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COVID-19 outlook on the US media & entertainment industry

Recover: Insights from The Center for Technology, Media, and Telecommunications

There are four key strategic issues that media and entertainment organizations should consider, to recover from the crisis while laying the foundations for a thriving future.

Positioning US industries for a stronger future

The continuing COVID-19 crisis is creating enormous uncertainty and change—and questions with no obvious answers: Which changes will persist? What will the new world look like? How will people and organizations adapt? Even as US technology, media, and telecommunications companies focus on responding to the global pandemic and its immediate repercussions, they hopefully will soon need to pivot toward recovering from the crisis and setting themselves up to thrive in the next era. Sudden change can loosen old foundations, creating opportunities for greater progress. Companies should reassess what and how they sell, how they operate, and how they can forge stronger and more direct relationships with consumers.

This series will frame a discussion and explore what’s changing, what strategic issues to consider, their impacts, key actions to take, and questions to ask. There are many different scenarios, and we may not have all the answers yet, but we can act with foresight to better position ourselves for a stronger and more resilient future.

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Key takeaways

To recover from the crisis while laying the foundation for a thriving future, media and entertainment organizations should consider four key strategic opportunities:

  • How to adjust business models and technologies for better consumer engagement
  • How to redefine relationships with advertisers during the spending pullback
  • How to reinforce content production and distribution to be “future-proof”
  • How to prepare for new consumer behaviors that may become permanent

Media and entertainment go off script

The evening of March 11 played out like a disaster movie scripted by a Hollywood writers’ room. Within less than an hour, the National Basketball Association halted all games after a player tested positive for COVID-19, the president of the United States announced a Europe travel ban, and actor Tom Hanks tweeted from a movie set that he had contracted the coronavirus. This sent shockwaves across many in media and entertainment (M&E) and led to the shutdown of hundreds of TV and film productions throughout the United States and the world.

Not long after, governments at every level ordered cinemas, live entertainment venues, and theme parks to close—and those allowed to remain open found themselves with few or no customers. And there are no reopening dates scheduled: A typical disaster movie ends with a resolution after two hours, but the broader reality for the M&E industry is a considerably longer period of triage, pragmatic continuity, and contemplation of the new normal, whatever that might look like. M&E companies rely heavily on positive consumer sentiment and social activity, so a disruption that keeps people at home—either voluntarily or by decree—is almost an existential challenge.

Making production sets, live venues, theaters, and theme parks physically and psychologically safe for employees and consumers will be a significant challenge. Some M&E sectors are better placed than others to endure the changes driven by the COVID-19 crisis, but many were already struggling with segments facing structural decline. This disruption will likely exacerbate those challenges.

Amid continued transition to subscription-based models, advertising remains important to M&E segments, and the rapid spending decline represents another challenge. Advertisers will surely resume spending, but the question is not just when, but also how and where. Additionally, new physical limitations threaten transactional revenues, especially from big-ticket items like live performances and theme parks. Finally, the road to recovery will likely hinge on the health of the broader economy. Depending on how soon the virus is contained, Deloitte’s US Economic Forecast for Q1 2020 sees a 50 percent probability of a recession and a 30 percent chance of a financial crisis. Even after employers begin to rehire millions of those whose jobs have vanished in recent weeks, the aftershocks could affect how much consumers are willing to spend on movies, live shows, vacations, and even subscription services.

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How to recover stronger than ever

M&E companies have made significant job cuts and business changes to survive the initial disruption due to the COVID-19 crisis, but as they transition from response to recovery, they can develop strategies that can position them to be more successful after the pandemic subsides.

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How to thrive in the next era

The recovery phase will likely require M&E companies to have the determination to confidently move forward. But to thrive, companies may need to break old models and build new ones that support a return to growth. Many content creators are celebrated for their rich heritage and connection to a romanticized era. This crisis is an opportunity to preserve the best of the old era while moving forward to imagine and create a renewed industry.

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Rebooting and rewriting media and entertainment

With consumers re-evaluating and experimenting with how they live, work, and play because of the COVID-19 crisis, the imperative for robust digital platforms, mature direct-to-consumer connections, and innovative content has never been clearer.

As much as venues reopening will likely be a positive signal for the industry—and for society in general—things will not return completely to normal right away. All M&E companies should ensure that their operational plans and longer-term strategies account for an extended period of adjustment.

Companies that rely on physical experiences and spaces will likely be challenged to reinvent their practices and content to ensure they are more agile and prepared when the next crisis eventually comes. Doing so can unlock new opportunities, capabilities, and experiences that can expand revenues while building resiliency.

As many M&E organizations respond and recover, they are being forced to build a new plane while flying the old one. And the pandemic has only exacerbated many structural challenges and trends that companies already faced. Leaders should address those and determine how to create a new future in which M&E companies can grow and thrive. The chance to rebuild such a mature industry is rare. M&E leaders should seize the opportunity.

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