The show must go on? The entertainment industry during (and after) COVID-19

Abstract

This article outlines how the COVID-19 pandemic has influenced different domains of the global entertainment industry regarding the physicality, synchronicity, and digitizablity of businesses. Physical location-based businesses with synchronous content delivery suffer from the outbreak; online businesses largely benefit from the lockdown situation. Continuity of impact is influenced by two interrelated factors: (1) whether there are explicit alternatives for consumers and (2) whether the altered consumer attitudes and behaviors during the pandemic become habitual, transformative, or ceased. We reach two points of comparison: the direction of the COVID-19 impacts (positive vs negative) and the continuity of the changes (continuous vs temporal). Our analysis yields four different scenarios that help us take a view of the unprecedented effects on the entertainment industry with a more comprehensive perspective: disastrous (negative and continuous), silver lining (negative and temporal), fortuitous (positive and temporal), and triumphant (positive and continuous).

Keywords

COVID-19 digitizablity entertainment industry games movie online streaming physicality synchronicity

Introduction

The COVID-19 pandemic has disrupted the whole economy, impacting almost every industry. Extant literature has identified and examined the effects of the pandemic on different socioeconomic domains such as retailing (Roggeveen and Sethuraman, 2020), tourism (Gössling et al., 2021), and publishing (Guren et al., 2021). Among others, the entertainment industry¹ across the global markets confronts the harsh reality by its sensitive-to-environment nature. Indeed, the fluctuation is omnidirectional, provoked by dramatic changes in consumer attitudes and behaviors. The changes have shocked the value chain in the industry, from production to distribution channels, but with different directions and magnitudes (Vlassis, 2021).

For example, all movie theater players across the world have been experiencing a demand cliff with mandatory shutdowns or moviegoers’ avoidance across the world. The shutdowns have affected the relationships between the movie studios and theater players. In December 2020, Warner Bros. announced that it would release 17 blockbuster lineups for 2021, such as The Matrix 4, Godzilla vs. King Kong, and Dune, to its brand-new online streaming service, HBO Max, at the same time as the theater release (Alexander, 2020). Warner Bros. has made this policy in response to the sharp decline in box office revenue during the pandemic. After the announcement, the stock price of AMC Entertainment, the leading movie theater chain operator in North America, plunged. Movie theater owners in other countries have experienced similar situations (Kim, 2021).

In the meantime, some-not many-companies are riding a wave of opportunity. For example, amid the market meltdown, Netflix has been a standout stock in the sector. The streamer’s shares were up 12.5% from January 1 through March 10, 2020, compared with the S&P 500’s 10.8% drop over that period (Lang et al., 2020). Disney+, Disney’s online streaming platform launched in November 2019, has dramatically expanded its membership base during the pandemic, while its theme park and resort divisions desperately suffer (Spangler, 2020). The point here is that COVID-19 is not a threat to all players, even though many players’ lives are at risk.

Extant pioneering research has examined the different impacts of COVID-19 on the global entertainment industry. However, the systematic assessment is lacking in both academic literature and industry practices regarding how the effects of the pandemic are different across the domains (Changsong et al., 2021; Nhamo et al., 2020; Sim et al., 2022) and how they are intertwined with the ongoing changes in the industry (Boyle, 2019; Hutchins et al., 2019; Johnson and Woodcock, 2019; Ryu and Park, 2018; Sanson and Steirer, 2019; Spilker and Colbjørnsen, 2020). We argue that the physicality, synchronicity, and digitizablity of entertainment media may affect the directions and magnitudes of the impacts led by the COVID-19 pandemic. For example, physical location-based entertainment with synchronous activities, such as movie theaters and live performances, suffers from the outbreak. However, digitalized entertainment media, such as video games and online streaming platforms, largely benefits from the lockdown situation.

