articles Ratings /ratings/en/research/articles/210106-here-s-what-the-u-s-media-and-entertainment-sector-has-in-store-for-2021-11792477 content esgSubNav
Log in to other products

Login to Market Intelligence Platform


Looking for more?

In This List

Here's What The U.S. Media And Entertainment Sector Has In Store For 2021


COVID-19 Impact: Key Takeaways From Our Articles


As European Hotels Grapple With Prolonged Restrictions, Are Operators And Landlords Sharing The Pain?


Pharma Outlook: Eighth Straight Year Of Credit Deterioration In 2021


How We Rate Nonfinancial Corporate Entities

Here's What The U.S. Media And Entertainment Sector Has In Store For 2021

As we step into the new year, U.S. media and entertainment companies can begin to look forward to recovering from the pandemic and its fallout. Some segments of the industry survived the initial disruption better than others by revising business models, renegotiating contracts and relationships, cutting spending, using debt proceeds, and quickly adjusting to changing consumer behaviors. However, some went into the pandemic with high leverage or deficient liquidity, already testing our rating boundaries and their credit quality. How companies used and will use debt proceeds will largely influence our outlook assessments and rating decisions.

Here, we look at key topics across the U.S. media and entertainment landscape that will continue to play major roles in the success or failure of media and entertainment companies. We've also linked to our investor presentation, "U.S. Media & Entertainment Industry Rebooting The U.S. Media Sector In A Post Pandemic World," which tells the industry's credit story in graphics. The pace of recovery from the COVID pandemic is key, especially for the out-of-home (OOH) entertainment sectors that were devastated in 2020 and have yet to recoup their losses.

Advertising Trends And The Recalibration Of Advertising's Secular Trends

Overall, advertising in the U.S. has recovered at a faster pace in the third and fourth quarters of 2020 than we anticipated, and we expect this trend to continue into the new year.   Still, a number of questions remain unanswered; chief among them are: What's the longer-term state of national television (TV) and for how long will it remain the premium medium for national advertisers? Despite the growing pressure on the linear TV model as audience ratings continue their nosedive, national TV showed resilience during the pandemic because advertisers remained loyal to that medium. There are several theories as to why advertisers remain loyal to national TV--such as TV's strength in brand building, TV's limited ad inventory, and TV's exclusive broadcast of key sports--which we cover in more detail in "S&P Global Ratings Cuts Its 2020 U.S. Advertising Forecast In The Face Of COVID-19", published April 6, 2020. The health of national television is important to our credit ratings on large global media companies, so we'll closely watch and share our assessment of how it performs in the post-pandemic world.

For now, we'll monitor the performance of several legacy media sectors that will have varying speeds and degrees of recovery.   While no one should disagree that print advertising won't ever return to 2019 levels, it's also likely that radio advertising won't either (for the record, we expect this year's radio advertising to recover to 90% of the 2019 level but then resume declining at a low-single-digit percentage rate). The recovery of OOH advertising will likely remain barbell shaped this year, with the billboard portion continuing its recovery and even exceeding 2019 by 2022, but the transit segment (e.g., airports and subways) and movie theater advertising will languish. We expect a recovery in air travel to pre-pandemic levels to take several years, though U.S. domestic travel (particularly leisure travel) should bounce back sooner than our 2024 estimate for global air traffic overall. Movie theaters, face shrinkage, bankruptcy, and lower attendance as film studios offer consumers in-home alternatives to viewing new movie releases in theaters (see the "Film windowing" section below).

Local television experienced record levels of political advertising in the second half of 2020.   We believe election ads masked the true health of the local advertising market. We're optimistic that local advertising will strengthen in 2021 and that core local-TV advertising will grow 10%. From a credit analysis standpoint, the strength of the back half of 2021, and our belief that elevated levels of political advertising will be the norm in even-number years, has been positive for our credit ratings on TV broadcasters.

Award Of New NFL Broadcast Rights Deals

Recent media reports indicate that the National Football League (NFL) appears to be close to awarding new television broadcast rights contracts that replace the existing ones expiring after the 2020 and 2021 seasons.  These include Monday Night Football this year and

Sunday afternoon, Sunday night, and Thursday night football next year. Expectations are high that these new contracts will cost substantially more and there could be a shake-up in who wins them.

