Why can't publishers monetise the COVID-19 demand surge?

With Britain on lockdown and millions of people stuck at home, newspaper websites and television channels have seen a surge in demand, both for news and entertainment.

Surge in demand for publishers doesn’t mean surge in revenue

You might have thought that these businesses would be thriving as a result, possibly creating an investment opportunity, but unfortunately that is not the case. In challenging economic times, such as these, advertising spending, which is discretionary, can be an easy cost for businesses to cut.

On top of that, it makes logical sense to rein in ad spending when consumers don’t have the freedom to visit the shops and when overall disposable income is falling with increasing numbers out of work.

Meanwhile, television channels are finding it more and more difficult to produce fresh content amid social distancing rules, with a whole host of show being cancelled. And according to the Financial Times, about half of UK companies are expected to furlough many of their workers because of the coronavirus including publishers and broadcasters, meaning less capacity to create content.

Performance set to take a hit for publishers in the UK and beyond

Media groups Daily Mail and General Trust along with Reach this week warned that trading performance was likely to take a hit. Daily Mail suspended its full-year (FY) guidance and Reach, which publishes the Daily Express, and the Daily Mirror said it was too early to tell the extent of the COVID-19 fallout.

This clearly isn’t just a UK issue. The Vatican’s 160-year-old newspaper, L’Osservatore Romano, suspended printing last week. And just this morning News Corp announced that it will stop printing 60 local newspapers in Australia, which will likely lead to many redundancies as the coronavirus takes its toll on ad revenues.

According to its executive chairman Michael Miller: 'The suspension of our community print editions has been forced on us by the rapid decline in advertising revenues following the restrictions placed on real estate auctions and home inspections, the forced closure of event venues and dine-in restaurants in the wake of the coronavirus emergency.'

Beyond television and newspapers, education publishing has also been facing financial strain from COVID-19. Last week, Pearson issued a 2020 profit warning and put its £350 million share buyback on hold as a result of the pandemic. All GCSEs and A-Levels have been cancelled in the UK this year while the company warned that its bottomline will take a hit from the postponement of US state exam assessments.

Advertising agencies are feeling the pain as well. The world’s largest ad company in terms of revenue, WPP, announced a £2 billion saving plan on Tuesday to combat impact of COVID-19 on its balance sheet after its revenues in China slumped by 23% in January and February. WPP has also paused its £950 million share buyback scheme and scrapped its dividend.

US publishers are currently scrambling to see whether the US $2 trillion fiscal stimulus package will be able to provide them with any kind of financial support. Facebook has also stepped up, pledging $100 million on Monday to help support news organisations through the coronavirus pandemic with financing and advertising spending. About $25 million takes the form of an emergency grant for local US media and $75 million is for marketing spending for news organisations around the world.