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How the coronavirus is going to affect the movie industry

The response to COVID-19, the novel coronavirus strain that originated in Wuhan, China, is already affecting just about every aspect of daily life. With the stock market in free fall and social distancing measures canceling mass gatherings like NBA games and music festivals, most industries are preparing for the worst. As our entertainment habits change to accommodate the growing pandemic, the movie industry is going to have to adapt in a few important ways. For an industry that plans and executes projects over long timelines, the effects of these adaptations are likely to reverberate long after the threat of COVID-19 has passed. In truth, we're already beginning to see those effects filter through to the public.

Disney was already forced to suspend production operations in Prague, where its straight-to-streaming series The Falcon and the Winter Soldier was shooting. The company also made the decision to move up the release of Frozen 2 on Disney+ to help parents cope with having their kids home from school. Many other movies have been delayed due to the coronavirus, and theaters across the globe are being temporarily shut down. While some indicators like box office figures are likely to take a major hit, the proliferation of self-quarantine among even healthy Americans presents something of an opportunity for home entertainment brands like Netflix and Hulu. 

Here are a few changes you can expect to see in the movie industry over the next weeks and months as the coronavirus situation develops.

Social distancing comes to the industry

Biologist Dr. Liz Specht recently ran the numbers on her best estimate for the spread of COVID-19. According to Stat, Specht claims we're likely to see as many as four million cases in the U.S. by mid-May, with the disease reaching its peak in July with over nine million cases worldwide. Those are overwhelming numbers to be sure, and it's predictions like these that are already inspiring drastic changes to the way entertainment companies work — as well as spooking stocks.

Brent Lang, Adam B. Vary, and Matt Donnelly have been covering this beat for Variety. As they point out, the movie industry is a "multibillion-dollar business built on a foundation of public gatherings and routine travel." Studios not only have to absorb coronavirus-related disruptions at every level of production, but they must also cope with the impact of medical advice promoting "social distancing" — a "conscious effort to reduce close contact between people" in hopes of slowing the transmission of COVID-19 — and discouraging the public from actually going out and consuming their products. 

Global travel restrictions are impacting entertainment companies and talent agencies as well, as talent and staff can't get around to do their jobs. In some countries around the world (like France) and cities in the U.S. (like the populous Los Angeles and New York City), movie theaters are closing their doors completely. From a public health perspective, it's the right thing to do, but there's no question that these measures are slowing down the business.

The movie industry is no longer recession-proof

Amid the coronavirus pandemic, most media stocks have taken a beating, plummeting along with the rest of the Dow Jones Industrial Average. According to Variety, Disney shares are down almost 23 percent; ViacomCBS is in even worse shape, shedding more than 51 percent of its value in 2020 alone. It's an unwritten rule of the entertainment industry that in times of great anxiety or upheaval, the movie industry usually over-performs for its ability to offer a little escapism to a public on edge. The nature of this pandemic has all but eradicated that counter-cyclical advantage.

Veteran media analyst Hal Vogel put it like this to Variety: "People are scared right now, and they're not going to want to spend a lot of time in a crowded theater. The big issue in my mind, and it's not answerable yet, is how long will this go on and will it intensify?" His questions are likely the ones that are taking up a lot of oxygen in Hollywood board rooms right now. With so many known unknowns, how can the studios even properly prepare?

Streamers have the advantage for now

As is so often the case, the box office's loss is the streaming companies' gain. Lang, Vary, and Donnelly predict that people will gravitate toward streaming services like Netflix, Hulu and Disney+ — at least, in the short term. The financial numbers seem to bear this observation out. Even in the midst of this total market tumbling, Netflix shares are actually up on the year by over 12 percent (via Variety). That's even more impressive compared to the 10.8 percent drop for the S&P 500 over the same time period. Unlike Hulu and Disney+ (both subsidiaries of Disney), Netflix is a pure streamer with limited exposure to other sectors of the entertainment industry. It, more than any other company, is fairly insulated from the effects of the virus, and is likely reaping the recession-proof benefits that use to accrue equally across the industry.

Of course, as this pandemic drags on, even Netflix will start to feel the crunch. As more and more productions get canceled or delayed to prevent the spread of the virus, eventually these setbacks will begin to have downmarket effects on the availability of fresh content. In the long term, Netflix may actually find itself overexposed to this supply drought due to its reliance on a steady stream of new movies and TV. Additionally, the longer self-quarantined people spend away from work (and thus away from a guaranteed paycheck), the less money they'll have available to spend on things like Netflix subscriptions.If the pandemic lasts as long as Dr. Specht predicts, look for companies like Netflix to inoculate themselves by assembling a war chest of old content with replayability value.

Expect more delays and production suspensions

Even before the downstream content drought matures, expect to see a release calendar in constant flux during the coronavirus pandemic. Paramount Pictures, a subsidiary of the now-floundering ViacomCBS, has already pulled the planned release of its John Krasinski horror sequel A Quiet Place Part II without any firm statement as to when the flick might make its way to theaters. MGM similarly pushed the release of its upcoming James Bond film No Time to Die from April all the way to November. Other delays include the live-action Mulan, Peter Rabbit 2, The Lovebirds, Fast and Furious 9, The New Mutants, and Antlers – and the list is growing. No studio wants to see an expensive tentpole film play to empty rooms across the country, so prepare for more delays of the films you're most excited to see.

If the bottom really drops out of the box office, one option may be to divert planned theatrical releases to streaming. Studio probably don't necessarily want to take that step, and there will be contractual issues to sort out, but as the pandemic drags on, expect this option to look more and more attractive. 

The unfortunate reality is that no one really knows how long the coronavirus crisis is going to last, which makes it impossible to predict the extent of the damage to any industry — particularly the movie industry. One thing's for certain, though, our viewing habits are about to abruptly change and a giant multi-billion dollar industry is going to spend the next few quarters figuring out how to adapt.