“Except for cinema admissions, COVID-19 can be seen as an accelerator of pre-existing trends rather than a disruption element”
Industry Report: Market Trends
Gilles Fontaine • Head of Department for Market Information, European Audiovisual Observatory
Our discussion revolved around two of the body's most recent studies exploring the impact of the pandemic on Europe's audiovisual industry
We met with Gilles Fontaine, Head of Department for Market Information at the European Audiovisual Observatory (EAO). Our conversation followed the publication of two of EAO's recent studies analysing the effects of the coronavirus crisis on the European audiovisual sector, namely “Modelling audiovisual sector revenue flows in the EU and test case on impact of COVID-19 on industry revenues” (accessible here) and “The European audiovisual industry in the time of COVID-19” (accessible here). In addition, the body is also tracking the measures implemented by the member states to fight the crisis hitting the industry (for further information, please click here).
Cineuropa: Could you describe the main features of the European audiovisual landscape before the COVID-19 crisis?
Gilles Fontaine: There are several trends which stand out when it comes to the pre-COVID audiovisual landscape in Europe and worldwide. First of all, over the last few years we noticed the rapid growth of VoD in terms of platforms, revenues, SVOD subscriptions and market shares. In the EU, SVOD platforms reached a record of 103 million subscribers in 2019, followed by 140 million new subscriptions in 2020, and this is a sharp increase certainly influenced by the confinement. (for further information, please see pages 17-18). Other important trends are the stagnation of TV advertising owing to the increasing competition from Internet advertising, the pressure on public funding and the collapse of the home video market. Overall, the COVID-19 crisis came at a moment of fragility in the audiovisual sector.
What do you think will be the immediate and delayed effects of the COVID-19 crisis?
The delayed effects may be, firstly, online advertising recovering much faster than TV advertising due to the intense progress of e-commerce during the confinement. Secondly, we can mention further pressure on public service broadcasters owing to the austerity measures to pay back the “COVID-19 debt.” A third point would be accelerating cord-cutting due to the massive growth of SVOD. This may result in a financing crisis for the production of content, in particular films.
Do you think there will be a structural change in the financing patterns of public funds and in the way audiovisual works will be financed?
Public funds are financed partly by the state budgets, partly by taxes and levies. Both sources of funding are at risk as austerity measures could weigh on state funding, and taxes and levies may decrease if the main contributing players see their revenues decrease.
In your study “The European audiovisual industry in the time of COVID-19” you quantify the revenues for the audiovisual sector of the 27 member states. What is the total value of these revenues and what is the breakdown by segments?
The total revenues for the audiovisual sector amounted to approximately €90 billion in EU27 in 2019. Subscriptions to pay-TV and SVOD services accounted for 37%, TV advertising for 30% and public funding of public service broadcasters and film funds for 24%. The rest of revenues came from cinema admissions (6%) and physical or digital home video (3%).
You have made several hypotheses on the impact of the crisis on the audiovisual sector. What will be the impact on the revenues flows?
In 2020, the most severely hurt segments were box-office revenues (with an estimated 70% decrease) as well as TV advertising (with a decrease in the range of 20%). The other segments were either resilient (pay-TV, public funding, home video), or kept on growing (SVOD). These contrasting trends led to a sharp decrease of the market by about 11%, or 14% excluding video-on-demand services. It is important to note that the COVID-19 crisis affected an already fragile sector, with a long-lasting stagnation of resources owing to the saturation of the pay-TV market, the growing competition for TV advertising and the pressure on public funding. Except for cinema admissions, COVID-19 can be seen as an accelerator of pre-existing trends rather than a disruption element.
What will be the impact on the financing of European original content?
The drop in our sector's revenues obviously translates into less financing available for the production of European content. For European films, distributors, film funds and broadcasters are the main sources of financing and each of them is being impacted by this crisis. However, SVOD services have more resources to invest in the production of European content, though these seem geared towards TV series rather than films. And it is still unclear whether higher backing from them will compensate for lower investments from the legacy players. Even before COVID-19, there were signs of at least pressure on the financing of films – which, in the COVID-19 context, may turn into a wider financing crisis.
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