The continued escalation of Coronavirus worldwide will continue to have a major impact on the global entertainment sector; major movie theatrical releases are being postponed, theme parks are closing, music concerts/theatre shows postponed and TV show production, particularly those with live audiences scaled back or cancelled/delayed. In addition, numerous major sports leagues and events have been suspended, providing broadcasters with major headaches.
As a result consumers will have limited options or desire to attend out of home entertainment experiences, whilst TV schedules could be left with gaping holes to fill, particularly for sports, but live/near-live prime time TV slots and late shows are also being impacted, or at least formats having to be seriously reviewed.
Couple this with an increasing emphasis to stay at home and travel bans, does this provide a highly unusual opportunity for the home entertainment industry? Whilst the word “opportunity” is used lightly, particularly as home entertainment companies are being impacted in numerous ways, pre-recorded home entertainment is likely to see a surge in viewing, particularly across digital platforms.
With consumers having more time at home and viewing options reduced, subscription video on demand (SVoD), catch-up TV services and transactional digital video services are well positioned to benefit in both an increase in engagement and potential new user uptake.
Premium digital video viewing behaviour is well established. Around two-thirds of US households now have at least one SVoD service, with this figure around half in the UK. “Service stacking” (taking more than one service) is now commonplace, with the average US SVoD household set to take around 3 services by the end of 2020, with this closer to 2 in the UK.
Futuresource’s Living With Digital survey suggests that strong momentum in SVoD subscription uptake in 2019 is set to continue into 2020. Whilst service churn will be evident, most SVoD subscribers say they won’t cancel their service in 2020 and over one-third of SVoD subscribers say they will take at least one more service in 2020. This figure skews even higher amongst those with 3 or more services already, indicating most consumers are not yet suffering from subscription fatigue. This positive momentum could be unexpectedly assisted by a (hopefully) temporary change in consumer lifestyle during the virus outbreak.
The “hot” service in the home entertainment industry continues to be Disney+. It is set to launch across key European markets on March 24th and went live early in India this week. The outbreak may well provide a further boost to its initial subscriber numbers, which could exceed 10 million in these markets during the course of 2020. It could also keep the momentum in existing launch markets, particularly the USA, helping reduce churn whilst attracting new, perhaps previously undecided consumers. In response to the current situation, Disney has added Frozen II to its Disney+ library just a few weeks after its home video release. This is unprecedented for a title of its magnitude and will undoubtedly attract new subscribers and keep existing monthly subscribers sticky. Free trials for Netflix, Disney+ and other services amongst current non-subscribers could see a rise, particularly as consumers worry about their personal finances.
Separately, Netflix has already become the de-facto SVoD service for many consumers in leading markets and could see its loyalty strengthened with existing customers whilst the impressive momentum experienced in the likes of Germany and France will be helped. Any uplift in subscriber numbers as a result of the virus would be felt outside of the USA. However, as with other entertainment services and content holders, uncertainty around potential production delays will be a concern.
Transactional digital video services could also benefit. With titles typically launched around 3 months after cinema, in the short term, digital sales and rentals of major movie releases in this window could receive a boost. Positioning on device/TV home screens and digital retailers would become increasingly paramount for these titles, especially against the backdrop of SVoD and other on demand options.
However, the postponement of key theatrical releases will have adverse impact on this sector in 2020, high profile new instalments from the Bond and Fast & Furious franchises are unlikely to witness a home entertainment release in 2020.
The unprecedented scenario has already seen the likes of Telefonica offer SVoD services and improved broadband for free to existing customers. Could we see the home entertainment industry also provide more unorthodox short-term alternatives to consumers to watch brand new, early release or otherwise delayed movies at home? For context, the crisis in China saw box office down almost $2 billion in the first 2 months of 2020. Vertically integrated companies such Comcast/Sky/NBC Universal are arguably well positioned to experiment with this.
Away from new release titles, it may be an opportunity to promote the wealth of older, library digital retailers have to offer. Curated campaigns such as “watch the classics you never got round to” or “revisit your favourite 80’s movies” may appeal to both casual and heavy movie enthusiasts who now have more time on their hands. However, the longer the crisis continues, consumers may look to lower cost, higher perceived value options.
Some consumers may also feel compelled to revisit their DVD/Blu-ray catalogue, whilst this isn’t necessarily a direct revenue driver, it may well help re-ignite a passion amongst lapsed users, once the virus has past.
The crisis also brings into light “The Battle for the Living” room, as discussed in Futuresource’s December 2018 report, which continues to be highly relevant today. As short-term consumer engagement spikes, which platform and devices will they use and what flaws will become apparent? Consumers could become acutely aware of the need for pan-service search and navigation, making the requirement for a “super aggregator” even more pertinent than previously.
Whilst the above is largely speculative, the crisis and uncertainty surrounding it will require entertainment companies to quickly evaluate alternative programming and release options, the likes of which we may never have seen before.
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