 on the TV industry

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An RTS panel examines the fallout from the crisis on TV businesses

Independent producers are the most vulnerable to the economic carnage unleashed on the television sector by corona­virus. That was the consensus of a lively RTS webinar examining the impact of Covd-19 on the UK’s TV and related content industries. However, despite this worrying situation, there was agreement that all the British broadcasters would survive the downturn.

Of the four panellists, Claire Enders, founder of Enders Analysis, used the most colourful language to describe the plight of what, a few months ago, was a thriving creative sector responsible for global hits and envied by programme-makers around the world.

She said the UK’s independent production community was “on its stomach” and contrasted how its peers in the US and Europe were being treated compared with our own Government’s attitude to indies.

Her primary concern was for the future of suppliers left “pitifully and badly afflicted” by the Government’s response to the pandemic.

She warned that up to half of the UK creative sector, including theatres and museums as well as independent producers, risked going under.

Enders highlighted the “incomparably greater” scale of state-funded support in France, Germany and Italy. These countries had all agreed to provide a financial lifeline for their audio-visual industries. Similarly, the US was providing state funds to ensure that Hollywood survived.

The UK was “in a completely different environment”, she said. “It’s extraordinary that our fiscal envelope does not seem to have any material impact at all.” She forecast a “great depression” in the UK once the Government’s furlough scheme ended, compounded by what she thought would be a hard Brexit.

Sean McGuire, Managing Director of consultancy Oliver & Ohlbaum, said the UK had never experienced “a downturn this deep” and predicted a “fairly profound structural shift” in the sector. He was unsure whether the TV advertising market – already down by around 50% year-on-year – would ever recover.

Even an apparently secure business such as pay-TV sport faced an uncertain future, he said: “Will people still be happy to pay out large monthly amounts for Sky Sports in the future?”

As for the TV industry receiving state aid, Damian Green MP, a member of the Commons Digital, Culture, Media and Sport Committee, said the sector was not high on the list of those likely to receive a subsidy.

“ITV is big enough to look after itself,” maintained the MP. Nor did he share McGuire’s negativity regarding the future prospects for live TV sport. He predicted huge audiences would return once live professional sport resumed.

The MP also drew attention to Chancellor Rishi Sunak’s “unprecedented” Job Retention Scheme, but admitted that the broadcasting sector was not among its priorities.

“Every minister is facing calls for bailouts from the entire country and the TV industry is not high on the list of [those] who tug the heartstrings, even within the DCMS sector,” he said. “However, I take the point that less has been ring-fenced for the creative sector than in other countries and the [select committee] will continue to talk to the Government about this.”

Lindsey Clay, CEO of Thinkbox, which represents UK commercial broadcasters, was optimistic about the future of TV advertising. She reminded everyone of its unique ability to reach mass audiences safely and its importance in driving economic activity. “It is irreplaceable,” she opined. She wondered, however, if ITV was “really big enough to take care of itself”.

‘Smaller producers and freelancers… face a future that is more fragile than ever’

Asked to vote on the shape of the eventual economic recovery, the web­inar audience thought the most likely outcome was a W-shaped recovery. The companies that survived would be those that were vertically integrated, such as ITV and the BBC, said Enders.

The audience was also asked to vote on the likely winners and losers from the crisis. Netflix would be the biggest winner, according to 68% of those taking part in the snap poll.

Clay suggested that, as competition increased in the SVoD space, more content owners would withdraw their programmes from Netflix to enable them to show these on their own ­platforms. “Third-party series such as Friends and The Big Bang Theory are some of Netflix’s most popular shows,” she said. “Once more content owners withdraw their shows, Netflix will look less attractive.”

Enders disagreed. She insisted that the secret of Netflix’s success was the huge sums it had invested in original series. “That is Netflix’s magic sauce: $50bn spent on content in the past eight years. Given how much Netflix spends, I’m always surprised that it’s only responsible for 9% of all video viewed in the UK.”

There was agreement that another outright winner of the pandemic would be the recently launched streaming service Disney+, which was already in 50 million homes worldwide.

The biggest loser was likely to be Channel 4, according to those participating in the webinar vote. Enders agreed that Channel 4 was vulnerable but suggested that it had options in the event of a prolonged economic crisis, such as selling its London HQ, relaxing quotas, closing some of its channels or merging with Channel 5.

Turning to the BBC, Green supported the continuation of the licence fee as a means of funding the corporation. “It shouldn’t work in theory, but it does in practice,” he said.

Enders said she was pleased that the pandemic had proved the overwhelming worth of the BBC, with the result that the debate over a subscription model for the BBC was, in effect, dead.

Green suggested that the BBC could be persuaded to commission shows from a more diverse range of suppliers in order to help independent producers: the corporation’s “firepower” could help to safeguard the future of smaller producers and freelancers, who faced a future that was “more fragile than ever”.

“It is essential that the next Director-­General builds on the move to Salford by spreading the BBC’s activity as much as possible around the UK,” he said.

Regarding news, Green said that the pandemic had led to an increased appreciation of trusted PSB news organisations, not least Channel 4 News, which had emerged as the most trusted news service in the UK. “The public are now more savvy about structured disinformation,” he added.

Clay said that regulators must not be allowed to be sidetracked by the corona­virus crisis from continuing their examination of how the Silicon Valley behemoths distorted the UK advertising market.

Green suggested that there should be a wide-ranging look at the existing PSB system following the crisis. “The root of it should be about applying economic and cultural theory to consider how many PSBs we need and how best to fit them within the structure that we have,” he said.

McGuire was sceptical about the current configuration of PSBs, which, he claimed, was shaped by the “considerable lobbying efforts” of the incumbents. “There was already a concern that Ofcom was going to use its PSB review to try to preserve the current ecology, but that isn’t the right question,” he argued. “We need to think about what public service broadcasting entails and what is the best structure within which to deliver it over the next decade.”

Enders praised Ofcom for delaying its PSB review. Such an investigation should wait until next year: “You do not look at the future when you’re in the eye of the storm.

“Survival is all that matters at the moment and you won’t find a chief executive or regulator who thinks any different.”

The RTS webinar ‘The industry impact of Covid-19’ was held on 21 May and chaired by journalist and media commentator Kate Bulkley. The producers were Jonathan Simon, Keith Underwood and Nigel Warner.

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