It's unlikely that a streaming platform could win exclusive rights to one of the major broadcast contracts. Amazon has been streaming FOX's broadcast of Thursday Night Football since 2017. Still, the NFL has experimented with broadcasting games exclusively on streaming platforms (most recently was the Dec. 26, 2020 game between the San Francisco 49ers and Arizona Cardinals) though we note broadcast networks have provided the production capabilities and crew.

The greatest risk is the impact of the NFL's decision on the key media companies.   The winners will likely strengthen their competitive positioning within the legacy TV broadcast ecosystem. This will allow them to continue commanding healthy affiliate fee increases. However, the winners will also likely face weaker credit metrics due to depressed EBITDA and cash flow because they won't be able to generate enough incremental revenues to counter the higher programming costs. Conversely, for those media companies that lose any of their current broadcast contracts, it may be more difficult to get the pay-TV distributors to agree to increase affiliate fees, though losing those contracts may free up cash flow, which they can invest in other programming.

We'll also closely follow how the NFL's decision helps or hinders the relationship between broadcast networks and TV station operators.   These TV stations, which are the actual face of the networks to consumers, pay the networks a monthly fee (so called reverse-retransmission fees) in exchange for the networks' programming. The winning broadcast networks may push the station operators to pay greater reverse-retransmission fees to counter their higher programming costs. We believe that most TV station operators pay greater than 50% of retransmission fees they collect from the pay-TV distributors to the big four broadcast networks (ABC, CBS, FOX, and NBC). In turn, the TV station operators will likely push for higher retransmission fees. We believe this sequence could have negative consequences for the legacy pay-TV ecosystem. Higher fees will ultimately get passed directly to the consumer, which could accelerate the rate of cord-cutting.

Pace Of Recovery For OOH Entertainment Sectors

There are diverging views as to the extent and rate of recovery for the various OOH entertainment segments, including live events, concerts, theme parks, conferences, theaters, and movie exhibitors.   Some experts believe that consumers' reaction to the end of the pandemic will lead to a "roaring twenties" mentality, which could accelerate the economic recovery. Conversely there are others who believe that consumers will be more cautious venturing back to large-scale public gatherings. S&P Global economists target a return to normalcy in the second half of 2021 though ongoing government-imposed restrictions may delay recovery for some entertainment and leisure segments.

From a credit standpoint, consumer behavior could determine the fate of those media and entertainment companies with elevated leverage or marginal liquidity.   Many of these companies, like movie exhibitors, are quickly running out of liquidity due to cash burn, and will need additional external financing to avoid bankruptcy. Cautious consumer behavior could be fatal to many of these companies.

Rethinking Film Release Windowing

Arguably, no media sector will be as altered after the pandemic ends as the global film industry--the studios and their exhibitor partners.   While other OOH sectors have been shuttered for significant portions of the year (e.g., live events, sports, concerts, and theme parks), the film industry faces additional secular obstacles on its path to recovery. The major film studios have used the crisis to test new business models, many of which they had been advocating prior to the pandemic. We believe the film-release model has been altered permanently and these new models won't go back in the box once the pandemic passes.

These new models include:

  • Shrinking the theatrical window (followed by Universal);
  • Skipping theatrical release, instead releasing through a premium video-on-demand (PVOD) platform (owned [Disney] or third party, such as pay-TV or streaming [Universal]);
  • Scheduling release days concurrently in theaters and through PVOD platforms (Universal, Sony);
  • Scheduling release days concurrently in theaters and through owned streaming service (Warner Bros.)
  • Skipping theatrical release and instead selling to third-party streaming services (Sony, Paramount)

These new models have fractured the already fragile relationships among film studios, talent (e.g., actors, directors, and producers), and the theatrical exhibitors. Studios will need to reevaluate which projects they greenlight, including determining what metrics to use, what's an acceptable return, and what's the appropriate release strategy for each project. Third-party film investors, talent, and the studios need to adjust the current participation rights model as box office metrics and windows have changed forever. Exhibitors need to rethink their business models as the theatrical release window becomes less valuable to the film industry. This will likely include reducing the number of screens, finding alternate use models for theaters, and revising financial relationships with the film studios. Ultimately, credit investors will have to face the challenge of limited information and transparency into the operating and financial performance of each film studio, making already difficult investment decisions even more challenging.

