Things are going to get worse before they get better. Photo / file
Things are going to get worse before they get better. Photo / file
OPINION:
Are we ever going to go out to have fun again? In the past 10 days, Disney has laid off 28,000 theme park workers, Cineworld has shuttered its US and UK cinemas and the release of both the new James Bond flick and have been pushed back.
At thispoint, the only major movies left on the schedule for 2020 are Wonder Woman 1984 and Pixar's Soul. No wonder AMC Entertainment, which only reopened US movie theatres in August, has closed Odeon cinemas in the UK on weekdays and is reducing hours elsewhere.
Mass entertainment has been hit hard by coronavirus. Shut entirely in the first months of the pandemic, some cinemas, theme parks and attractions have been able to reopen. But they are operating with reduced capacity, and those guests that do come are spending less.
Six Flags, a US theme park chain, said over the summer that spending per guest had dropped 15 per cent year on year, partly because the parks that were open had fewer "in-park spending opportunities". And Disney told analysts that it was seeing less upside than expected from reopening its Florida parks because more guests were from the local areas and spent less on hotels and merchandise.
But public health restrictions have kept two of the US's most important markets, California and New York, almost entirely closed. Even in Asia, where the virus is under better control, Hong Kong Disneyland is still closed two days a week and attendance at Comcast's Universal Studios Japan is running at 25 per cent of normal.
Before the latest lay-offs, IAAPA, the global industry group for theme parks and attractions, told the US Congress that the pandemic had resulted in 235,000 job losses and would cut industry income by $23bn in the US alone. That's a drop of 40 per cent.
Things are probably going to get worse before they get better. After all-but begging California to let parks there reopen, Disney has now thrown in the towel, for the short term. Other park operators are likely to follow suit. "It's going to be a shitty one to three years," says Martin Lewison, an associate professor at Farmingdale State College who studies theme parks. "We will find out which businesses are sustainable at lower capacity."
For cinemas, the news is even worse. They need blockbusters to drive attendance, but film studios are wary about wasting their biggest offerings on empty theatres. That creates a vicious circle that was exacerbated by the disappointing release last month of Tenet, the Christopher Nolan science fiction epic. It cost $200m to make but took in just $41m in its first month in the US.
Since then, the studios have fallen over themselves to delay their blockbusters — so many 2020 films have been pushed back that The Batman, originally set for next October, has been moved to 2022. But Netflix and other streaming groups are continuing to pump out new offerings, giving cautious consumers even less reason to leave home. "Hollywood looks like a deer in the headlights. The entire entertainment business is paralysed because theatres are closed," says Rich Greenfield, analyst at research group LightShed. "It's a case study on how hard it is for a legacy business to adjust."
At a glance, cinemas and attractions share many of the same issues. Due to Covid-19, consumer demand has fallen sharply, and high fixed costs mean they have relatively few ways to respond. They therefore must ask what to do while they wait for a public health breakthrough and for demand to revive. Lay-offs, reduced hours and temporary closures will only go so far.
However, the sectors are facing different fates. Even before the virus, cinemas were already under threat from streaming. While high-impact visual extravaganzas still had the power to pull people out of their homes, more and more people were preferring to watch ordinary films at home. Between 2015 and 2019, the take from global theatrical releases has risen 8 per cent to $42bn, but the home/mobile market has leapfrogged it, growing 62 per cent to almost $60bn, according to the Motion Picture Association, which represents US studios.
Analysts say that the US had too many movie screens (40,000-odd) before the pandemic — total attendance was down 4.6 per cent in 2019 — and it probably needs fewer now. UK film attendance has been relatively flat.
"Probably that five to 10 years of industry disruption has instead been condensed into six months," says David Ingham, partner at Cognizant, a tech consultancy. "Attendance levels are not likely to return to pre-Covid levels any time soon."
By contrast, theme parks have been on a decade-long tear, with global attendance at the top 10 theme park groups hitting 521m in 2019, up 60 per cent from 322m in 2010, according to the Themed Entertainment Association. With the biggest rollercoasters easily costing $100m and taking years to design and build, incumbents also have a huge advantage once the crowds come back, points out Prof Lewison.
"The movie theatre industry won't be as strong as it was before. There was already a negative trend toward streaming that is being accelerated by the pandemic," says Alexia Quadrani, a JPMorgan analyst. "Theme parks are not as easily replaceable."
That makes it all the more attractive for the big operators to cut variable costs, hunker down and wait. It's bad news for theme park workers right now, but may be the industry's best chance for long-term survival.
