Essec Business School

The COVID-19 pandemic has highlighted the gap between the sectors that make up the content industry, impacting a fragile economic fabric that serves as a lung for our social lives. 

The media industry is both heavily digitalized and reliant on in-person work: as such, it has two faces, which were differentially impacted by the pandemic. On one hand, there is widespread exposure to the virus, with symptoms that may be difficult to combat. On the other hand, there is resistance or immunity, with the virus also leading to improved health in some cases. In both cases, the content industry has been disrupted in a way that will have repercussions in the coming years, be it in how we consume media, the equilibrium of the industry’s economic forces, or public policy. In any case, we know without a shadow of a doubt that the media is at the heart of our lives and of our collective lives during times of isolation. It is a point of reference, a place where we can express ourselves freely and gain access to the world in times of closed borders and quarantines. On the physical, in-person side, the media and culture industry have been devastated by the virus. With the closure of theatres, cinemas, and museums, and cancelations of concerts and festivals, cultural life has been heavily disrupted. The cultural industry finds itself in a critical situation, with it being one of the five sectors most impacted by the pandemic along with the food service industry, tourism, events, and sports. They are all social sectors, hit hard by the confinement and social distancing. 

As a result, the government, especially in France, acted quickly to provide support in the form of an economic emergency plan (partial employment, solidarity funding, exemption from social security contributions and charges, cancelation of rent for public spaces, etc.) However, this will not bring back shows that have been indefinitely postponed or festivals and markets that have been canceled, even if the année blanche (“white year”, meaning a year without taxes) for workers in the entertainment industry prevents a more tragic crisis. 

The effects of the crisis are clear and quantifiable. The slow return to physically experiencing culture will not erase other consequences, ones that may be irreversible and less visible but no less impactful in the recovery, such as canceling shootings, recordings, and rehearsals. Creative work is a long process that usually begins well before it is seen in public. In most cases, this work is collaborative and was thus halted by the virus, like how the virus paused most live television shows (with the exception of the news). While authors, writers, and screenwriters were able to continue their work in some form during the confinement, such was not the case for all creatives whose work involves bringing art to life, such as performers, producers, and directors. The cessation of production activities for long weeks, be it for reality television/talkshows/game shows, fiction programs, or documentaries, will lead to issues with the availability of programs on television schedules, which will compound the serious and worrying consequences on the entirety of the professionals whose work depends on these productions.

Just as Zoom, Microsoft Teams, and Google Hangouts have become allies of distance learning and remote work, digital technology is a natural recourse for the media industry, though it leads to some resistance. The media industry has invested in digital technologies for over 20 years, acting as a pioneer; while this does permit access to content, it is not always in a way that satisfies human and economic needs.

One might have hoped that we would have read more books during the confinement. However, the publishing industry is in a worrisome state as a consequence of the crisis. The closure of bookshops, not included on the list of essential businesses in France, broke the link that French readers have with physical books recommended by their bookstore. Consuming e-books, while not as popular in France, may have increased during the confinement, along with a boost in consuming audiobooks. That being said, physical books still represent 90 to 95% of book sales in France. The increase in digital consumption cannot compensate for the losses accrued by the sector, as indicated in the survey conducted by the Syndicat National de l’Edition (The French Publishers Association) to evaluate the impact of the confinement (1): ¼ of publishing houses predict losing more than 40% of their sales in 2020, with 72% of them turning to partial employment measures. 

During the confinement, The Plague by Camus proved to be an exception in the norm of declining book sales, highlighting readers’ interest in turning their thoughts toward the pandemic. Questions, worries, existentialist anxieties, and everyday concerns have all increased our need for information, notably through the news, which is now often shared on social media (a phenomenon in and of itself that will not be further discussed in this piece).

The way the virus touched the sector shows a strong disconnect between medias that have successfully transitioned to digital technologies and those that have not. Media agencies that are still transitioning to digital, especially when it comes to their business model, suffered from a three-pronged impact: two on sales, impacting both sides on the two-sided model, as sales went down and advertising revenue dropped, and the third on production capacity, both in the form of journalistic work and on production, hampered by the confinement restrictions.

While the press can serve as a resource for informing and enlightening citizens in times of uncertainty, it is also profoundly shaken by the crisis, from newsstands selling papers and lacking a viable digital alternative to producing news and maintaining links with consumers.   

However, even when digital habits are more established, we typically note that it is not all positive news for the media industry. For example, music streaming platforms have seen a reduction in consumption and in subscriptions, with a few exceptions like Vialma (2), a platform with a strong cultural identity that streams classical and jazz music. 

These trends tell a story of at least two tales of the confinement of interest to the media. The first is that the commute is conducive to consuming content (sometimes consuming more than one type at the same time, like reading a book or the paper while listening to music). The second is that for those who were confined with their family, the presence of everyone at home did not offer a lot of quiet time to read books. On the other hand, looking for information reached a peak, particularly for digital mediums (and television, as discussed below). The French are thirsty for information on the situation, which helped to maintain or perhaps increase radio scores, as radio listener numbers have seen a boost of late, led by news programs. The decrease in car journeys, often a time when people listen to the radio, did not affect the listener numbers for radio programs. The fact that radio is free, coupled with its ability to deliver valuable information, likely contributed to this loyalty and the positive trend in listening. 

