Entertainment industry. Will the old days return?
The ongoing COVID-19 pandemic and quarantine measures in most parts of the world have severely impacted the entertainment industry. To prevent further spread of the virus, cinemas, theaters, festivals and sports activities have been closed. Film studios have stopped their production and announce rescheduling of high-profile film premieres.
According to preliminary estimates, such a closed regime will last at least one to three months. Some give even more pessimistic forecasts. Let us try to figure out how it affects the entertainment industry. And the situation “as before” will return after the pandemic.
Is there anything to lose?
2019 has been a very successful year for the industry. The global entertainment market (total consumer expenditures on theaters, cinemas, mobile and home content consumption) exceeded the $100 billion mark for the first time, reaching $101 billion.
Source:The Motion Picture Association
At the same time, last year there was an important change in the structure of consumer expenditures on entertainment. People did not spend less on going to cinemas, on the contrary, there was an increase, but the share of digital and home consumption (viewing on mobile devices, desktops, chargeable television broadcasts, subscription streaming services, etc.) became dominant for the first time.
If for the period from 2015 to 2019 the box-office receipts grew by 8%, then the income from digital in all its manifestations grew by 62%.
This is an important trend. And if someone says after months of the pandemic that it was the reason why people stopped going to cinemas, preferring home viewing, be sure that this happened before. The pandemic will only strengthen this trend.
Source:The Motion Picture Association
Film distributors, rental organizations, cinemas are already suffering losses. And they are enormous. It is enough to look at the box-office receipts of past years to assess the extent of the industry’s shortfall with each week of the pandemic. Each month of closed doors in cinemas costs at least US$3.5 billion.
Source:The Motion Picture Association
In China, where 70,000 cinemas were the first to be closed in January, real losses have already been calculated. The box-office receipts in the country in the first two months of this year fell by $1.91 billion compared to the same period last year. This is a real disaster, because the auditoriums were closed on the days of the Chinese New Year. And this is the time when residents traditionally go to the cinema in an active manner.
What will happen after?
When it comes to post-pandemic forecasts, there are two possible variants.
The first is that residents will get tired of being locked in their houses, they will miss their usual activities, and with the opening of entertainment venues, they will attend events even more actively. There are several vulnerabilities in this variant.
It is difficult to predict what kind of airbag the distributors and owners of cinema chains have, whether they will wait for supportive measures from the government. To put it simply, the longer the pandemic lasts, the more likely it is that some players will simply not live to see the reopening.
The pause in film production will not just change release schedules. It is likely that there will be a shortage of films. That is, when cinemas open, there simply may not be strong enough blockbusters for premieres that provide maximum box-office receipts.
The second variant is that the trend towards the dominant role of home and mobile consumption, which was outlined even before the start of the pandemic, will increase. It seems the most likely. Firstly, people who bought subscriptions in order not to be bored during quarantine will simply get used to watching movies at home.
An additional stimulating factor is the reduction of the rental period in cinemas, after which the films get into the catalogs of media services. If earlier this gap was 90 days, then it will be reduced. New items will appear on streaming services much earlier. It is possible that premieres will be able to appear in the halls and on streaming at the same time.
Major media companies have already started moving their theatrical releases to digital platforms. For example, Disney+ pre-released “Frozen Heart 2”, which was originally supposed to be released online in October. Following the example of Disney+, their counterparts Netflix, Amazon Prime, HBOGo are planning to release new episodes of series and films before their expected date.
Will the number finally win?
At the end of last year, the market shares of cinemas and digital services were commensurate - 42% and 48%, respectively. Now cinemas are suffering losses, streaming is showing record growth in both the number of subscribers and the financial performance of companies.
In the current situation, cinemas have no chance to win back the gap by the end of the year. 2020 will be the worst year for the industry, even if the pandemic ends in the coming weeks. Next year or with the end of the pandemic, it will be possible to restore the lost positions, but far from being in full.
Yes, the number will finally win, moving the once equal opponent to another category.