The Cost to Hollywood

Broadway is shuttered, movie theaters are shut down, TV and films have stopped production, releases have been delayed or moved to digital, awards shows and major film festivals have been nixed or put on pause. And many industry pros say that even when things return to “normal,” Hollywood as we know it has changed forever.

Among the biggest film delays: Wonder Woman 1984, In the Heights, The New Mutants, Mulan, Black Widow, The Personal History of David Copperfield, The Woman in the Window, No Time To Die, Peter Rabbit 2, A Quiet Place Part II, Fast and Furious 9. Among the biggest event cancelations and delays: SXSW, the Cannes Film Festival, ComicCon, Coachella, the Olympics, the NBA‘s season.

The cost of these delays has been estimated to be as high as $20 billion.

Even before this public health crisis, the theatrical audience has been moving from theaters to home video. Now with more people at home, that trend has accelerated, with streaming usage up 60% according to Nielsen, gaming up 75% and internet usage so high in Europe, officials asked Netflix, Amazon, Apple and Disney to reduce the video quality of their streams to reduce the burden on overtaxed networks.

Some say that the virus is exposing gaps in digital strategy at major studios.

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“COVID-19 will expand the gaps between those lagging and leading in the transition to digital distributions and business models,” says venture capitalist Matthew Ball, former head of strategy at Amazon Studios. “OTT video services will surge, while pay TV loses its most valuable content – sports – and sees an accelerated decline in subscriptions and ad revenue. Parks and movie theaters are ground to a halt, while gaming companies hit new highs in usage.”

Others, like ViacomCBS, Endeavor and theater chain AMC Entertainment, that carry a serious debt burden, or Disney, which relies on theme parks and cruise ships for revenue, will see plummeting revenue. Cowen analyst Doug Creutz slashed his price target for Disney from $159 to $101 and for ViacomCBS from $25 to $17.

Meanwhile, others see hope after the Senate passed a $2 trillion relief package Wednesday night.

“With this agreement, movie theaters can look forward with confidence to re-opening and once again serving their communities,” the National Association of Theatre Owners said.

The package sets aside a $454 billion loan guarantee fund for distressed businesses.

“With this aid, movie theaters can get through this crisis confident in being able to re-open, knowing their vital, trained workforce is able to weather this pandemic and have jobs waiting for them when it is safe to reopen,” NATO said. “We are grateful for the work of Congress and the Administration and those in and out of the entertainment industry who have supported our efforts on behalf of this industry that is so central to our culture and civic life. We look forward to its quick passage in the House and signature by the President.”

Now, most studios are releasing new films digitally early, and putting them up for rental or digital download for about the price of a movie ticket or two. Some of the biggest have been Disney’s Onward, Sony’s Bloodshot and Warner Bros.‘ The Way Back, Universal’s Invisible Man.

But others still maintain that things will return to normal. Sony Pictures chairman Tom Rothman predicts: “There will be a great surge of emotional appreciation for collective experiences. That’s who we are, as human beings, and that’s who we have always been since telling stories around the fire in prehistoric times, and I think it’s primal. I think it’s going to remind people how much they love what they’ve missed.”