Streaming and YouTube are well positioned to thrive right now during COVID-19 lockdown where other entertainment suffers. At least as of writing this article many countries are closing bar, restaurants, sports venues, and concert halls, as well as asking that people stay indoors (shelter in place). Group gatherings over 10 people are prohibited. This leaves indoor, solo activities, especially Netflix, YouTube, and livestreaming well positioned. Let’s talk about why.
Most of the things I mention here as “streaming” will also apply to YouTube/VOD content.
Streaming has some traits of an inferior good
Streaming has qualities that make it similar to the economic concept of an inferior good. I’m not saying that streaming is inferior to something. In fact, it’s a trait that could help all of us in the streaming and esports space.
An inferior good is a good whose demand rises and falls opposite household income. An example would be something like cheap instant ramen. When people are earning high incomes and the economy is doing well fewer people choose instant ramen, given that they can afford other things like meat or ramen in a restaurant. However, when times are rough demand for instant ramen goes up. It’s inexpensive, keeps forever, and easy to prepare. Hence why it’s a staple of college students. I certainly ate plenty in college.
Streaming has some of those qualities. It has an extremely low barrier to entry to watch since you don’t even have to have an account to watch on most platforms. At its most basic level it’s free and ad supported. That means watching the stream helps keep the stream alive. Even if you do decide to contribute financially to a streamer you can do it for cents or dollars and with low transaction costs. When times are tough people will move away from expensive entertainment and towards inexpensive entertainment.
The good news is that I don’t think streaming is actually an inferior good. After all, it’s been on the rise in one of the longest periods of economic growth. It just shares some traits that make it more resilient in downtime. It’s a model that works when times are tough but thrives in good economic environments as well.
Traits that work well under lockdowns
Streaming also should have an advantage in lockdown situations. Most major sports leagues are already cancelling their seasons. After all, having tens of thousands of people together in an arena spells a disaster for disease transmission. Theaters, restaurants, bars, and other entertainment/recreational venues will see way less traffic. Casinos are closed, which is often the place that people flee to when they’re feeling down on their luck financially.
Streaming doesn’t have that problem. You watch from your phone, your desk, or your couch. You can gather in groups of tens of thousands, virtually and without COVID-19 transmission risk, or in small, very communal groups. It helps you maintain that sense of connection when everything else is isolating.
Additionally, productions costs for streamers are super low. Most broadcasters don’t need a studio, staff, tons of equipment, or major infrastructure. Yes, having some of that can increase broadcast quality but it’s not required. Anything that lowers overhead in tough times makes a business more resilient. A resilient business can survive tough times and be positioned to thrive once things bounce back.
Money still might not be great
At its core streaming and YouTube are ad supported platforms. Yes, there are other forms of monetization. However, if fewer companies are doing well because their customers are in lockdown they’ll also be spending less on advertising. That means potentially fewer ad dollars coming to the platforms.
It’s hard to know exactly how this will impact companies like Twitch and YouTube. It could be that there’s such a dramatic drop in ad dollars that they feel the pinch. However, it could be that while ad dollars towards entertainment drop, they thrive as the only game in town still getting eyeballs. If an advertiser might spend $100k on ads across ten mediums and eight of them are closed it would take a similar 80% cut in their spending for the remaining platforms to be hurt.
Tips may also drop. Again, it’s a similar question to ads. Let’s look at it. If more people are unable to work or unable to work to their full potential it’s likely that there will be less disposable income in your audience to tip you. However, we may see the situation where their disposable income is down but all of their other normal forms of entertainment are cut down as well. Additionally, streamers and YouTubers provide such a community feel for their audiences that you might be late in getting cut, if at all.
Sponsorships and affiliate sales can also be a big part of a broadcaster’s revenue profile. Again, it’s hard to know what exactly will happen here since there’s arguments in both directions. First, there’s potentially a drop in sponsorships as companies expect to do less in sales. Less discretionary income in the economy means fewer new PC, tshirts, energy drinks, etc. However, it could also be the case that just like with ad dollars there’s fewer places to put any remaining budget so therefore broadcasters get more. Affiliate sales (use my creator code! Kinds of things) will also potentially see a drop. Same opposing forces where it’s hard to know whether a bigger slice of a smaller pie is actually larger than the smaller piece of a bigger pie.
What to do, strategically
If you can cut your personal costs down and make it through a potentially lean time while building a committed audience, you’ll be well positioned to see revenue explode once things turn around. Yeah, there might be a dip once everyone can go see a movie or go to their favorite bar again. But if you’ve built committed fans they’ll come back. With their wallets ready to support you.
So, how do you do it? First, focus on being consistent and building a community. The same things you should be doing, regardless.
Second, acknowledge the potential for lean times and cut your expenses back. This should be something temporary but it’s prudent. Plus, it might not be hard to do if you spent on things like travel and going out to shows! The longer you can go on less the more likely you are to be well-positioned to do big numbers once times are good again.
Finally, use this time to build industry relationships. It may be that they’re not something immediately beneficial for your business. However, with conferences being cancelled the usual routes for meeting people are cut off. You have a chance to, at low cost, make some industry friends and connections that once things rebound could be good for business. So, how do you do this? As organically as possible and with as good of intentions as possible. No one likes to feel used, they want friends. You don’t want to be that person exploiting a pandemic. It may be something as simple as sharing an Animal Crossing friend code and playing games.
Conclusion
Streaming and YouTube are better positioned to ride out an economic downturn and lockdown than most forms of entertainment. The audience is already viewing from their homes, the barrier to watching is tiny, and the costs of running production are relatively low. If you do prudent things to harden your business against a potentially slow time you will be well positioned to take advantage of growth once there’s a rebound.
You don’t have to figure this out alone. This is what we do- help streamers make great money decisions. If that’s something that sounds interesting to you reach out me or schedule some time for a free consult. You can check out what I do here.
