The long-term impact of the pandemic on Media Giants???? ??
?? Top story of the week??
(Disclaimer 1: This is food for thought and my private perspective. I’m not and probably never will be an academic researcher or journalist, timings are estimated by my personal judgement.)
The entertainment industry has been under high scrutiny since the beginning of the pandemic, torn between considerable opportunities - historic numbers for at-home media consumption - and unavoidable challenges - production/broadcasts postponed or cancelled, leading to spending reallocations or cancellations of budgets/retainers by advertisers and a subsequent drop in revenue for those companies.
In all sectors, major and high-profile studios, record labels or entertainment companies face an increasing challenge to adjust their releases while production has completely stalled, especially now that they are deprived of most of their usual distribution and promotion platforms & outlets.
Releasing Blockbuster content - be it a feature film, a record release of a triple A artist or a major Esports event - is a major revenue and bottom line driver with the potential to make a dent in pop culture and dominate the narrative for a certain period. This strategy represents
“making disproportionately big investments in a few products designed to appeal to mass audiences.”
Releases are postponed and pushed back, as major outlets like movie theaters, late night TV shows or Esports events are either cancelled or produced without guests or audiences, losing attractivity and drawing less eyeballs. The absence of these blockbusters means more time spent on other types of entertainment - and users are flocking more to music, livestreams, tournaments and productions that are D2C, low & mid sized budget productions with short content life cycles (e.g. independent music).
The main question is: how will major entertainment companies adapt their production and content-release schedule, and what are the variables that control the timeline?
From our understanding of the strategies of the Blockbusters makers of today combined with the impact COVID-19 has on production cycles, we tried to illustrate the current situation in the graph below:
Key
As Blockbuster content is wrapped between 3-6 months (across media, across outlets), before being released, the main two areas are:
- When (theoretically) more releases are scheduled & released then supply is produced.
- When production is back to its fullest but releases are scarce due to the prior phasing.
Variables:
- Soft production: how much can the companies prep, produce or edit while in lockdown (different productivity across sectors e.g. Live Entertainment to Gaming).
- Recovery: when will they be allowed to ramp up production and when will the promotional outlets serve their purpose again (Late Night show + Guests).
- Delaying Releases: how much Blockbuster content can be delayed without a) hurting the release schedule and b) threatening revenue projections.
→ If you move these three variables in the chart, the curves would bend or straighten respectively.
Implications:
- Blockbusters cycles imply staggering releases; as most studio activities have temporarily shut down, we see a downturn in finished products.
- Production will start up again at soft speed with relaxation of health regulations and innovations in the working processes. Companies will stretch their catalog or decide to go straight to d2c (see Trolls World Tour’s success) to capture revenue.
- If the backlogs run empty, people will look for entertainment somewhere else. It’ll be time to bend to the rules and get creative (see ESPN streaming esports and reruns to face live sports cancellations).
- Finally, full return to pre-COVID production rates and normal rhythms of releases, maybe preceded by a bump upon theaters, esports arenas and concert halls reopening (Fast & Furious 9‘s release is already put back 11 months).
Final Thoughts
Waving goodbye: Non-digital Players of the Blockbuster value chain are feeling the heat more than anyone else, especially if suppliers decide to cut the middleman out and run with the revenue: AMC, the world's largest theatre chain, announced they would not play movies from Universal after their rogue move to go d2c with the Troll movie (and earn $100Mio.) .
Survival of the Fittest: if the lockdown is longer then expected companies will survive if they
- a) have a strong cash position
- b) have a strong catalogue contribution to top & bottom line
- c) are forced to bend to the new normal due to a lack of a) or b)
Prediction:
Entertainment companies (across the board) that are forced to release Blockbuster content without the major promotional support and in non-traditional ways (scenario c) could face economic pressure and a devaluation of their assets.If the hold-out is longer than their balance sheet can take, expect these companies and their IP to be a lucrative M&A target for big corporates and private equity companies in the sector.
This could especially apply to mid-size companies in growth sectors like digital live entertainment and esports, as these companies still struggle with profitability, hold under- or overvalued assets and will have an urgent need for cash injections.
Questions:
- Is there a risk of market over-saturation once the lockdown is lifted and all companies release their products at the same time?
- Will the lack of platforms such as the box-office, physical & digital venues or promotions tours (talk-shows and so forth) be the downfall of some of these industry giants as consumption patterns change drastically?
- If it were to last, how much would their core business have to change for them to really adapt to the new normal?
(Disclaimer 2: In this analysis we are looking at Blockbuster content, which is the opposite of long tail: knowing that the long tail could see major pick up (growth of Twitch channels and Instagram live etc.) we focus on the implications that COVID-19 could have for the production, distribution and promotion of capital and production intense audio and video content.)
P.S. big thanks to @Louise for a) helping to sort my thoughts and b) making sure the structure and verbiage actually make sense.
Links:
Coronavirus: Fast and Furious 9 film release put back by 11 months
Esports Fill the Void as Coronavirus Shuts Down Traditional Sports
https://www.dhirubhai.net/pulse/lockdown-listening-independent-artist-mark-mulligan/
https://harvardmagazine.com/2014/01/the-way-of-the-blockbuster
?? Co-Founder || CEO @Aitek Labs ?? Partnerships Activation || Communications & Brand Strategy @Freelance
4 年Great insights - thanks! Would be interested to hear your opinion on what do you think about collaborations between different industries and their potential production for a lockdown period and post-covid entertainment world. Do you think that could be a lifeline for a smaller/ mid-size companies?? There are some examples already of synergies between gaming industry and music (Scott Travis performance stream on Fortnite) or nightlife industry and tech companies (Ushuaia/ Hi Ibiza VR clubs development with SensoriumXR) etc.
A Website Studio? & Off*Work
4 年Good and important read, specially during these times where social broadcasting has gained such momentum.