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The media and entertainment industry has been forced to re-evaluate and reimagine content supplies, consumer demand and production as a result of the COVID-19 pandemic, and companies in the sector should continue to adapt and brace themselves for more disruption and change, according to SAP and Vistex executives.

In the past decade, we have seen streaming services become a growing force, from the early days of Netflix and Hulu to newcomers that include Apple TV Plus,  Comcast/NBCUniversal’s Peacock and HBO Max, Richard Whittington, SVP of M&E, industries and customer advisory for SAP, said Sept. 10 during the webinar “Brace Yourselves for the Next Disruption in the Media Industry.”

The streaming services have “become the sanity in the last few months for many of us,” as we have sheltered in place and shifted to remote work from home globally, he noted.

“Things have changed dramatically, even in the last three or four months as it relates to streaming,” he said, adding the pandemic has “almost accelerated it to warp speed.”

As we know by now, “many productions are shut down” still as a result of the pandemic, he said. We are, meanwhile, seeing a massively “competitive environment in streaming right now,” he pointed out.

“Consumer demand has shifted,” he told viewers, noting: “We’re no longer going to the movies. We’re all consuming streaming services.”

At the same time, the “economics of content have shifted overnight, so the idea of [a movie] opening in a particular window and that window driving the economics have had to be rethought drastically in the last few months,” he said.

The live action movie version of “Mulan” is a “great example” of that, he said, pointing to Disney’s hybrid release of the live-action film in which it was released theatrically in Asia but direct to consumers in other markets, including the U.S., where it is available on demand via Disney Plus in the U.S., at an extra $29.99 fee to subscribers of the company’s pay streaming service.

“Entire countries have been isolated or shut down in terms of travel and that’s having an effect on things like production,” he noted. However, “there has been no shortage of content,” he said, adding: “The volume of that content may lag a little bit in terms of stuff that was already being made or was almost ready to be finished.”

However, “we are starting to see some bidding wars in different parts of the world around content, particularly in the U.K.,” he said, explaining: “We work in a very vast ecosystem in this industry of suppliers, and particularly in the Hollywood space around production and many of those suppliers are desperately hanging on to stay in business, and that may also have an impact in terms of costs as we reemerge here.”

One challenge for the industry is that “media is a discretionary spend and you don’t have to dig too deeply into the news to understand the economic hardship a lot of people are under, and so when you’re struggling to put food on the table, maybe that last $15 streaming service is a little bit too much for the family budget — or even a $4.99 one,” he said.

Add on top of that the challenges posed by the increased need to work remotely.
“If you think about the long-term impacts of this… disruption… with the emergence and the acceleration of some of these streaming services, you will see almost an arms race around [continually] producing fresh content,” Whittington said.

In this “production-constrained world,” the pricing of existing content will likely rise due to the “laws of supply and demand,” he projected.

One more factor: “Advertising is a huge part” of budgeting, he said, predicting: “As consumer products companies struggle through the economic downturn here, you will see constrained budgets around advertising, which also has a sort of a double whammy effect.”

Some Good News

“But it’s not all bad news,” Whittington said. “As an industry, we’ve responded really, really well to this. Media has provided sort of a solace, a comfort to people, which is what we’ve always done. And I think the industry did a good job initially responding” to the pandemic.

We are now “looking into the recover phase” of the pandemic disruption, he said. “But the real thing and the real value, I think, is how you reimagine the industry,” he told viewers, calling this a “pause point where we look at things like the amount of money that’s being spent on production and ask ourselves: ‘Is there a way to make more content at a lower cost of goods sold so you can have extra inventory for the next crisis? Is there a way to balance different revenue models so that you can keep and retain [content] that you have really spent a lot of money on acquiring? And is there… a better way to understand [the] consumer and deliver insight?”

In the virtual panel discussion that followed, Amos Biegun, global head of rights and royalties at Vistex, agreed that business models including windowing have changed significantly as a result of the pandemic. He too pointed to the “Mulan” hybrid release and predicted “windowing will be used potentially as another lever in a very short window to maybe eke out a little bit of value in a transaction or a license, but I think you’ll see multiple channel releases of major theatrical productions” going forward.

“’Mulan’ is just the beginning of the sort of models that we’re going to see unfold,” Biegun predicted.

The Content Challenge

“Platforms are desperate for content and they need a variety of content,” Biegun went on to say. “They need good, new stuff that’s exclusive and they need a good old library of evergreen material to keep you going and binging. And that’s very tough.”

On that front, “if we’re looking at who has the advantage, I don’t need to tell anyone Netflix does,” he told viewers, adding: “It’s almost like Netflix was preparing for  this pandemic for 10 years because they have the deep inventory and they’re actually using their deep pockets to buy more inventory.”

On the other hand, “content is a real challenge” for many other M&E organizations and there is a “massive challenge” for organizations like the BBC to compete against streaming services, especially as their viewers get older, he said.

“You have to know what you have” in terms of content “before you can exploit it,” he noted. If a company is going to put its content on streaming platforms, it “needs to be cleared correctly” and the organization needs to “have a really good understanding of what’s in their vaults and, sadly, not all of them do, and I’d say most of them don’t – especially the ones who go back many, many decades,” he said.

Compared to releasing content on TV and theaters, streaming content is a “very different ballgame,” so organizations competing in the space “need to be nimble, they need to be quick [and] they need to have a very good horizontal and vertical view of their business,” he said, adding: “They must actually get their house in order in order to drive content downstream [and] driving content downstream is clearing rights first and foremost.”

More Good News

TV production is “resuming slowly” and “one of the drivers” in the U.K. is that the government “stepped in to ensure production companies for any COVID-related shutdown insurance that they needed to undertake,” Biegun noted.

In March, it was widely believed that “animation would take over the world” during the pandemic because of how much easier it is to produce animated content than scripted content, he pointed out. However, “I haven’t seen that happen,” he said.

Yet, he conceded: “I do fear that we’re going to be inundated with reality shows, game shows and talent competitions because they are very quick to produce and release. So, in the U.K., get ready for more ‘Britian’s Got Talent’ and ‘Strictly Come Dancing.’”

M&E a Bright Spot for Travel Sector

The overall travel sector still looks “pretty bleak,” with “83 percent less tickets sales than this same time last year,” Jake Hoskins, co-founder and CEO of project management software firm TripGrid, which specializes in business team travel, told viewers.

“But there is good news,” he said. In entertainment travel, “travel is actually starting to ramp back up” among most film studios and TV networks, he said. Internally, his firm is seeing unscripted TV crews and even film crews starting to travel again, but international travel is not expected to recover so fast as productions are relying on local crews and talent for now, he noted.