Pivoting To A Streaming World

More streaming video choices will become available this year.  This year will be the first full year of the new media ecosystem. Disney and Apple launched Disney+ and AppleTV+, respectively, in 2019. This past year, NBCU launched Peacock, Warner Media rolled out HBO Max, and Discovery announced Discovery+. With ViacomCBS's anticipated relaunch of CBS All Access as Paramount+ this year, the streaming strategies for all the major global media companies will finally be in full display for all to evaluate. With so many streaming choices for consumers (including Netflix: streaming launched in 2007; Hulu: publicly launched in 2008; and Amazon Prime Video: rebranded in 2008), we expect to see significant differences in key operating metrics (primarily subscriber growth) between the various streaming services. Throughout this year, we expect to evaluate each service within the strategic needs of each company (the definition of success will vary by company), and ultimately adjust our ratings and thresholds based on our view of each company's competitive positioning within the streaming world.

The impact on credit ratings could be twofold.   We could change our leverage thresholds based on our updated assessment of each company's overall business. This calculation would consider our winners and losers assessment and the strengths and weaknesses of the company's other businesses. It's unlikely we would change our credit ratings immediately following a change in our leverage thresholds. Instead, we would likely give the affected company time to assess its commitment to the revised threshold.

Secondly, our commitment to holding companies to our leverage thresholds won't change just because they're investing for the future. We expect margins and cash flow to be depressed as media companies launch streaming services. These streaming initiatives are likely to be strongly cash flow negative into 2022 with the successful ones only reaching scale beginning in 2023. To the extent that leverage rises and cash flow metrics weaken outside of the thresholds we've set for our ratings, we would look to revise outlooks on or even downgrade these companies, accordingly.

Rate Of Cord-Cutting

What the pace of video cord-cutting will be after the pandemic ends is one of the biggest mysteries in the media industry.Prior to the pandemic, the rate of cord-cutting was worsening sequentially. After peaking at, we estimate, over 5% in the second quarter of 2020, the rate of pay-TV subscriber losses (which includes both traditional and virtual operators) lessened in the third quarter and appears have lessened more in the fourth quarter. Is this improved loss rate an anomaly driven by the pandemic so that cord-cutting rates will reaccelerate this year? Or, will subscriber declines continue to moderate as traditional pay-TV penetration finds a stabilizing floor? While not a ratings risk for the cable industry, which is basking in the strength of its high-speed data service, the answer to this question is important for the television sector because it still depends on high-margin affiliate revenues. The impact of cord-cutting on television is compounded by declining audience ratings. The combination will curtail the ability for the TV networks to extract revenues from both advertisers and pay-TV distributors.

Regulating Social Media

Social media is in the hot seat, with challenges coming from all sides in many regions.  If there's one thing that's united the world--whether liberal or conservative, democratic or autocratic--it's their collective dislike of social media. This past year saw the large global social media platforms (i.e., Facebook, Google, and Twitter) under increasing fire from regulators, legislators, and the courts. In the U.S., we're keen to see what happens to section 230 of the 1996 Communications Decency Act, which provides immunity from liability for internet websites that publish third-party content. Revoking section 230 has been a high-profile priority for the outgoing Trump administration and the incoming Biden administration agrees that section 230 needs to be reformed. In addition, Facebook and Google face several antitrust lawsuits, both in the U.S. (filed by numerous state attorneys general) and overseas (European Union among others).

We believe that much of the risk to the largest global social platforms is headline-related. While both Democrats and Republicans agree on the need for reform, reform legislation is unlikely to pass during a split Congress (i.e., a Democrat-led House and Republican-led Senate). Finally, even if the U.S. courts were to rule against either company, any implementation of fines or other punishments would likely be delayed for years due to appeals and counter lawsuits.

