Corona Capital

14 Dec 2020 By Breakingviews columnists

Corona Capital is a column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.


– NFL’s ad fumble

Nevermore. The National Football League is usually a gold mine for broadcasters. This year, fewer people are watching matchups on TV partly because schedules are moving. A Thanksgiving game between the Pittsburgh Steelers and Baltimore Ravens had to be postponed because of players contracting Covid-19.

The result means media companies like Comcast’s NBC are put in the rare position of having to lower prices for commercials or offer free ad space, according to the Wall Street Journal. Nearly $4 billion is at stake collectively for the networks including ViacomCBS and Walt Disney based on Kantar Media’s estimates for last year’s ad haul from the regular football season.

This year could be an outlier but there is little buffer. GroupM estimates U.S. national TV advertising will decline 8% this year to $39 billion because movie premiers and travel-related commercials have ground to a halt. Sporting events were supposed to be a win, not a fumble. (By Jennifer Saba)

Projektile motion. Investors in Poland’s CD Projekt are learning that it’s possible to lose money in the video-games sector during a pandemic. After a stellar year for game makers, the group’s value has slumped by 31% since last Thursday to $7.2 billion, because of worse-than-expected reviews and technical bugs in the new release “Cyberpunk 2077”. For joint Chief Executives Adam Kicinski and Marcin Iwinski, also the largest shareholders, it’s a reminder of how risky it is to base a company on a few hits.

“Cyberpunk 2077” will account for 82% of revenue this year, Bernstein analysts reckon, taking over from last year’s “Witcher 3”, which brought in 88%. Unlike U.S. giants Electronic Arts and Activision Blizzard, CD Projekt mostly relies on game sales rather than subscriptions or in-game purchases. It’s now valued at 18.4 times average earnings over the next four years – close to the average 21 times for EA and Activision. A bigger discount looks warranted. (By Liam Proud)

Need for Speed. Lossmaking supercar maker McLaren has pulled over for a much-needed pit stop. The UK company on Sunday announced it had sold a 33% stake in its Formula 1 racing team, once home to Lewis Hamilton and the late Brazilian track legend Ayrton Senna, to a group led by MSP Sports Capital at a valuation of 560 million pounds. That’s a trophy price considering the business accounted for only around a tenth of McLaren’s 1.5 billion pounds in sales in 2019 and reported negative EBITDA in the last two financial years.

The 185 million pound investment injects some fuel into McLaren’s knackered financial engine, which has been hobbled by pandemic-slammed car sales and net debt of 661 million pounds. Last week, the boss of the automotive segment mooted a possible deal to reverse itself into a special purpose acquisition company and raise up to 500 million pounds in equity. The F1 deal should at least allow McLaren to keep driving forward. (By Christopher Thompson)

Peak season. Exports from China surged 21% in November from a year ago, while the weekly export container shipping index set a fresh record on Friday as orders pile up on the country’s congested docks.

The appetite for China’s consumer goods is going well beyond medical protective equipment. However, exporters think clients are “front-loading” orders to stock up months in advance, worried about a repeat of the paralysis that occurred at the beginning of this year when the virus outbreak froze supply chains. Absent a real recovery in global demand, Chinese exporters are fretting about their razor-thin profit margins and rising raw material costs. Nearly one year on, the pandemic is still distorting businesses and trade flow. (By Yawen Chen)

Sacrificial mink. The pandemic has saddled some luxury fashion houses with a supply chain dilemma. Denmark killed 17 million mink after Covid-19 outbreaks at hundreds of farms. After years of falling prices because of lower demand, the massive cull may boost the $22 billion market for alternative furs like chinchilla and fox. Luxury giant LVMH, which Reuters reported said it is using only 100% certified mink, fox and finn-raccoon, is likely to see costs go up.

Longer term, however, the gruesome saga may speed up the shift away from fur. Designers such as Coach and Chanel have already banned the use of fur in its collections, and those houses that still do use it are looking increasingly outmoded. The mink deaths may not have been in vain. (By Dasha Afanasieva)


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