Can The Movie Industry Survive COVID-19?

With more people turning to streaming content at home as cinemas remain closed due to the pandemic, what does this mean for the movie industry?

For movie lovers, this year has been nothing short of disappointing as a number of highly anticipated releases such as ‘A Quiet Place 2’ and ‘Black Widow’ have been delayed. Even before the coronavirus swept the world, Hollywood was bracing for a bad year in the box office as more people trade the movie theater experience for the comfort of their own couch and streaming services. 

How badly has the movie industry been affected?

The Chinese government closed cinemas on January 23 following the viral outbreak,  which was just before the release of ‘Furious 9’ and ‘Mulan’. Other countries didn’t take long to follow in their footsteps, sending the box office revenues to a 20-year low, down around 60% compared to last March.

The closure of cinemas is driving some of the world’s biggest studios to change the way they see the industry “window”. This is the three-month time frame that exists between a theatrical release and when a movie is made available for rental or streaming devices. Universal was the first to allow movies to be available digitally the same day as their global release, starting with ‘Trolls World Tour’. The film made almost $100 million in three weeks through its digital sales which is more revenue than the original ‘Trolls’ 5 months in theaters. 

What companies have been hit the hardest
Some of the biggest cinema companies in the United States are suffering immensely and studios are looking at zero box office revenue for the foreseeable future. AMC Entertainment (NYSE:AMC) and Cinemark Holdings (NYSE:CNK) shares have dropped 74% and 70% respectively, over the past year. At the box office, revenue fell by 100% in the third week of March to $5,179 from the week before. 

Walt Disney Co (NYSE: DIS) has not only pulled big movie releases, but closed theme parks and halted cruise ships because of the viral outbreak. The company relies heavily on blockbusters as a key source of revenue and it is believed Disney will start putting their biggest films straight onto its streaming platform Disney+. For instance, its upcoming ‘Artemis Fowl’ movie is now a Disney+ exclusive.

Why is streaming so popular?

Streaming platforms like Netflix (NASDAQ:NFLX) were just short of breaking the internet, as millions of people are isolated in their homes and looking for entertainment. The coronavirus has undoubtedly boosted the demand for such platforms that includes Amazon Prime (NASDAQ: AMZN), and Apple TV+ (NASDAQ: AAPL) just to name a few. 

Netflix reported a record 15.77 million additional subscriptions during its first-quarter fiscal 2020 earnings report. The streaming giant also reported more than double its net income year-on-year from $334 million to $709 million. 

Disney+ also experienced a huge jump in subscriptions, hitting 50 million in just 5 months.  

What is the future of the movie industry?

Streaming has become a very popular way to watch television shows and movies, but does anything really compare to that premiere theater experience with popcorn in hand? As the coronavirus wreaks havoc, medical experts predict it could be at least a year before we have a vaccine. This could be a little bit too late for the movie industry as they may not be able to afford to keep the big screens off for that long.

It is likely that we will see more movies released closer to the cinema air date on streaming platforms or exclusives through platforms like Disney+ that skip the cinema experience altogether. It will be interesting to see if this style of release is able to be maintained or popcorn lovers will simply miss watching their favorite actors on the big screen.

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in stocks mentioned above. Read our full disclosure policy here.