Hollywood

What Will Be the Impact of the COVID-19 Crisis on the Film Industry?

An empty Hollywood, halted productions and closed cinemas: the pandemic threatens an entire industry while giving streaming platforms a powerful advantage.

Husam Sam Asi 30 March 2020

A cinema temporarily closed during the coronavirus pandemic. — A cinema closed during the coronavirus pandemic. Photo: Northwest / Wikimedia Commons, CC BY-SA 4.0.

When I walked through central Hollywood this morning, I felt like Will Smith in the disaster film I Am Legend. The streets were empty, public spaces deserted, and the famous cinemas and tourist shops closed. This was what the city of dreams looked like after the mayor of Los Angeles asked residents last Sunday evening to follow the authorities’ instructions and stay home.

At the supermarket, I found a queue of people standing two metres apart, waiting to be allowed inside so that the shop would not become overcrowded.

Strict measures had been imposed across cities in California, New York and Washington, the states that had recorded some of the highest numbers of coronavirus infections and deaths in the United States. With California and New York serving as engines of the American economy and centres of its most important industries, Americans everywhere felt the repercussions of a crisis that would leave a lasting economic mark.

One of the industries facing the greatest challenges is filmmaking. Production companies, including Hollywood’s enormous studios, have had to halt film and television shoots, postpone or cancel major releases, and close their doors. The resulting losses will be severe.

Companies often finance production with bank loans. Without releasing their films, they cannot repay those loans or pay thousands of technicians, marketers, assistants, consultants and other employees. Postponing the ninth Fast & Furious film until next year, for example, means its studio will forgo more than $1 billion in expected box-office receipts this year.

This week, the industry woke up to the lowest box-office income since its beginnings almost a century ago: zero, as cinemas closed around the world. But instead of surrendering, Hollywood has decided to adapt and turn the new circumstances into an opportunity to create a different model that could benefit it in the longer term.

The end of the 90-day window

For years, Hollywood studios tried to shorten the 90-day period that cinema owners demanded between a film’s theatrical release and its availability online. Negotiations repeatedly failed.

Netflix paid a heavy price when it refused to comply and insisted on streaming its films alongside their cinema release. Exhibitors boycotted the company, and campaigns against it in France helped prevent its films from appearing at Cannes.

The present crisis has imposed a new equation. Confined to their homes, people turned to Netflix for films and entertainment. Once cinemas closed, studios had little choice but to follow its example and abandon the 90-day agreement.

Paramount reached an agreement to release films through Netflix. Disney made films available online for around $20 with a 48-hour viewing period before their arrival on its subscription service. Disney+ launched in Europe this week, following its American launch last November.

Hollywood adapts but cinemas face ruin

This is not the first time Hollywood has faced an existential threat. Television challenged it in the 1950s, followed by videotapes in the early 1980s and DVDs in the 1990s. The studios succeeded in turning those crises into new sources of profit.

Television still generates income several times greater than their share of box-office receipts. DVD sales became a principal source of income until streaming services emerged in the early 21st century and began replacing them.

The biggest losers in the current crisis are therefore cinemas, which collect roughly half the ticket revenue from Hollywood’s major films. Without that income, they cannot survive. Even if they weather this crisis, they will confront another harsh reality afterwards: studios imposing new terms that may deepen their losses.

Technicians, producers, equipment and catering suppliers, and other freelancers also face an existential threat. Their income depends on production projects. If the crisis lasts more than a few months, many will fall into bankruptcy and have to seek work in another field.

The struggle for survival created by coronavirus looks Darwinian. Some parts of the industry, such as cinemas and independent production companies, may be crushed. Others, particularly streaming platforms led by Netflix, will emerge with greater power, influence and profits.