Strategic Management Case Study

Case - How Will the Pandemic Change the Entertainment Industry?Author Madeline Rae

Abstract

This case looks at changing business strategies in the entertainment industry as lockdowns brought on by the COVID-19 pandemic push television and film studios to adapt to the loss in revenue from closed theatres and venues, the disruption in production schedules, streaming technology, and new distribution models.

Learning Outcomes

Students should apply learning in strategic management, strategy transformation and implementation, and industry analysis to project how the pandemic might alter traditional entertainment models and discuss how studios can best adapt.

The Issue

Streaming services have saved the sanity of more than a few bored people in quarantine. By the middle of March live sports were cancelled, movie theatres were shut down, stay-at-home orders were issued, and people turned to their television for entertainment amidst the coronavirus pandemic. Netflix saw a boom in subscriptions, as did Disney+ and HBO Go, and 74% of U.S. homes are now subscribed to a streaming service. The endless supply of content on streaming services, however, is beginning to wear down some viewers anxious to be outside again. By the end of April, viewership on streaming services dropped, while those tuning in to live news increased.

Major events in the film industry, such as film festivals and world premieres, have been delayed or cancelled altogether. In terms of production, TV shows and feature films have had to halt filming or delay seasons. Late night shows, on the other hand, adapted to quarantine conditions fairly quickly, recording from the hosts homes, or special warehouses where the crew could be safe and socially distant.

Why Is It News?

Spring is usually a busy time for those in the entertainment industrytelevision networks release fall schedules and local theatres prepare for the summer blockbusters. Currently, few networks have released full fall schedules, although CBS is leaving its own fairly unchanged, banking on the comfort and familiarity of its brand to bring audiences the shows they know in a time of uncertainty.

Universal Studios released Trolls: World Tour straight to on-demand, forgoing theatrical release, and while the studio claimed it was successful, figures have yet to be seen on how profitable a digital-only release can be. Most summer movies pushed their theatrical release into the fall or even into next year, while Paramount Studios simply sold its comedy The Lovebirds to Netflix.

One major factor in determining the delay-or-stream dilemma, however, is the Academy of Motion Picture Arts and Sciences, which is responsible for awarding Oscars. Films must be released in theatres to be considered, and awards often lead to increased revenue. However, the Academy has not yet decided if its next awards season will loosen the rule on theatrical releases or if it will combine the 2020 and 2021 film seasons, which may push more studios to delay release. Moreover, most major film festivals have been cancelled, meaning one of the main avenues for independent productions to secure major distribution to theatres has been blocked. Until awards guidelines are made clear, many in the entertainment industry have been hesitant about all-digital release for fear of losing awards eligibility and revenue.

When theatres reopen, some wonder if they will remain profitable in a socially distanced world; enforcing social distancing by limiting ticket sales may not collect enough revenue for movies to break even on their production costs. A streaming subscription, or even buying movies on-demand, can be better options for many Americans, but they dont make as much money as feature films shown in theatres, as current losses are clearly showing. And after months of premieres being delivered via streaming platforms, whether audiences will even be willing to return to theatres remains to be seen.

Case Study Questions(Each question is worth 5 marks)

1. Consider the drop-off in streaming numbers the longer lockdown orders last. Is there a ceiling to how much content audiences are willing to watch? How should this inform strategy for streaming platforms after the pandemic? (500-650 words)