In addition to the physicality, synchronicity, and digitizablity of entertainment media, what other components should be considered and analyzed to wholly grasp the situation? What will consumers’ behaviors look like when the pandemic is over? We need to consider the ongoing transformation progressed in the sector. It would fundamentally affect entertainment consumption and determine whether the pandemic could catalyze a persistent impact. Thus, one can reach two points of comparison – the direction of the COVID-19 impacts (positive vs negative) and the continuity of the changes (continuous vs temporal) – that yield four different groups of businesses that help us understand the unprecedented effects on the entertainment industry more comprehensively.

Defining four groups: disastrous, silver lining, fortuitous, and triumphant

The direction of the pandemic’s impact on players is highly related to the nature of their business – physicality or offline synchronicity matter in this regard (Hellén and Gummerus, 2013). Next, continuity of impact is influenced by two interrelated factors: (1) whether there are explicit alternatives for consumers and (2) whether the altered consumer attitudes and behaviors during the pandemic become habitual, transformative, or ceased (Wood and Neal, 2009). For example, the value from live performances of seeing celebrities in person cannot be replaced by any other digital channels, so the behavioral change is likely to be temporal. Using online streaming services for watching movies is likely to be habitual in the long term, as it is repetitive consumption and supports a higher level of autonomy and flexibility. With the two criteria, direction, and continuity of the impacts, four different scenarios can be identified: Disastrous, Silver Lining, Fortuitous, and Triumphant (Figure 1).

Figure 1.

Four scenarios for entertainment industry players during (and After) COVID-19.

Disastrous: business with physicality and explicit alternatives online

Players in this group based on physical locations and offline attributes inevitably have the most challenging time during the pandemic. The players provide services with explicit physicality and synchronicity while confronting the competition with the digitalized alternatives. Making it worse is that the situation can be persistent and may be irreversible. For example, AMC and Regal, two of the largest movie theater chains in the United States, said they were closing their venues starting March 17, 2020, for at least 6 to 12 weeks (Adgate, 2020). ComScore reports that for the weekend of March 13–15, 2020, the domestic box office was $54.7 million, a decline of 46% from the previous weekend and 60% from 1 year before. It was the lowest-grossing weekend in 20 years. Consequently, the National Association of Theater Owners (NATO) asked the federal government for support during the pandemic of the 150,000 people who work at and for movie theaters (Verhoeven, 2020). In Italy, before the closure enforced by the government, box office tracking estimated a 94% drop for the weekend of March 6–8, 2020, compared to the same period in 2019 (Grater and Tartaglione, 2020).

Before the pandemic began, the continued popularity of digital alternatives had already impacted movie theaters. The growing popularity of online streaming services such as Netflix, Amazon Prime, and Hulu expanded the territory of digital media in the United States and globally. The transformation was accelerated in 2020 with Disney+ and Apple TV+, along with the second-quarter launch of HBO Max. The international theatrical market growth was already flattened with an increase of merely 3% in 2018, reaching $30.8 billion. In the North American market, apart from the pandemic, the theatrical box office in 2019 was $11.4 billion, a drop from the record-high $11.9 billion in 2018. As more cities mandate that theaters and other public spaces close or even enforce lockdowns, a skyrocketing increase of online streaming may be catalyzing the beginning of a new era: the dark age of theaters (Dockterman, 2020).

The recent surveys by McKinsey echo that consumers in most countries, even where the pandemic was notable, show a higher intent to continue replacements for in-person activities at public spaces like going to the mall (vs online shopping) (Bhargava et al., 2020). Looking forward to the ‘new normal’, consumers are hesitant to resume substitutable in-person activities. Also, when a newly adopted behavior becomes a part of a routine, the likelihood of abandoning it decreases. The movie theater (vs. online video streaming) is only one case.

