Where did Disney and Live Nation’s missing $10 billion go?

In both economic and pandemic terms, we are in a relatively quiet period compared to the first half of the year. COVID-19 is at much lower levels in most countries and there are multiple sectors, such as housing and auto, that are reporting booms. These positive indicators will likely be both a pre-recession bounce and the lull before COVID-19’s second peak. However, there is a crucial subtext here, which is that one sector’s loss is often another’s gain. COVID-19 saw winners and losers, as any post-recession recovery is defined by ‘scarring’ where some companies and formats build where others have failed. For entertainment companies that lost revenue during the first half of the year, the question is whether they will regain that revenue or whether their lockdown legacy will be a long-term contraction.

Live Nation and Disney (because of its theme parks) were two of COVID-19’s biggest and highest-profile entertainment company casualties. Live Nation’s revenues fell from $3.2 billion in Q2 2019 to $74 million in Q2 2020, a 98% decline. Disney’s fall was less in relative terms (-38%) due to having a diversified business but more than double Live Nation’s loss in actual terms. Between them, Disney and Live Nation lost nearly $10 billion of revenue which can be bluntly equated with $10 billion of consumer entertainment spend that went unspent in Q2 2020. The big question is whether that spend remains dormant, waiting to be tapped when doors open again, or has it gone elsewhere – and if so, can it be won back.

The lockdown winners were companies that could trade on consumers being cooped at home: games, video, home shopping, video messaging etc. Some of these were stop-gaps that consumers turned to in order to fill the void; others represent long-term behaviour shifts. Here are some of the places consumers shifted their spend, and how it might impact recovery for entertainment businesses:

Home improvements: One of the areas to see strong lockdown growth was home improvements – people stuck at home staring at the DIY jobs they had always meant to get around to doing and now had both the time and the money to do them. Home Depot saw its Q2 2020 revenues increase by $7.2 billion, nearly three quarters of that lost Disney and Live Nation revenue. Obviously, these are not like-for-like shifts as different geographies are involved, but the direction of travel is clear. The beauty of the home improvements business model is that there is always another room to do, another project to start. The risk for entertainment companies is that a portion of these new home improvers may have got the DIY bug and will have less spend to shift back to entertainment.

Home shopping: Amazon was a huge lockdown winner, growing quarterly revenues by 42% compared to 2019, representing an increase of $38.3 billion. Those revenues include, among other things, its cloud business, which rode the wave of many of lockdown’s other success stories. Additionally, the shift to home shopping has been pronounced. Amazon’s growth has extra implications for entertainment companies. Its subscriptions were up 29% which largely refer to Amazon Prime, which of course comes with music and video bundled in and will in turn compete directly with pure-play propositions like Spotify and Netflix. This will take on added significance during the recession: when cost-conscious consumers are forced to cut back on spending, an all-in-one entertainment bundle that includes home shipping looks a lot more cost effective than a handful of standalone subscriptions. Amazon Prime is not recession proof, but it is certainly recession resilient.

Changing of the guard: Some of most interesting shifts are actually within entertainment. For example, AMC cinemas saw quarterly revenues fall by a catastrophic 99%, representing a quarterly loss of $1.5 billion while over the same period Netflix gained $1.3 billion. Again, the geographies are not directly comparable but the direction of travel is clear: old video being replaced by new video. A similar changing of the guard is happening in digital advertising. Alphabet, the powerhouse, saw revenues fall by 2% while Amazon saw its ad revenues grow by 40%. Turns out that advertisers will pay a premium to reach customers that are one click away from a purchase. Who’d have thought it…

The list of examples of lockdown shifts goes on and on. In fact, so much so that MIDiA is currently working on a major new piece of research exploring these shifts and what the long-term implications are for entertainment businesses. We’re calling it ‘Post-Pandemic Programming’. There will be a series of in-depth reports for clients and also a webinar and podcast mini-series. So, watch this space!

But returning to the above findings, the key takeaway is that companies that lost entertainment spend during lockdown should not assume that this spending is waiting in consumer’s bank accounts, ready to be spent as soon doors open again. Pent-up demand will ensure much of it will but some of it is probably gone for good, allocated to new habits developed during lockdown but that will persist long after. This is not to say that those companies cannot return to previous heights, but to do so they will need to unlock new spending from new customers. Which may not be the easiest of tasks during a global recession.

