Author: Katherine Stevenson, Graphics: Rose Lee
The BRB Bottomline
The pandemic, as it has done to so many industries, has put in a pin in the production and distribution of movies and television shows, yet as so many people are forced to self isolate, the demand for content new and old has never been higher. As COVID-19 drains some sectors of the film industry and boosts others, we investigate who the biggest winners and losers of the pandemic are in the entertainment industry.
Ever since stay-at-home orders went into effect months ago in mid-March, bored Americans have been spending more time in front of the screen now more than ever before. Although the pandemic has led more people to binge the latest fad tv show or movie, producing enough content to keep consumers happy is not as easy due to new, extensive protection guidelines to keep the cast and crew COVID-free.
Making a Movie
Due to mandatory social distancing guidelines, many movies and shows have been forced to stop production. Anticipated films and shows like Friends (reunion special), John Wick 4, In the Heights, Minions: The Rise of Gru, and the final season of The Walking Dead have all been postponed, and that barely even begins to cover how many productions will be delayed.
Despite some delays in production, some shows have been greenlighted to continue production, but they must follow a strict set of guidelines. A joint report from the Hollywood unions the Directors Guild of America, SAG-AFTRA, IATSE, and the Teamsters titled “The Safe Way Forward” outlines the instructions required to continue filming. Notably, a health safety supervisor must be appointed in order to oversee testing and protective zones for the cast and crew who are unable to social distance. While this initiative fails to cover how documentaries can be safely produced and there will be many extra costs associated with implementing this policy, “The Safe Way Forward” has excited production companies who are eager to return back to production.
One show that has continued production despite a brief delay is The Bachelorette. Unlike previous seasons spent at the Bachelor Mansion, this season is being held at La Quinta Resort in Palm Springs, CA in adherence with safety protocols. Because of the show’s more “intimate” nature, producers had to create a bubble and enforce testing protocols to produce this season. Compared to a normal season, the filming process was actually shorter as cast and crew remained in their bubbles, and since travel was off-limits, they could shoot everyday.
Pushing Back Premiers
The film industry isn’t just feeling the pressure from COVID during the movie-making process; the delayed releases of movies post-production is putting the strain on production companies and movie theaters.
The Incentives to Delay Releases
Releasing a film directly to consumers instead of first going through movie theaters means that studios lose millions. Instead of having a family of five pay $20 a ticket each to see a movie in theaters, having that same family rent the film for $20 would mean $80 in losses just for one family. For the whole market, that means millions in losses if studios decide to release films on demand or streaming services instead of waiting for the pandemic to subside so that they can release films in theaters.
Strains on Marketing
Because production companies are hesitant to release films on demand now, they have to ensure that once they eventually release films in theaters, there is enough interest to draw in a big crowd; otherwise, the wait wouldn’t be worth it.
Consequently, building a marketing plan has become difficult if not possible. While delaying a film’s release by a few weeks at a time could cost studious $200,000 to $400,000 in marketing fees, a sudden delay within two weeks of release could mean $5 million in losses. Since studios push marketing the most during the two weeks right before release, sudden changes in coronavirus infection rates could easily cost a production studio millions.
Costs aren’t the only thing plaguing marketing strategies. Typical marketing strategies like playing trailers in theaters, organized press tours, and advertisements during championships games are impossible during a pandemic. In order to adjust to current trends, studios are finding new ways to rewrite the marketing script. By using TikTok trends and releasing trailers on Fortnite, marketing teams are finding new ways to reach their audiences at home.
Closing Curtains on Movie Theaters
While production studios have been feeling the pressure from COVID-19, no sector of the film industry has suffered quite like movie theaters. Considering that their entire business model is based upon stuffing strangers into an insulated, enclosed area to eat and drink overpriced food for around two hours, theaters have been struggling to stay afloat during the pandemic.
AMC Theaters is expected to post $2.4 billion in first-quarter losses. America’s biggest movie theater chain has been forced to close over 1,000 of its 8,218 US theaters while it furloughed 600 corporate employees. Less than two months after theaters began to reopen in late August, Regal Theaters shut down operations at all 536 locations in October with no clear timeline as to when it will resume business. Cineworld, Regal Theaters’s parent company, saw its stocks plummet from around $52 to $22 following its subsidiary’s announcements to shut down operations.
Considering that theaters have been operating for movies on little to no revenue, it is unclear whether theaters will survive the pandemic. Since the pandemic has no clear end in sight, only time will tell if theaters can push through the pandemic or if movie viewing will be changed forever.
