During this month’s HPA Tech Retreat, Variety Intelligence Platform (VIP) president and chief media analyst Andrew Wallenstein presented “The Third Wave,” the second VIP report on COVID-19’s impact on the media and entertainment business. “The Third Wave” analyzed the consumption habits of 23-to-49-year-old viewers, relying on data collected by VIP and the Trailer Park Group. “Perhaps it’s no surprise,” said Wallenstein, “that every available form of media and entertainment saw increases during the pandemic … but the biggest winner was streaming.”
The study looked at consumer hesitancy in leaving the home to seek entertainment in movie theaters or other venues. What it found, said Wallenstein, is that the levels of concern in October are nearly as high as they were in June. “That’s not good news for theater owners,” he said. “You could see some broader openings in 2021, but a true normal won’t happen for most of these businesses until 2022. With fears over virus variants, I would call this a fragile recovery.”
There’s a presumption that pent-up demand will create huge surges in all sectors of the M&E industry but it’s unclear how this will play out. Wallenstein noted that, although movie theaters have opened to some extent in most states, because New York and Los Angeles remained closed, studios have pulled back big releases.
“The impact on huge exhibitors has been incredible,” he said. “AMC has had to raise $1 billion to avoid bankruptcy and $1 billion in deferred rent. In the best case scenario, AMC will emerge but with massive, massive debt. This business will be in an existential crisis for quite some time.” He forecast that, “the business will consolidate … and the footprint of theaters will shrink over time.”
Box office also took a big hit. Although Sony had success with “Bad Boys For Life,” which brought in $420+ million just before the pandemic, “the pain was evenly divided among the studios.” “The deprivation may lead to a big bounce in 2021,” said Wallenstein. “But the bounce-back will be a significant reduction from 2019. You’ll never see the movie business come back to what it once was.” He also posed the question of whether streaming movies has “trained audiences not to come back to theaters.”
“I personally believe that’s the case,” he said. “The biggest blockbusters will still draw audiences, but not in the same way for the smaller films.”
Music concerts have also experienced considerable damage, he added. “It’s come to a screeching halt and no one knows when it will pick up,” he said. Artists have turned to live streams and drive-in outdoor concerts which, although not as profitable, are the best options. He also noted that Live Nation, the biggest company in the concert space, saw its stock crater. “But it’s back up at record levels,” he said. “Again, the presumption of a lot of pent-up demand. Bottom line, this sector isn’t going anywhere in the long term.”
He was equally bullish on theme parks recovering their groove. VIP plans to do another report on COVID-19’s impact on the industry after the pandemic subsides.