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Thursday, October 22, 2020

Pandemic, Downturn To Cost Entertainment Industry $160 Billion In Growth Over 5 Years

The economic impacts of the lockdown and recession will badly stunt growth in the entertainment sector over the next five years, hitting theatrical exhibition and advertising the hardest, according to projections from Ampere Analysis released today. Streaming video, by contrast, is expected to see a double-digit boost to its growth as viewing habits accelerate their shift away from traditional media.

The add-on effects of the pandemic, lockdown and economic decline will together eliminate “$160 billion of growth” from entertainment, Ampere said. The theatrical business – already challenged by declining attendance, zombie malls, shifting viewing habits – will be hit hardest on a percentage basis.

“While the biggest impact will be felt in 2020 and throughout 2021, growth will be reduced each year for the duration of the five-year forecast period,” according to Ampere’s report. “While gross loss (the total amount of lost growth in dollar terms) will be greatest for the advertising sector, it’s also important to look at the relative impact pegged to the size of the sector. On that basis, theatrical will be hardest hit, set to lose $24.4 billion over the next five years, with its revenue growth down more than 11 percent over Ampere’s previous forecasts.”

In 2019, domestic box office was $11.3 billion, according to the National Association of Theatrical owners, down 4 percent from 2018. This year will be far below those numbers, with most theaters closed since mid-March and nearly all new films postponed for months to come.

Advertising as a whole will be hurt badly too, and in larger dollar amounts, Ampere projected, losing $40 billion in growth in 2020, and $41 billion in 2021, before beginning to recover.

That’s hitting both in traditional and digital advertising, as brands pull back amid the big economic downturn already in motion.

Today, for instance, the latest federal jobs report said another 2.4 million people filed for unemployment, bringing to nearly 39 million the number of unemployment claims since the pandemic struck.

The entire economy is looking at a gut-wrenching plunge in GDP, according to projections from half a dozen financial institutions and analysts, including Bank of America
BAC
, J.P. Morgan, and Goldman Sachs
GSBD
, the Wall Street Journal reported today. All those projections have pegged the decline at 39 to 40 percent for the quarter ending June 30.

McKinsey & Company, meanwhile, has said in recent reports that the pandemic’s impacts are effectively force-feeding five years worth of digital transformation into a mere eight weeks of real time, as work, play and everything in between is shoved into new modes of operation and expectation.

Amid the gloomy news, “the big winner,” according to Ampere, will be streaming video, which would gain 12 percent more revenue growth over the five-year period. Companies such as Netflix
NFLX
, YouTube, Tubi, TikTok, and Hulu are reporting huge jumps in viewership and, where relevant, subscribers.

Ampere said “a huge surge in streaming consumption and new subscriptions, benefiting subscription video-on-demand, broadcaster video-on-demand and other catch-up services” will drive the higher growth in streaming.”

The behavioral shift to streaming is unlikely to change, even if there’s a temporary post-lockdown backlash. That has huge implications for traditional broadcast networks and pay-TV providers, both of which are seeing audience share dropping rapidly.

The return of live sports may shore up some of those losses, but pay TV will still “lose significant value in what was already a challenging market structurally, representing around 4 percent of its previously forecast value,” according to Ampere.

The analyst also warned of the potential for knock-on effects over the long term. The delay of many theatrical releases this year, for instance, may create a glut of product in following years, leading to a pull-back in film production later.

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