And The Oscar Goes to…
While the pandemic has made producing movies more difficult and theaters are losing millions from lost sales, plenty of sectors of the entertainment industry are booming. Most notably, streaming services and animation are enjoying the limelight that COVID-19 has put on them.
Everyone remembers the early days of the pandemic. Reports of lone cases began popping up throughout the US, and suddenly the stay-at-home order took effect. Yet fear and anxiety were not the only feelings running rampant; boredom was all-pervasive. What was everyone to do without the stimulation of attending class, going out to restaurants, or partying at Coachella? And so people began consuming content at levels never before seen. Whether someone watched a childhood favorite like Avatar: The Last Airbender or tuned into the newest fad like The Tiger King, one thing was irrefutable: streaming services were reaping in millions.
Sales for the streaming industry grew 47% year-over-year in April 2020 compared to a 39% increase during April of 2019. Certain states like Connecticut and Alabama saw the biggest increases in consumption, reaching more than 60% year-over-year. For most streaming services, they saw the largest spike at the beginning of the quarantine with HBO Max seeing a 300% increase in subscribers from March 16 to June 1. As seen in Figure 1, all streaming services except YouTubeTV and CBS All Access saw increases in new subscribers. Netflix specifically attracted 16 million new subscribers in the first three months of 2020, which is more than double their rate in the last months of 2019; meanwhile, their share price has grown more than 30%.
Since the demand for streaming services has increased so dramatically, some companies have been forced to reduce the quality of their videos in order to ease the strain on internet providers. As of June, almost 80% of Americans were subscribed to at least one streaming service. In fact, the average consumer is subscribed to four different services.
Nevertheless, streaming services are still facing some setbacks due to the pandemic. As streaming services have delved deeper into movie production, nearly all of their current projects have been put on pause. Furthermore, because the pandemic has ravaged economies across the world, the value of currencies in other countries has depreciated. Consequently, subscriber growth outside of the United States has not benefited streaming services as much as before COVID-19.
Despite a few setbacks, the pandemic has largely been a major boost for streaming services that have reaped the benefits of more subscribers and more content consumption.
Streaming services are not the only ones thriving during the pandemic. Animated movies and tv shows have managed to successfully navigate the production process brought upon by COVID. While social-distancing orders make the production of live shows difficult, animators are able to work and collaborate from home.
For example, the new show Tooning out the News had to suddenly change strategies to adapt to the pandemic. Originally, the creators planned to use motion capture and high-speed, fast-turnaround animation to produce their show; after COVID-19 sent them back to the drawing board, animators have been designing and creating in the comfort of their homes. Specialized programs for illustration, animation, coloring, and editing have enabled animators to maintain the quality of their work remotely. Thus far, the biggest problem they have encountered is the sharing of large files. Studios are having to increase their staffers’ internet connections, compress files, and design simpler characters and backgrounds to work around this roadblock. Nevertheless, animation has largely emerged from the pandemic victorious.
One benefit of working from home is that voice actors can record themselves from all corners of the world. Talent no longer has to be locally-sourced from Los Angeles or New York; now, studios can draw from actors in more diverse geographic regions, further democratizing the voice acting industry. Additionally, with so many live-action actors out of work, many are turning their talents toward the animation industry.
Since animation is booming as live-action has stalled, animation is drawing new interest and investments, especially since streaming platforms must match the need for more content. Consequently, animation has seen an uptick in advertising. The production company Titmouse, which produces Big Mouth and Star Wars: Galaxy of Adventures, has been receiving five to six advertising requests a day, which is far higher than normal.
- While plenty of studios have been forced to postpone production, causing strains on their budgets, many films and shows have restarted production under a strict set of guidelines to prevent COVID exposure and infection.
- Studios are incentivized to delay releases since they would reap more profits if they wait to release films in theaters, yet doing so increases marketing costs.
- The pandemic has meant billions in losses for movie theaters as they have operated for months without any revenue, raising the question of whether or not they will survive the coronavirus.
- Thanks to stay-at-home orders, streaming services have benefitted from an increased demand for content and seen a dramatic increase in subscribers and consumption.
- Although most studios cannot make movies and shows from home, animation has managed to successfully allow animators to create content from home, making them a surprise winner during this pandemic.
Katherine is a sophomore in the Global Management Program and intends to minor in History. Her interests in international business and markets inspired her to join BRB’s economics column to explore more about economics around the world. Beyond international relations, she also enjoys understanding how the political landscape affects markets and is excited to pursue these passions in BRB. As a San Diego native, she loves nice, sunny days and can be caught reading in the park; otherwise, you’ll find her binging some movies or shows.