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Opinions Mon, 6 Apr 2020

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Coronavirus and advertising spend

Introduction

Those who have followed my passion for media profitability especially, in Ghana will not be surprised to read this from me during these very disturbing times of the Coronavirus pandemic.

Globally, the world economy is taking a serious hit from the disruption this pandemic has caused businesses, notable amongst those highly hit businesses are the airlines, tourism, hospitality and those that can be easily mentioned.

Reading through various information online especially extracts published by the World Economic Forum, gives me cause to worry for the Ghanaian media, their owners and the lucky few that have their livelihood working in media enterprises.

As the journalist and program anchors churn out what they believe are newsworthy for the audience consumption, I definitely know the owners are already scratching their heads as to where their sources of revenue will be coming from, I mean new advertising revenues and also how to collect revenue already done businesses. As many managers in the industry are aware of, businesses that are already advertising often pay on credit usually, at the end of month and others go beyond this period.

The global indications as captured in the sub-headings below and I believe media owners and practitioners will have to device new ways in driving their revenue agendas as we await the ramifications of COVID-19 as the days roll on with the attendant lockdowns.

I foresee the media in Ghana also suffering massive layoffs and job loses that may require government’s stimulus support.

Decrease in advertising spending

Major brands could decide to lower their advertising spending, as supply chain issues or reductions in sales affect their products. For example, consumer-packaged goods or manufacturing-related companies might decrease ad spending if there are inventory issues due to constraints in their supply chains, not wishing to risk marketing products that are not available. A survey of brands in China at the end of February showed that 7% had stopped advertising completely and 14% moving their budgets from offline spend to online. Industry sources predict that advertising growth rates in China will fall from 7% - predicted before the pandemic – to 3.9%.

Consumers may also reduce spending on non-essential items, which could impact how brands allocate advertising spend across their portfolio of products. Bricks-and-mortar retailers are widely expected to suffer a drop in sales. According to HBR, the most agile companies can redeploy new sales channels to account for shortfalls – one beauty company in China achieved 200% growth in year-on-year sales after hiring online influencers to push their products online.

What does this mean for the long-term?

It is difficult to say what the long-term impacts of coronavirus will be on the media industry because nobody knows exactly when things will return to normal. The extent of the disruption will likely depend on the type of content that media companies produce and distribute.

In the news industry, for example, many companies have used live events as a diversification strategy to offset declines in print revenues. Many of them may not be able to absorb the hit to their bottom lines if large-scale events are cancelled indefinitely. How will that affect our news diets?

The film, TV and video industries can only maintain output if their physical operations are maintained. Already, movies and shows shot in China, South Korea and Hong Kong have faced delays; on-location content produced in Italy has been halted entirely. Would you still subscribe to Netflix if it couldn’t add new shows to its library?

Even media giants are not immune: “ecosystem” companies that use media to drive revenues to other parts of their business will also face disruption. Disney has announced it will close every one of its theme parks around the world, as well as suspending its cruise lines until the end of March at least. Disney may be one of the most well-known content producers on the planet, but 34% of its revenues come from theme parks and another 8% from consumer products.

Finally, if sports stadiums are forced to close their doors for the long term, they could lose their allure to broadcasters. Would these competitions be as good, or as popular, without the live atmosphere that fans create?

Ultimately, the most important thing for the media and entertainment industry is to help slow down the spread of the virus and keep people informed about what people should do to stay safe. With luck, these disruptions will just be temporary.

Beyond this, the industry is in uncharted waters.

Columnist: Kofi Asante

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