In recent weeks, COVID-19 (better known as coronavirus) has globally sent shock waves through markets and captured the attention of the world. Since mid-February, the outbreak has accelerated and infections have become widespread, resulting in significant market volatility that is expected to continue for the foreseeable future. Substantial disruption to business operations has occurred and all sectors of the economy have been impacted, including the broadcasting industry, which has seen an increased audience but faces an unknown economic impact.

At this point, it is impossible for us to know how long the outbreak and shutdown will last or the lingering effects on businesses, the economy, and the credit and M&A markets. However, despite temporary disruption, we believe that once business resumes, the broadcasting industry will continue to see high levels of activity as companies respond the impacts of COVID-19 and winners and losers take shape.

While political spending in 2020 may provide ballast to broadcasters, they face distinct challenges from a likely decline in advertising spending while needing to adapt to a competitive and evolving technology landscape as audiences look to consume content in new ways. If a softness in the advertising market persists for several months, we expect many companies to face challenges and, within the confines for the current regulatory regime, may look to explore strategic M&A/divestitures/distressed M&A to navigate survival. The 2008 financial crisis proved to be a pivotal moment for radio broadcasters—whose advertising levels never fully rebounded—and COVID-19 could prove similar for television broadcasters as audiences continue to cut the cord.