The near-term risk from these lawsuits and constant bad publicity is that large advertisers may scale back or withdraw advertising on social platforms. Still, as we've seen in previous boycotts, large advertisers are deterred from fully participating because of Facebook's and Google's global scale. Financially, these boycotts have only marginally hurt the two platforms, which continue to experience strong demand from small advertisers.

Distribution Versus Content

The balance of power between distribution and content has been shifting back and forth since the dawn of the pay-TV distributors and this year will be no exception.   For the past few years, this balance has favored the content creators as demonstrated by both the ongoing survival of the full-size video bundle (despite strong consumer sentiment for smaller "skinny" bundles) and the steady growth in per-subscriber affiliate fees. We believe we could see a rise in the number and level of disputes between distributors and content creators this year for a number of reasons: Each of the major media companies has, or will shortly have (if you consider ViacomCBS's relaunch of CBS All Access as Paramount+ as a new service) their own streaming platforms, which they will want to push in front of consumers. The distributors will want a piece of the economic pie, complicating negotiations between distribution and media. For negotiations with legacy pay-TV distributors, this won't just be about the streaming platforms but also legacy television networks. Furthermore, new distribution powers (in particular, Roku, Amazon, and Apple) have taken aggressive negotiating positions versus the media companies. For example, carriage of AT&T's streaming service, HBO Max, was delayed well after initial launch on both Amazon and Roku.

We'll also closely watch the state of those linear networks that have either no or limited streaming options. We are keen to see what happens with the regional sports networks, which have found themselves under considerable pressure because sports leagues either delayed or scaled back their seasons last year.

Mergers And Acquisitions

After a relatively quiet year for media and entertainment mergers and acquisitions (M&A), we expect a flurry of activity over the next 12 months or so, driven by three considerations.

Consolidation to achieve scale:  

  • Scale has become a key differentiator across all media sectors. However, this is especially true for those media companies rolling out streaming video platforms. Thus, we expect smaller independent studios with film and TV libraries to be in demand.

Rationalizing noncore assets within existing portfolios and adding new capabilities and assets:  

  • Media companies are likely to tweak their business portfolios. Those seeking to lower leverage will sell noncore assets while others will pursue digital media and technology companies to quickly add technical capabilities.

Adding media assets to support other consumer subscription services:  

  • Apple, Amazon, and AT&T built or purchased media assets to support and strengthen their primary non-media businesses. We expect other non-media companies may follow their lead.

The increased M&A will be aided by the availability of low-cost financing and excess cash on many companies' balance sheets. Challenges to completing M&A deals, as always, will come from differences in valuation, both for the desired assets and, increasingly, for legacy assets that come along in the transaction.

Will Credit Measures Rebound?

Even before considering the pace of recovery this year, the already elevated credit metrics for many media companies are troubling.   This includes companies that experienced significant declines in revenues and cash flows in 2020 and now have leverage that exceeds our ratings thresholds. Their ability to return credit measures to more normalized levels will depend on the pace of economic and consumer recovery. Those companies rated in the 'B' or 'CCC' category (more than 70% of the media and entertainment companies we rate) are most at risk for downgrades or defaults because the recovery may come too late for them.

In addition, many media companies issued debt during the pandemic to shore up liquidity. In some cases, companies used this cash to fund cash flow deficits last year (continuing through this year) and won't be using it to lower gross debt. These companies will exit the pandemic with elevated credit measures and, depending on the pace of recovery, may have a difficult time getting leverage back in line with historical levels. For those companies that borrowed, but didn't use the borrowed cash, we'll assess how they use the excess cash--will they pay down debt, which is neutral to positive for credit ratings? Or, will they use it to fund either M&A (it depends) or shareholder returns (clearly negative for ratings)?

Related Research

This report does not constitute a rating action.

Primary Credit Analyst:Naveen Sarma, New York + 1 (212) 438 7833;

No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, (free of charge), and and (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at

Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to:

Register with S&P Global Ratings

Register now to access exclusive content, events, tools, and more.

Go Back