The COVID Bounce: Part II

In their early stages, COVID-19 self-isolation measures have quickly created new consumer behaviour patterns, oriented around four key axes:

  1. Communication
  2. Entertainment
  3. Information/news
  4. Education (for children at home)

COVID-19 top apps downloaded midia research

The demand for the first two of these behaviour groups is clearly illustrated by the mobile apps that consumers are downloading. Across the Apple App Store and Google Play Store, the top 10 most downloaded free apps are dominated by video communication apps and games. These types of companies have been some of the biggest winners in the early stages of COVID-19.

Meeting the demand for human connection

The top two apps are ones that have been around for a long time but have found their moment in the current crisis. Following years establishing itself as a tool for business, Zoom has become the go-to for work-from-home staff, consumers and a host of people and small businesses looking to continue classes with students such as music classes, fitness and yoga. Zoom has managed to achieve that most elusive of consumer market forces: to become synonymous with an entire product category, much like Spotify has for music, Netflix for games, Google for search and Amazon for e-commerce.

Multiple other video communication apps such as Google’s Hangouts have also grown strongly, but the biggest business-focused winner after Zoom is Microsoft Teams. Over the last half a decade, Microsoft – the original tech major – has been rebuilding its business, establishing itself once again as a global power player. With its strong focus on enterprise and utility capabilities, Microsoft could be better positioned than the consumer-facing tech majors (Alphabet, Amazon, Apple, Facebook) to weather the likely COVID-19-driven recession. Apple’s Facetime has also experienced strong usage during the COVID-19 dislocation, but because it is a native iOS app does not appear in the app store charts.

Houseparty has grown fast… perhaps too fast

Houseparty has achieved a similar role for the pure-consumer side of the equation. After years of modest success – it was launched in 2016 – it has rocketed up the app store charts, with its highly social, fun focus giving it particularly strong reach among younger age groups. The early signs though are that Houseparty’s developers Life on Air may not have been fully prepared for the surge in usage. While its original Gen Z and Millennial target user groups may have been tolerant of the wide social reach Houseparty delivers, there are widespread accounts in the media of older consumers reacting badly to features such as people unexpectedly joining parties who they are not close to but were automatically added when they synced their contacts to the app. Also, as with any rapid growth comes the risk of scams, as illustrated by frustrated users complaining that their payment details have been hacked via the app. These are all the sort of issues that Life on Air would have been able to manage more systematically if it had grown more steadily. It is now running to keep up and risks a consumer backlash if it cannot respond quickly and robustly enough.

Filling the down time

The other big app gainers are games, with four placings in the top 10. While games as a wider sector has been a key beneficiary of the COVID-19 dislocation, mobile games tend to skew more towards casual gamers. Popular mobile games are often easy to play, giving them wider appeal. The four games in the top 10 – Save the Girl!, Perfect Cream, House Restoration and Park Master – are clear illustrations of bored consumers looking to fill the extra time they have on their hands. Mobile games were early winners in the attention economy but lost market share as other forms of media grew in competition. Now, with an average of 15% of new attention time being available for employed consumers – due to no commuting or going out for leisure – mobile games is enjoying a similar dynamic as in the early days of the app economy. With disruptions to TV, film and music production, this boom will likely extend – albeit at lower rates – beyond the social-distancing phase, until other media categories can produce enough new content to win back more consumption time.

Post-COVID new world order

When the COVID-19 dislocation finally ends, consumers and businesses alike will return to a state of greater equilibrium. The transition will be steady rather than instant, and newly-established behaviours will take time to change. However, the point from which they will change will be different from today as consumers and businesses are still only beginning to establish new forms of normality in these abnormal circumstances. However, what is clear is that consumers and businesses will take with them into the post-COVID world new perspectives on life and behaviour.

Video messaging was already on a strong upward curve but COVID-19 has accelerated that by rapidly expanding its business use and pushing it to older, more mainstream audiences more quickly than it would otherwise have done. When the COVID-19 dislocation subsides, video messaging is one of the activities that will have a higher usage watermark than before the crisis.