Silver lining: value from ‘real’ experience over digital alternatives

Live performance is another victim of the pandemic, with physicality and synchronicity at the core of its characteristics. Most large gatherings, including concerts, conferences, and exhibitions, were canceled or postponed. For example, the world tour of BTS (Bangtan Boys), a Korean boy band, underwent schedule changes due to coronavirus concerns (Canter, 2020). Their latest album, Map of the Soul: 7, has reached $4.1 million in sales, making it the best-selling album in South Korea. Their previous tour, ‘BTS World Tour: Love Yourself’, ran from August 2018 to April 2019 and won the Tour of the Year award at the 2019 American Music Awards. The new tour was expected to rewrite the history of live performances, but the event was canceled due to the pandemic.

However, unlike movie theaters, the live performance sector will be back on track when everything returns to normal. Here is the reason: from the consumer perspective, digital alternatives cannot directly replace their experience at live performances, which means the value from digital clips is not as worthy as that from ‘real’ experience in live concerts (Hellén and Gummerus, 2013). In other words, continuing the alternative behavior provides less significant psychological benefit to consumers, and we rarely had digital concerts before the pandemic, unlike the frequency of watching movies.

The demand for concerts can be flattened due to the lack of supply and the necessity of social distancing, but it may not be allocated to other alternatives. From the production side, the music labels and artists have no paralleled alternative that can generate revenue compared to concerts. Thus, live performances can be a target for ‘revenge spending’² and will be on the rise again after the pandemic. Live Nation is preparing for the next step by offering an attractive option for the ticket holders of canceled shows to receive a credit of 150% of the original ticket price that can be used in the future (Kiefer, 2020).

Fortuitous: unwittingly winning, but temporarily

While there has been a growing impact from COVID-19 on the game industry, most game types are unwitting beneficiaries of the pandemic. This entertainment media is mostly free from physical restriction and can be consumed in a non-synchronous manner and through different digitalized channels. Steam, a video game digital distribution service launched in 2003, has seen the concurrent user record, presumably linked to the sheer number of people self-isolating or staying at home due to coronavirus concerns, this time seeing more than 20 million users playing games simultaneously (Olson, 2020). China has also seen a spike in mobile game use, to the point that Honor of Kings (Tencent) and Game for Peace are seeing downtime due to server overload (Yeh, 2020). Looking specifically at Honor of Kings, China iOS revenue during the 17-day Lunar New Year period (January 20–February 9, 2020) was 44% higher than revenue during the 17 days immediately prior.

However, the increase in game playing is likely to be temporary in this uncertain time. Unlike other home entertainment sectors, the customer base for games is not large enough, although the pandemic could expand the base to some extent. The increase might be led by the extended playing time of the existing user groups rather than newly acquired users. It may not be easy to capture the new user groups’ attention once they have returned to normal. The end of the pandemic should affect the increased playing time of the existing users. Thus, the impact of those quarantine periods cannot last for a longer term. As long as there is no herding or social contagion, the continuity of impact will be limited.

In the same surveys from McKinsey, compared to the countries still under stay-at-home restrictions, Chinese consumers tended to shift their time away from indoor leisure activities toward working (Bhargava et al., 2020). After the pandemic, people may increasingly spend less time on games and other entertainment content and spend more time in learning and physical exercise without any outdoor activity restrictions.

Triumphant: proposing the irreplaceable value in a stable long-term position

Almost all types of online video consumption are skyrocketing during the quarantine periods for COVID-19, similar to the gaming media. This sector is virus-proof, with virtually no exposure to epidemic-related revenue declines. More importantly, video streaming was not invented during the pandemic and was already being used by a fraction of users (Lotz, 2019). Streaming services stand to benefit if the situation worsens and people avoid going out. For example, Netflix has plenty of original content on the service and in the pipeline amid a shortage of live events (e.g. sports, performance) (Swartz, 2020). Disney’s new streaming service has almost doubled its global subscriber numbers to 50 million since the coronavirus outbreak took hold in February, as lockdown conditions prove a boon for streaming services. Disney+, which launched in the U.K. and most major western European markets earlier in 2020, with hits including the Star Wars spinoff The Mandalorian, has signed up 50 million subscribers just 5 months after launch (Sweney, 2020).

