Coachella backed up. Disneyland shut down. James Bond does not return as planned to theatres. Shows like Good Morning America don’t film to crowds in the theatre. Those such as, The Amazing Race, stopped production. The NBA and other sports leagues had their seasons suspended. They postponed the iHeartRadio Music Awards. And the Summer Olympics 2020 will no longer be celebrated in 2020.
Thousands of people around the world have died from the potentially lethal virus in just three months of the new year and many more have been infected, including prominent names such as Tom Hanks and Rita Wilson, Idris Elba and many others.
Despite no cure or vaccine, a rapidly growing death rate and the number of confirmed cases, the epidemic has triggered alarm around the world. It has spurred plummeting stocks, closing schools, travelling to halt, and flocking millions of people to shops to clean the shelves of products such as toilet paper and hand sanitizers. Needless to say, the influence of this pandemic is being felt around the world and in nearly every way, including over in Tinseltown, where film releases, tours and cherished annual events face a domino effect of cancellations and postponements.
Hollywood funds more than 2 million jobs and 400,000 American businesses; English film and television are worth about £ 60 million a day to the UK economy. Countries such as China are also taking bold measures to improve creative efficiency.
The industry is on the brink of the “biggest change in Hollywood history.”
First, the business model changes from distribution by third parties and single-ticket sales to management distribution and recurring revenue. It is demonstrated from investments in SVoD infrastructure, where a single film or TV show is rarely a profit-driver; instead, recurring subscriptions (and, in some cases, advertisement revenue) generate value.
As a result, media outlets no longer tailor releases for set schedules, primetime TV slots or common holiday weekends. Rather, the goal is to improve interaction, thus increasing the retention of users and the visibility of content data. The corollary is a rise in demand for propitiatory content.
Individual theatres are expected to have a major effect. Well before the pandemic, studios would still offer exclusive rights to larger chains or orders that smaller outlets must block screens irrespective of demand. Some warn of contraction among theatre operators. In Italy, for example, the Art House and the Indie Distributors are calling for government intervention to protect the dominance of the market.
Many operators respond by enhancing customer targeting. “We have a good loyalty system with a lot of relevant consumer data that enables us to understand what our customers want to watch and the cinemas they want to visit,” says Gianchandani. “We use technology that incorporates this data into our communications systems so that we can recognise all the points of interaction that consumers have with the theatres in their everyday lives.”
Consolidation will provide economies of scale for theatre owners, but it also improves the largest film studios. Despite fewer films available, blockbuster franchises are taking an increasing share of box office sales.
The share of revenue attributed to franchises rose from about 30% in the 1980s to 40% today.
Disney plays a larger role in the development of franchises:
Since 2000, the share of box office revenues earned by the big six has risen by more than 10%; Disney’s share over the same era has more than doubled, with the highest share in the last decade.
It has knock-on effects on growth. COVID-19 has made film production more expensive due to higher health and insurance costs. Private studios can find it more difficult to raise money. This may have the unintended effect of raising the diversity of film material – a concern that has grown since Disney bought Marvel in 2009.
Hollywood likes an underdog, but it’s not yet time to write off the film industry. There is plenty of space for growth – particularly new revenue based on IP content, such as video games, toys, books and theme parks.
The sector can still have its fairy-tale ending.