Traditional video ratings are “solid (for now),” Cowen analysts wrote investors Tuesday, but unit losses could have “further downside” from a COVID-19 recession. Though linear TV ratings are “up meaningfully” during the crisis, Cowen expects “heightened cord-cutting pressure due to a COVID-19 driven recession” as linear TV’s price-value becomes top of mind for subscribers vs. over-the-top video, said analyst Greg Williams. In this macro environment, traditional video is a “2-sided coin”: Live local news is leading higher ratings for traditional TV, though sports cancellations and delays could affect the value of traditional video, noted Williams and colleague Colby Synesael: Cord-cutting trends should continue, as hourly employees look for ways to shed personal expenses, and streaming services provide cheaper video options. Cutting the cord involves sacrifice, but the wide selection of options in this OTT era makes that decision “more tolerable in a recession,” said the analysts, forecasting a 4% drop in cable subscriptions this year. OTT and pay-TV services are riding the wave of sheltering at home: Since the week of March 14, the Starz app has had a 44% bump in average viewership and a 142% increase in new customers, and Disney reported April 8 it had passed 50 million paid subscribers globally, noted analyst Doug Creutz. The coronavirus outbreak has driven a “significant linear ratings tailwind” for most cable network groups “other than Disney," he said, whose ESPN network was slammed by the shutdown of live sports.
Q1 Netflix subscriber net adds as COVID-19 hit soared to 15.77 million globally, 125% higher than its Jan. 21 forecast and a 64% increase from Q1 2019, said the streaming service Tuesday. “We are fortunate to have a service that is even more meaningful to people confined at home, and which we can operate remotely with minimal disruption in the short to medium term,” said a quarterly shareholder letter. “We’re seeing temporarily higher viewing and increased membership growth,” but Netflix expects viewing to decline and membership increases to slow down as “home confinement ends, which we hope is soon,” it said. It’s forecasting Q2 net subscriber adds to decline 52% sequentially but increase 178% from Q2 last year. “This pandemic has demonstrated the importance of a strong internet like never before,” said the letter. Networks in some countries “have struggled to cope” with the higher demand, it said. The engineering team in March was able to reduce network use by 25% “virtually overnight in those countries, while also substantially maintaining the quality of our service, including in higher definition,” it said. “We’re now working with ISPs to help increase capacity so that we can lift these limitations as conditions improve.” Most operations have "gone smoothly" during the pandemic, except for "significant disruption" in customer support, and content production has come to a global standstill, it said: "This has been devastating for millions of workers in the TV and film industry."
Office Depot refinanced an existing credit agreement with a $1.3 billion asset-based credit facility maturing in April 2025, it said Monday. Upon closing, the retailer borrowed $400 million to repay the remaining $388 million balance on a term loan and $66 million in other debt, it said. The company expects annual cash interest and amortization savings of nearly $90 million. The actions “simplify our balance sheet and reinforce our liquidity position as we navigate the current environment created by the recent global health crisis,” said CEO Gerry Smith.
Amazon had about 118 million Prime members in the U.S. March 31, partially bolstered by more trial conversions during COVID-19, reported Consumer Intelligence Research Partners Monday. Prime members were 65% of Amazon shoppers in the most recent quarter, CIRP said. Conversion rate, which had "trended down" over the past few years after monthly membership's launch, increased by five points over the past year, said analyst Mike Levin. “COVID-19 probably accounted for some," with new customers deciding to buy a Prime membership to help with ongoing quarantine shopping, said the analyst. The retention rate for one- and two-year members was down slightly in the past year, likely due to some members, “on hiatus when surveyed during the year,” switching to monthly payment plans, he said. Findings were based on surveys of 500 U.S. consumers who made a purchase on Amazon.com January-March.
The Trump administration should suspend duty-free treatment under the Generalized System of Preferences program for certain products from Thailand amid the “rapidly deteriorating economic conditions” from the COVID-19 pandemic, wrote CTA and 16 other trade associations Friday. The suspension, scheduled to take effect Saturday, would raise costs for U.S. employers already “struggling to maintain employment levels in response to shutdowns and falling demand around the world,” said the letter, which the National Retail Federation and the Retail Industry Leaders Association also signed. They asked the White House to delay implementation for at least six months, “or until the current emergency ends.” Many of the 22 million U.S. jobless claims filed in the past four weeks “are the result of government-mandated shutdowns to help slow the spread of COVID-19,” said the trade groups. “Liquidity is a major concern for businesses of all types as we wait for the pandemic to slow and the economy to reopen.” The White House didn't comment Monday.
The Trump administration’s 90-day “limited duty deferral” for importers is “welcome news to retailers,” said National Retail Federation CEO Matthew Shay Monday. Many importers are getting “diminished or no revenue” during the pandemic “while still incurring costs, including the duties, taxes, and fees associated with imported merchandise for their clients and supply chains,” said Customs and Border Protection Sunday. “Aggravating matters, many major retail chains” are closing their stores voluntarily or to comply with mandated shutdowns, it said. The 90-day deferral “provides some retailers with additional liquidity and better cash flow, giving hope for business continuity and a faster recovery once the pandemic has passed,” he said. The deferral doesn’t apply to the Section 301 tariffs on Chinese goods, which remain in effect. “We encourage the administration to broaden these deferrals for additional relief,” said Shay. The Information Technology Industry Council welcomes the administration's "action to alleviate tariff burdens," said CEO Jason Oxman Monday. "We urge more expansive action for the more than $370 billion of goods subject to Section 301 tariffs," he said: "Deferring payment on these tariffs would provide much-needed flexibility and facilitate the delivery of assets to U.S. healthcare providers, companies, and consumers” amid COVID-19.
COVID-19 show cancellations have begun stretching into July. GSMA scrubbed the June 30-July 2 Mobile World Congress Shanghai 2020 show “in light of current government guidance” and the “global concern regarding the coronavirus outbreak,” it said Friday. GSMA “will work with government and health authorities to find a suitable date and venue to hold regional conferences in China in the latter half of 2020,” it said. “We will confirm the feasibility of this in the coming months.” GSMA shut down February's MWC 2020 in Barcelona (see 2002120056). The National Association of Music Merchants canceled the July 9-11 Summer NAMM show in Nashville, it said Monday. “The harsh realities of this crisis make it impossible to undertake the many months of careful planning and preparation that are required for such a show,” said NAMM.
Arlo Technologies will help provide 25 meals through Second Harvest of Silicon Valley and Second Harvest Food Bank of Orange County for every purchase of its video doorbells or Ultra or Pro 3 security systems, the company said Friday. The smart home company’s first effort during the COVID-19 outbreak was to donate N95 masks to local hospitals. It became clear there was a "severe second-order impact on the ability for people to satisfy their most basic needs including food,” said Arlo CEO Matt McRae.
AARP wants the FCC and industry to ensure older Americans are connected during the pandemic, said a letter Friday in commission docket 20-89. It wants the commission to suspend broadband data caps and overage charges, encourage free or subsidized broadband to residents of nursing homes and assisted living facilities, increase the broadband minimum service standards for Lifeline wherever possible, and give Lifeline customers unlimited voice minutes and text messages. The group wants the FCC to extend the Keep Americans Connected Pledge.