Pro AV, CE and leisure sectors set to lose $120 billion due to COVID-19 pandemic

posted on Tuesday, 28th April 2020 by Steve May

Trade  Pro AV  home cinema  Streaming 

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Upwards of $120 billion could be wiped off the combined retail value of consumer electronics, Pro AV and entertainment content sectors this year by the COVID-19 outbreak, say experts.

Social lockdowns, plus interruptions to supply and manufacturing chains, are exerting massive force downwards, says Simon Bryant, Director of Research at Futuresource Consulting. But each sector is finding itself under slightly different pressures.

A new report from Futuresource suggests that while digital video and streaming services could see growth of 200 per cent over pre COVID-19 forecasts, total consumer spend on video, TV, music and games is expected to decline by 1 per cent this year due to declines in Pay-TV, Box Office and packaged media.

Lockdown could even hasten the demise of physical media, suggests GlobalData, a leading data and analytics company, as consumers migrate en masse to streaming sites.

“Streaming has been a significant disruptor in the video market, with the likes of Netflix and Amazon Prime enticing consumers to invest in their services at the detriment of physical DVD and Blu-ray sales,” says analyst Zoe Mills. “The COVID-19 pandemic is set to exasperate this even further as not only is there a major new entrant to streaming but also with more people spending time at home, investment in these subscription services appears more worthwhile as consumers are able to use them more regularly.”

"With consumers tied to streaming subscriptions they have less of a reason to purchase a physical film...”

Disney + achieved 50 million global subscribers just five months after its US launch. Netflix took seven years to reach the same milestone.

“It’s clear streaming services are becoming integral to consumers’ lives and the numerous lockdowns across the world are encouraging people to spend more time in front of the TV or on a laptop,” says Mills. “This will have a detrimental impact on the sales of DVDs for retailers not only during the lockdown but after as well as consumers are tied to these subscriptions and have less of a reason to purchase a physical film.”

The home video market will also suffer as major theatrical releases are delayed. “With no notable releases this year, 2021 may be too far away for retailers.”

The consumer spend on recorded music is also predicted to decline, although the sector isn’t mirroring OTT services.

“Music is behaving differently,” notes Futuresource’s Alexandre Jornod. “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.”

Consumer electronics suppliers are actually better placed to weather the retail uncertainty than most, suggests Mike Fisher, Associate Director at Futuresource, not least because buyers were already shifting to online sales.

“Online versus instore, along with the omnichannel challenge, have been popular topics within CE retail for some time, and that groundwork is now paying off as retailers everywhere are coming to terms with a dramatically altered commercial landscape.”

Research, carried out in February and March in China, France, Germany, Spain, the UK and USA, reveals that online purchases were already dominating the audio sector, with 67 per cent of headphone purchases and 68 per cent of wireless speaker purchases being made online.

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According to PMA Research, market information source on large displays, while there are some similarities between the 2009 global financial crash and the economic impact of the COVID-19 pandemic, the latter has more serious implications for Pro AV.

In addition to expected issues with supply, it suggests, soft demand could prove the greater problem, not least because LCD panel prices have been in negative margin territory for months with no room to drop and drive more demand.

Conversely, desktop monitor sales have grown dramatically as companies rushed to equipe employees working from home, and consumers looked to upgrade for gaming and entertainment.

“Our scenario modelling has revealed a range of long-term possibilities, from the most serious to the most optimistic outcome,” adds Futuresource’s Bryant. “In the best-case scenario, the majority of COVID-19’s impact will be on the supply chain. There will be disruption, but 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.”

However, Futuresource’s worst-case modelling predicts that vendors will struggle to bring new products to market, with some devices seeing significant delays in release. Market disruption continues into 2021, with the pandemic either proving difficult to contain or resurfacing as further outbreaks occur throughout the year.

“We expect the reality to fall somewhere between the two extremes, with market recovery continuing through to 2021,” says Bryant. “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.

In the world of stay-at-home working, collaboration solutions have found fresh traction. Futuresource suggests that it’s poised to become one the biggest long-term growth segments as businesses shift irrevocably to online meetings.

Steve May

Inside CI Editor Steve May is a freelance technology specialist who also writes for T3TechRadarHome Cinema Choice, Trusted Reviews and The Luxe Review.

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