The COVID-19 restrictions have dramatically changed watching habits, but in the same direction as they proceeded for a considerable time. During the epidemic, people may find the value of those online video platforms compared to watching movies in theaters. They provide more mobility and flexibility in choosing what to watch as well as where, when, and how. Moreover, studios are trying to rapidly calculate how to cut their losses by breaking their theatrical windows. In addition to the Warner Bros. case mentioned in the introduction, Universal also announced that it would offer its mid-budget movies, such as Emma, The Hunt, and The Invisible Man, to stream for $19.99 (Dockterman, 2020). Studios have struggled for years to lure moviegoers to theaters to see mid-budget movies. If other studios follow, this could undoubtedly help cement their place on streaming services. As the pandemic continues, people are turning to the habit of watching (new) movies, implying theater attendance will never bounce back to the levels it once was.

Not surprisingly, the usage of online streaming has increased rapidly across most countries during the pandemic (Bhargava et al., 2020). Moreover, among all types of entertainment consumption, online streaming time is expected to be less influenced when the dust has settled. While consumers in the relieved areas allocated less time for future entertainment consumption, the degree of decrease was smaller for online streaming (−1% to −14%) than other activities such as movies or live TV (−15% to −29%) (Bhargava et al., 2020). This observation may also be related to the fact that online streaming services, with their mobility and flexibility, are customized for use in commute or spare time.

Future prospects and suggestions

We aim to add knowledge to the literature on the effects of the COVID-19 pandemic on different socioeconomic domains by systematically analyzing the effects on the entertainment industry across the world (Changsong et al., 2021; Kim, 2021; Vlassis, 2021). We propose that physicality, synchronicity, and digitizablity of entertainment sectors may drive the directions and magnitudes of the effects, in conjunction with the consideration on the ongoing transformation progressed in each sector, from a long-term perspective (Boyle, 2019; Hutchins et al., 2019; Johnson and Woodcock, 2019; Ryu and Park, 2018; Sanson and Steirer, 2019; Spilker and Colbjørnsen, 2020).

People increase their time- and wallet-share online in the pandemic. This is a considerable challenge (or an opportunity) for every player in the entertainment industry, whether it is providing their products online or offline. Specifically, physical distancing requirements during the COVID-19 pandemic have spurred an increase in online streaming. Streaming platforms can better serve customers by increasing access to their services, creating personalized offerings, and adapting the way they deliver content, which may accelerate to form consumers’ watching habits. Also, those players must not hesitate to explore consumers’ unmet needs and unrealized desires. Companies that do so can build lasting customer relationships and put their businesses in a more robust long-term position (James et al., 2020).

Conventional strategic thinking and approaches will not be helpful for planning the next ‘new normal’ after the pandemic. They need to experiment with agile practices from planning and development, distribution channels, and marketing to a business model. To do this, they must identify which behaviors can be sustained or changed after the pandemic. In any case, online can be a more significant channel for content delivery and consumer engagement, so the players need to develop adequate digital strategies by proactively adopting technologies and initiating hybrid business models embracing online and offline options. Specifically, players in the Silver Lining (or Disastrous) group should adequately respond to the longer-than-expected pandemic situation. For example, BTS, who inevitably canceled their world tours, virtually brought their fans together for? ‘Bang Bang Con’, through their official YouTube channel during a weekend of April in the period of social distancing. The nearly 24-hour online streaming event gained 50.59 million total views and 2.24 million concurrent audiences at its peak from 162 different regions (Canter, 2020). Later, they held a paid-for live streaming concert on June 14, 2020, which drew in 756,600 fans from over 100 countries (Millman, 2020). The single online streaming concert generated around $20 million in ticket revenues.

These new attempts create new markets beyond temporarily substituting (offline) live performances. Such newly emerging online content in the pandemic is expected to continue to expand and settle as a new category of online streaming content, adding more value to the ‘digitalized’ entertainment industry.

Footnotes

Funding

The author received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Sunghan Ryu

Notes

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