The COVID-19 situation is bound to throw a wrench into the global economy, taking its toll in the form of business closures, sweeping redundancies, human dramas and growth in social problems.

But the effects of the pandemic are far-reaching and certainly not equally severe for every branch of industry. With strict lockdown in full force across many countries around the globe, self-isolation boosts media consumption. As reliable statistics on the media streaming usage start pouring in, we gain a fuller picture.

In this post, we aim to present the possible effects of COVID-19 on the OTT industry.

Lockdown favors streaming platforms, but there is more than meets the eye

Most people might expect popular video services to be riding the wave of popularity these days. This seems logical – as people remain at homes in self-imposed quarantines, they are more likely to indulge in binging.

But the truth is that the figures can be partly attributed to natural growth. Media consumption was at an unprecedented high even weeks before the pandemic hit for good. The boom for SVOD content has been here for some time, with 76% year over year growth in viewing time. Respectively, live video grew only by 32% (Conviva report, Q4 2019).

This suggests a steady trend – consumers embracing streaming platforms. According to a study by Deloitte, 60% Millennials and Gen Z-ers stream video daily compared to just 30% for Baby Boomers. At the same time, three-fourths of U.S. consumers subscribe to at least one SVOD platform.

Bottom line? While the pandemic effect is certainly at play, it may not be as significantly impactful for streaming businesses as the statistics might suggest. On top of that, as most SVOD platforms like Netflix, Amazon Prime and HBO Now use a fixed-rate pricing model, the increased consumption during the coronavirus pandemic may not directly affect their revenue. People may watch more streaming content compared to the pre-pandemic situation, but they don’t have to spend anything extra to access it.

Ad-supported services reap the benefits

Interestingly, the services which could mostly benefit from the uplift in views are hybrid services offering ad-supported models on top of their premium tiers. The AVOD (advertisement-based video on demand) media streaming services include:

YouTube is a particularly good example – not only does it benefit from more ad views during the coronavirus pandemic, but also its aggressive push for YouTube Premium earns Alphabet a steady revenue stream from those viewers who are fed up with skipping ads.

Major sports leagues around the world are powerful magnets for advertisers, but once they have suspended their activities indefinitely, advertisers may pour digital ad spend into ad-supported streaming platforms. This could present an opportunity for OTT platforms, but it’s not certain how long the effect could last.

The pandemic also affects the advertisers

People watch more online content, so it might seem logical to jump on the bandwagon and direct all promotional efforts to SVOD. But the situation is volatile and very complicated. Viewership figures are really optimistic for now, but it’s too early to call it wins – the global economy is basically a system of connected vessels and everyone will be affected at some point. Money will keep pouring into digital advertising, but only as long as the advertisers themselves can viably afford to pay.

Major brands, for example, could decide to halt their ad spend. This can result from a variety of reasons: supply chain issues, reductions in sales, inventory issues etc.

The launch of new OTT platforms

It’s hard to imagine a more fitting time to launch an OTT platform than the coronavirus epidemic consuming the world – people are tied to their households and watch like crazy. However, the launches of the new streaming platforms HBO Max, Peacock planned for this year (we wrote about them in a different post on our blog) are seriously challenged by the COVID-19 situation. Film productions and production for certain series are either put on halt or indefinitely delayed.

Peacock, for example, hinged its aggressive marketing on the 2020 Summer Olympics – which obviously won’t happen. Quibi’s launch will lack a back catalogue of interesting titles, not to mention it will be harder to find a major corporate parent that could be challenging in the middle of a pandemic.

Pricing may be key for some subscribers

With uncertain prospects for the future, people are more aware of their spending, and may not be ready to continue subscribing to multiple streaming platforms. The effects of this may be felt by the more expensive players: HBO Max’s $14.99 subscription might feel a bit pricey as customers realize the looming economic collapse.

Depletion of content may be round the corner

As mentioned above, certain film productions are either put on halt or delayed. This means we may quickly not see a new episode of:

  • “The Bachelor Summer Games”
  • “Genius: Aretha”
  • “Succession” and “Barry”
  • HBO Max’s “Friends” Reunion
  • “American Idol”
  • “Saturday Night Live”
  • “Fargo”
  • All Amazon original series, including “Lord of the Rings,” “Carnival Row” and “Wheel of Time”
  • “Handmaid’s Tale”
  • “The Witcher”
  • Several Disney Television Studios shows currently in production, including “Empire,” “American Housewife,” “Pose,” “Last Man Standing” and “The Orville”

Apart from the content that’s available on streaming platforms, feature film productions are equally affected. Likewise, major sports leagues halt their operations amid the COVID-19 pandemic. The prospects are hardly optimistic – the postponed Tokyo 2020 Olympics will likely not happen until 2022, even if a vaccine is made available by then.

It’s a bit too early to tell how stopping content production will pan out for the viewers. Some SVOD providers might earn new subscribers as mandatory quarantines around the globe continue for months. Viewers might turn to new platforms seeking new interesting content to watch.

Even today, there are people who subscribe to multiple streaming services, but it’s hard to make any predictions. Since no one really knows how long the lockdown will take, subscribers might as well, at some point, want to cut down on the number (either for economic reasons or due to the so-called subscription fatigue).

Trouble in Hollywood

Partly at its own behest and as a result of clinging to the well-outdated cinema-and-tickets business model, Hollywood has found itself in big trouble during the pandemic.

But as COVID-19 is in full spin, it can potentially accelerate the adoption of a completely new model of film distribution – something like direct-to-streaming (we once had the direct-to-video model, go figure). Hollywood has been toying with the “streaming-first” idea for quite some time now, but it seems it needed a gentle prod to finally make it happen.

It will be interesting to see what effect the ongoing pandemic, as well as the time of extended social isolation will have.

Netflix, is hardly affected by the situation. As a global production powerhouse, they are able to continue the release of new, often exclusive and award-winning productions. The fact that they do not rely on the box office for new releases places them in a convenient position.

The extended pandemic and lockdown of cinemas could bring SVOD platforms early access to big titles which will likely have a positive impact on viewership. At the same time, the same is true for their competitors and as mentioned above, isolated users have more time exploring and comparing different services.

A shift in preferred devices

The consumption of media on mobile phones dropped significantly as people don’t commute to work. Because the time on the underground ride was, for many people, a good moment to catch up with some outstanding episodes, the device of choice was the phone. Now, we are witnessing a surge in content being watched on connected TVs and OTT platforms.

Lower Out-Of-Home ad spend

OOH advertising may be essentially ineffective as social distancing and quarantine regulations continue. This could positively impact the digital media advertising spend.

Lower entertainment spending outside the home may have knock-on effects for brands trying to reach consumers through out-of-home media: billboards, brochures, buses or lamp posts.

Conclusion

While the current situation is by no means positive, there is some positive impact for consumers. Streaming media providers, not wanting to lose and alienate subscribers, will likely take a more people-centric approach, and care more about the quality of their service – in part to meet the higher demand.

The possible effects of COVID-19 on the OTT industry are certainly far-reaching, but it is still too early to take any of the predictions as revealed truth. The situation is volatile, and the individual effects like the bump in binge watching and ad spend, while a logical consequence of the lockdown, may not be long-lasting.