A similar trend was seen with audiences of audiovisual content, equally motivated by their need for news and clear information. However, this increase in time spent in front of a screen does quite allow for celebration given the fact that advertisers are pulling funds en masse. Many advertising campaigns have been delayed or canceled, with ongoing discussions and renegotiations; the context is complicated for many advertisers and particularly for those in the entertainment, tourism, and transport industries, typically very present in ads. This has led to a negative effect on results and on advertising performance. According to research, we can probably expect budgets to decrease by a third (3), which is extremely problematic for business models that rely heavily on monetizing ad space.

There is another phenomenon that must be considered in this situation, itself accentuated by the confinement: that of the boost in video-on-demand consumption (like Netflix and Amazon Prime), whose subscription model is not sensitive to advertising disinvestment. Against the backdrop of COVID-19, the war of audiovisual platforms, an unequal battle between major players (now all American) and local proposals (for the moment almost exclusively national), has continued and the gap may have widened. The arrival of Disney+ during the confinement, postponed by a few weeks in France to take into account the risk of network saturation due to the massive shift of employees and students to teleworking (4), can only have benefited from the fact that families were now at home 24/7.

Admittedly, video platforms have also made an effort to limit their speed in order to lighten their weight in bandwidth and thus limit the risk of effects on teleworking and schooling (5). Nevertheless, the figures leave no doubt about the positive effect of confinement on the consumption of video streaming, and this is a predictable fact. If we take the example of Netflix, which now has around 200 million subscribers worldwide, this means that the platform has gained nearly 16 million new subscribers worldwide during the pandemic. 

To get into the community spirit and provide a way to socialize during the confinement, Netflix now offers “Netflix Party”, built on the need to have social connections, a phenomenon also seen in the gaming industry. This phenomenon has indeed materialized in a veritable explosion in online video game numbers, especially those that create a bond between multiple players. 

Here too, platforms have displayed impressive numbers: there are more than 60 million players signed up for the Warzone edition of Call of Duty (Activision Blizzard), released in March (6); an increase of more than 48% on average for Amazon’s Twitch for April alone, largely for streaming games; Facebook’s games platform also saw a 72% boost in April; and Microsoft’s educational Minecraft edition, made freely available, was downloaded more than 50 million times between the beginning of April and mid-May (7). There are many other examples, like the wild success of Nintendo’s Animal Crossing phenomenon: released March 20th, the Nintendo Switch version had already sold 11.7 million units by March 31st (in 11 days, compared to 12.5 units of the previous edition sold over the course of an entire year). The duality of the pandemic’s effects on the media industry does not erase some common characteristics of the content industry. 

First, there is a powerful force impacting the public’s availability, often described as a war for attention. Not many mediums can be consumed at the same time (like reading the paper and listening to music), making attention a scarce and valuable resource. One’s attention span, which temporarily operated in an unforeseen manner due to the confinement, is not an unlimited resource. For each media consumed, another is not, and when one is watching a show or reading a book, that means they are not doing another activity. The deconfinement has been marked by people unsubscribing from streaming services like Netflix and Amazon Prime, as other activities have replaced binge-watching series. If the public health conditions allow, this could lead to a redistribution of attention toward content that can be enjoyed in public spaces that have reopened, or toward other activities that are once again available. It is clear that the challenge of capturing the audience’s attention is an important one for the success of the media.

Further, a digital strategy that is as clear as possible in terms of its offer, its target audience, and its organizational and operational methods is essential for effectively communicating with consumers. A successful transition does not necessarily mean a total switch to online offerings, but rather having a digital presence and the accompanying business model is key for maintaining competitiveness even without considering what worldwide stay-at-home orders have done to our online presence. Essentially, a common point that all media shares is the ability to resonate with the world we live in today, and often the opportunity to connect with others. This social factor, be it for informing, aesthetic purposes, or entertainment, has been made clear during the COVID-19 pandemic, as we are not able to connect in the same way we normally do, and media provides us with a way to connect, as seen in the success of community-driven media.

 The value of content, be it news or cultural and artistic creations, assumes that the creation chain will be preserved so that content is invented, produced, and distributed. All these steps have been challenged by the virus, and the impact will linger. For the time being, the public can help by going to the bookstore, the cinema, and to concerts, and by refraining from unsubscribing from content that they used during the crisis, and by being patient as a lot of content was not able to be produced during the pandemic. 

References 

1. https://www.sne.fr/actu/impact-de-la-crise-sur-les-editeurs-le-sne-devoile-les-resultats-du-sondage-realise-aupres-de-ses-membres/

2.  Founded by Guillaume Descottes, an ESSEC alumnus who works closely with our  Chaire Media & Digital and our The Media House incubator.

3. It should be noted that as far as signage is concerned, the consequences are even more sensitive as one can imagine.

4.  Called for by Stéphane Richard, CEO of Orange, in a request addressed to the national and European authorities at the beginning of containmen

5. According to Arcep figures, in France, streaming accounts for 50% of bandwidth, including 23% for Netflix.

6. https://cod.tracker.gg/warzone/articles/call-of-duty-warzone-player-count

7. Avec le confinement, Minecraft, Fortnite et Twitch explosent leurs records. May 19th, 2020. The Huffington Post.