Covid-19: Bleak Times and Silver Linings for Entertainment Industry
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The next year or so for the Film industry will likely be a pretty bleak situation with the after-effects of the COVID19 pandemic ensuring that delayed releases and a shortage of consumer confidence bring little cheer to an industry that has suffered badly during the preceding lockdown. Since March 16th, most cinema halls across the country have been closed, those that did operate after that date were then closed down completely by the time the PM made the decision to effectively lock down the country on March 21st. The exhibition, with high fixed costs and needing customers to ensure revenue streams, like all other hospitality and outdoor businesses, therefore have been left in a state of limbo. Harsh decisions will need to follow for many exhibition companies to ensure that they can meet their cashflows with many already invoking ‘Act of God’ to ensure that rental agreements can be made ‘Force Majeure’.
In addition to these significant losses that will come from an extended period of closure, there will be a huge loss of confidence from the audience who will view coming back to cinemas as a risky proposition in the current environment. This would certainly lead to major releases being pushed back a considerable period to try to mitigate this risk, which again would lead to low occupancy even if theatres would be able to reopen. Some clue can be seen from the Disney-Marvel slate which pushed back its film ‘Black Widow’ a full 6 months from May to November to ensure that there are no repercussions of this pandemic by then. Now, this could be wishful thinking on their part but the logic is clear. This summer blockbuster season of 2020 is a write-off and many a theatre business may well be with it.
Production has ground to a halt as well. This means that films that were due to hit theatres will now not make their release dates, meaning that films perhaps a little long in the tooth - take their place and this could lead to audience apathy. Film-watching is a habit and this quarantine period has squeezed that habit out of us and the film industry will in many ways pay a direct result of that as box office occupancy levels have been downgraded across the world for the whole of the financial year 2020-21. This ebbing of the film watching habit though maybe a small sliver of a silver lining for another part of the M&E business, one that has been perfectly placed to capitalize on the extra time millions have had to while away hours while sitting at home - OTT, and Television.
The past three weeks have seen an unprecedented rise in the viewing of the television screen. Some studies have suggested that TV viewing has grown anywhere between 8-15% in some places and no doubt the other time is certainly been taken by the rise in streaming services like Netflix, Amazon, and the newly launched Disney+ Hotstar. Now as yet, there are no figures on just how much these services have gained in the last three weeks but without a doubt, they have been the major benefactor of people being incarcerated at home. Whether these services are being viewed via AVOD or SVOD, the hours of viewing has certainly been hugely boosted with binge-watching becoming a norm throughout the day and night. How much this retained time online has caused a conversion from AVOD customers to SVOD, we will have to see but I am under the impression that this has happened in a significant number.
Surely though this is something that can easily be expected but there is a catch. That is that these services are of course also dependent on new production and the longer the quarantine goes on, the slower the delivery of this new content will be. Disney+ has already announced that some of its marquee shows will be delayed as a result and it is the same for the other streamers as well. How long the pandemic lasts may have a direct result on how these new subscribers are retained by the OTT’s in the long run. The recession which will likely follow may also cause rationing of expenses in the household and entertainment like OTT subscriptions, may end but rationalized as well. Hypotheticals maybe, but not without some reason.
What does this mean for the long run? Is this a new normal for entertainment viewing even after Coronavirus is left as a distant (hopefully) memory? Well, there is no doubt that some of the OTT gains made will be lasting. As I mentioned, the movie-going business may take time to recover both in confidence as well as in content, which would mean that habits formed, may last and I would suspect, that once someone has bitten into that OTT apple, it will be hard to take it away. Everyone won’t stay but many conversions will be permanent. Television isn’t quite so lucky as appointment driven TV will continue to be the main draw and as people return to work, the extra time available to watch the idiot box will be taken away. Viewing habits though may be permanently altered and the march to OTT supremacy in our lives may have been hastened by the unlikeliest of all sources.