The COVID Bounce: How COVID-19 is Reshaping Entertainment Demand

The economic disruption and social dislocation caused by the COVID-19 pandemic is not evenly distributed. Some business face catastrophe, while others thrive. Across the entertainment industries the same is true, ranging from a temporary collapse of the live business through to a surge in gaming activity. As we explain in our free-to-download COVID-19 Impact report, the extra time people have as a result of self-isolation has boosted some forms of entertainment more than others – with games, video and news the biggest winners so far.

midia research - the covid bounceTo further illustrate these trends, MIDiA compiled selected Google search term data across the main entertainment categories. The chart below maps the change in popularity of these search terms between the start of January 2020 up to March 27th. Google Trends data does not show the absolute number of searches but instead an index of popularity. These are the key findings:

  • Video streaming: All leading video subscription services saw a strong COVID-19-driven spike, especially Disney+ which managed to coincide its UK launch with the first day of national home schooling.
  • Music streaming: Little more than a modest uptick for the leading music services, following a long steady fall – reflecting a mature market sector unlike video, which has been catalysed by major new service launches.
  • Video demand: With the mid- to long-term prospect of a lot more time on their hands, consumers have been strongly increasing searches for TV shows, movies and games to watch and play. The fact that ‘shows for kids to watch’ is following a later but steeper curve reflects the growing realisation by locked-down families that they have to stop the kids going stir crazy while they try to work from home.
  • Music demand: Demand for music has been much more mixed, including a pronounced downturn in streams in Italy. Part of the reason is that music is something people can already do at any time in any place. So, the initial instinct of consumers was to fill their newfound time with entertainment they couldn’t otherwise do at work/school. As the abnormal normalises music streaming will pick up, as the recent increase in searches for music and playlist terms suggests. Podcasts, however, look like they will take longer to get a COVID bounce.
  • Games: Games activity and revenues have already benefited strongly from the new behaviour patterns, as illustrated by the fast and strong increase in search terms. However, the recent slowdown in search growth suggests that the increase in gaming demand may slow.
  • News: The increased searches correlate strongly with the growth of the pandemic, but the clear dip at the end provides the first evidence of crisis-fatigue.
  • Sports: The closure of all major sports leagues and events has left a gaping hole in TV schedules and the lives of sports fans. The sudden drop in search terms shows that sports fans have quickly filled their lives with other entertainment and have little interest in keeping up with news of sports closures.
  • Leaders: Finally, Boris Johnson has seen his search popularity grow steadily with the pandemic, while Donald Trump’s has dipped.

The COVID Bounce: How COVID-19 is Reshaping Entertainment Demand

The economic disruption and social dislocation caused by the COVID-19 pandemic is not evenly distributed. Some business face catastrophe, while others thrive. Across the entertainment industries the same is true, ranging from a temporary collapse of the live business through to a surge in gaming activity. As we explain in our free-to-download COVID-19 Impact report, the extra time people have as a result of self-isolation has boosted some forms of entertainment more than others – with games, video and news the biggest winners so far.

midia research - the covid bounceTo further illustrate these trends, MIDiA compiled selected Google search term data across the main entertainment categories. The chart below maps the change in popularity of these search terms between the start of January 2020 up to March 27th. Google Trends data does not show the absolute number of searches but instead an index of popularity. These are the key findings:

  • Video streaming: All leading video subscription services saw a strong COVID-19-driven spike, especially Disney+ which managed to coincide its UK launch with the first day of national home schooling.
  • Music streaming: Little more than a modest uptick for the leading music services, following a long steady fall – reflecting a mature market sector unlike video, which has been catalysed by major new service launches.
  • Video demand: With the mid- to long-term prospect of a lot more time on their hands, consumers have been strongly increasing searches for TV shows, movies and games to watch and play. The fact that ‘shows for kids to watch’ is following a later but steeper curve reflects the growing realisation by locked-down families that they have to stop the kids going stir crazy while they try to work from home.
  • Music demand: Demand for music has been much more mixed, including a pronounced downturn in streams in Italy. Part of the reason is that music is something people can already do at any time in any place. So, the initial instinct of consumers was to fill their newfound time with entertainment they couldn’t otherwise do at work/school. As the abnormal normalises music streaming will pick up, as the recent increase in searches for music and playlist terms suggests. Podcasts, however, look like they will take longer to get a COVID bounce.
  • Games: Games activity and revenues have already benefited strongly from the new behaviour patterns, as illustrated by the fast and strong increase in search terms. However, the recent slowdown in search growth suggests that the increase in gaming demand may slow.
  • News: The increased searches correlate strongly with the growth of the pandemic, but the clear dip at the end provides the first evidence of crisis-fatigue.
  • Sports: The closure of all major sports leagues and events has left a gaping hole in TV schedules and the lives of sports fans. The sudden drop in search terms shows that sports fans have quickly filled their lives with other entertainment and have little interest in keeping up with news of sports closures.
  • Leaders: Finally, Boris Johnson has seen his search popularity grow steadily with the pandemic, while Donald Trump’s has dipped.