As Covid-19 continues to create economic and social disruption, Futuresource Consulting has evaluated the potential financial impact on consumer electronics (CE), entertainment content and professional AV markets. The consultancy firm anticipates as much as $120 billion (€111.2bn) will be wiped from the retail value of these sectors combined, when compared with pre-Covid-19 forecasts.
“Interruptions within supply and manufacturing chains, coupled with the necessary social lockdowns have inevitably led to substantial downward pressure on many industries,” says Simon Bryant, Director of Research at Futuresource Consulting. “It’s evident that large employers are being hit severely, particularly in tourism and financial services. Businesses with tightly integrated supply chains and those working on lean manufacturing principles are also heavily exposed, with hotspots within automotive and industrial. In contrast, some categories within CE, entertainment and professional AV sectors are benefiting from the social distancing measures. Video conferencing, gaming and SVoD are good examples.”
Digital video will be one of the big winners with Futuresource estimating that “Stay-at-home” orders will boost growth by 200 per cent over pre Covid-19 forecasts. However, total consumer spend on video, TV, music and games is expected to fall by 1 per cent this year due to declines in pay-TV, Box Office and packaged media. Futuresource also expects consumer spend on recorded music to decline.
“Music is behaving differently to other forms of entertainment,” says Alexandre Jornod, Research Analyst at Futuresource Consulting. “Rather than an uplift in streaming subscription services, we’re seeing a reduction in uptake, at least in the short term. This is due to disruption of daily routines and the time spent listening out of home being reduced, like the daily drive to work or gym time. When it comes to competition with other media, people are currently looking to more immersive pastimes. Gaming, SVoD services and music videos are eating into music streaming, with radio also making an impact. We’re also hearing reports of an increased downturn in the sales of packaged music, predominantly due to lower retail footfall, but also a shifting consumer focus elsewhere.”
Futuresource expects gaming to become a much-needed escape route for households that are self-isolating. It not only fulfils a need for at-home entertainment, but can also serve as a social outlet, with online multi-player video games allowing friends to connect and communicate.
Looking to the world of work, collaboration solutions are poised to become one the biggest long-term growth segments resulting from the current situation. Although many companies have had online video conferencing capabilities for some time, the technology has been underutilised. The Covid-19 pandemic has forced millions of people into taking that first click, with an unprecedented shift to online meetings.
Beyond CE and entertainment, the report also explores the growth of Covid-19 in the worst affected countries, government responses, comparisons with past recessions, impact on key industries beyond CE and entertainment, including electronics, airlines and tourism, automotive and the leisure industry, plus government fiscal responses.
“Our scenario modelling has revealed a range of long-term possibilities, from the most serious to the most optimistic outcome,” added Bryant. “In the best-case scenario, the majority of Covid-19’s impact will be on the supply chain. There will be disruption, but in this model, manufacturing and logistics will return to normal before the end of the first half of this year and there will be a reasonably seamless return to business as usual. Fiscal and monetary stimulus packages will stabilise markets and restore consumer and market confidence, compensating for some, but not all, lost shipments.
“In the worst-case scenario, we see key vendors struggling to bring new products to market, with some devices seeing significant delays in release. Market disruption continues throughout 2020 into 2021, with the pandemic either proving difficult to contain or resurfacing as further outbreaks occur throughout the year. This results in a global recession, with markets worldwide entering a period of decline.
“We expect the reality to fall somewhere between the two extremes, with market recovery continuing through to 2021. Industries will experience a ‘bounce’ as demand recovers as lock-down-orders are lifted, returning categories back to their original market trajectory. But we anticipate market disruption to continue through the year, with both demand and supply-side issues not being fully resolved until the first half of 2021. However, such is the interrelated nature of supply chains and manufacturing that the full impact from Covid-19 will not be known for some time to come.”