The following study is part of an Arts in the Age of Covid research team project conducted over the summer. This study is compiled from the research conducted and summaries articulated by Victoria Li and is being published in two parts.
One of the areas of the entertainment industry that has been hit the hardest by the Covid-19 pandemic is live audience-based TV. Not only is it difficult for show participants to film in person, but social distancing guidelines also prevent live audience members from attending normally. To investigate the effects of the pandemic on live audience-based TV, this post will look at the political, economic, social, and technological factors that are impacting live entertainment in the United States.
What are live audience-based TV shows?
When referring to “TV shows,” this article will mainly focus on the “live audience” based shows. There is a tremendous difference between live television and live audience-based shows, though there may exist some overlaps.
To start with, a live audience-based show has an audience shot alongside the show and features real-time reaction to the show. A live show is “A television production broadcast in real-time, as events happen, in the present.” Normally, it refers to those shows which are not rehearsed or edited and are shown only as they were recorded prior to being aired. Live television encompasses a variety of types of shows, among which some also fall into the category of live audience-based shows. Common types of live television include morning and news shows, entertainment shows, sports, reality programs and, occasionally, episodes of scripted television series and films. From this list, “entertainment shows” are the type of live audience-based TV this post will primarily focus on.
Morning shows and news shows
Morning shows, which are often hosted by a small team of hosts, are types of programs typically targeted at the combined demographic of people getting ready for work and school, and stay-at-home adults and parents. Morning shows normally take the form of news broadcasting, debating, celebrity, weather forecasting, special-interest storytelling, and feature segments. Example TV shows include This Morning, Today, and Good Morning America. News shows have broadly the same format, but include different segment topics, such as world news, politics, and weather.
Although these programs are aired without editing, they don’t have audiences interacting with them in real-time. Thus, morning shows and news shows don’t belong to the live audience-based shows category.
Entertainment shows
Entertainment shows include award shows, beauty pageants and reality competition franchises, and talk shows.
Representative TV programs include American Idol, Dancing With The Stars, the Academy Awards, the Golden Globe Awards, the Billboard Music Awards, the Primetime Emmy Awards, and the Grammy Awards.
These shows have the audience shot alongside with the shows and show real-time reaction to the show. Thus, entertainment shows could be classified as live-audience based TV shows.
Sports
Examples of TV programs include the Super Bowl, WWE, World Cup, and Olympic Games. These shows fit into the definition of live audience-based TV shows, but will not be discussed in-depth in this article. To read more about how the sports industry is adapting to the pandemic, read AMT Lab’s previous post, What the Arts Can Learn from Sports.
Reality programs
Reality programs include purportedly unscripted real-life situations, often starring unknown individuals rather than professional actors. Some examples include reality competition and game shows and documentary-style reality shows such as those focusing on the interactions between a close-knit group of people.
Although these programs are aired without editing, they don’t have audiences interacting with them in real-time. Thus, reality programs don’t belong to the live audience-based shows category.
This research will only focus on the entertainment show category of live audience-based TV shows. Besides the live shows mentioned above, there are many more shows that include live audiences even if they are not featured on camera, a majority of which are scripted television series. For example, shows like Friends, The Big Bang Theory, Mom, 2 Broke Girls and many more are all taped in front of live studio audiences.
Analyzing the Impact of COVID-19 using the PEST Model
On March 13, the White House declared a national emergency concerning the novel Coronavirus Disease (Covid-19) outbreak. In the following few days, governors from different states issued executive orders to cope with the emergency status, including best practices guidance for film and TV. Covid-19 swept the nation at such an alarming speed that it caught everyone off guard, including the entertainment industry. The entertainment industry has dealt with disruptive events before, but this one is a bit different. This report is going to elaborate on how Covid-19 imposes industry-wide changes to the entertainment industry based on the PEST analysis model.
Figure 1: PEST Analysis diagram. Source: Excel Project Management Templates.
1. Political factors
The political aspect of PEST Analysis focuses on the areas in which government policy and/or changes in legislation affect the specific industry or organization in question. Areas of policy that may particularly affect an organization normally are tax and employment laws. However, the outbreak of the Covid-19 has forced a series of unprecedented administrative intervention policies to control the spread of the pandemic. The scale of the administrative intervention is larger than ever before and has had tremendous impact on the entertainment industry—an industry that relies heavily on a group of people being physically on site and collaborating frequently and closely.
Interventions come from two sides: one side is policies which are universal to all people, such as mandatory facial covering when people are out in public and social distancing, and the other side is best practices guidance specifically for the media and entertainment industry.
To start with, it is worthwhile to note that social distancing encompasses many measures, including avoiding physical contact (which is defined as 6-foot distancing in the U.S.), workplace closures, canceling mass gatherings, travel restrictions, quarantine for travelers, and stay-at-home orders. The required face covering, avoidance of physical contact, as well as the cancelation of mass gatherings make film and TV production very hard to proceed as scheduled. The workplace closures also make it difficult for production companies to complete post-production tasks, and the travel restrictions as well as the mandatory quarantine requirement for travelers from high risk regions make production companies reluctant to shoot scenes outside of the U.S., which affects international production the most.
For live audience-based TV shows, specifically, the stay-at-home orders and cancelation of mass gatherings make it almost impossible for the audience to physically attend the shooting. Even if a very small fraction of the audience were willing and allowed to attend, the avoidance of physical contact, as well as required facial coverings, make it difficult to show the audience reacting to the actors/hosts in a normal manner, which would inevitably discount the TV program’s performance.
As for guidance specific to the entertainment industry, different states issued their own, but they are similar in majority. For example, Brian Kemp, Governor of Georgia, released the first statewide Covid-19 health and safety guidance for the film industry. This 11-page document was developed in cooperation with studio and production companies in Georgia and can be used alongside industry-wide labor and management protocols as well.
In the guidance, it gives out specific instructions to productions mainly in two aspects. First, in terms of general sanitation routine, it gives out instructions for frequent hand washing, increased disinfection and sanitation of equipment, and the use of personal protective equipment. The guide also includes instructions for call sheets and contracts to be circulated digitally rather than on paper. Social distancing is recommended between the crew members on the site, and it asks crews to have their temperature checked daily. It suggests that alternate shot setups and lenses may be needed to allow for greater distance between actors. It also asks the production to keep records of the interactions between actors if distance cannot be maintained between them, to use actors from the same household, and to reduce the number of background actors. This is a sample of safety guidance, but production companies must follow appropriate state and national policies for shooting involving actors, crews, and live audiences.
2. Economic factors
The economic portion of the PEST analysis targets the key factors of interest and exchange rates, economic growth, supply and demand, inflation, and recession. This report will focus mainly on economic growth, supply and demand, and recession.
As seen in the “Real GDP” chart below, COVID-19 has had a tremendous impact on the U.S. economy. Before the spread of the pandemic, the GDP values were constantly at a 2% or above increase from the preceding quarter. However, when the pandemic hit, it caused a 5% decrease from 2019 Q4. It is worth noting that this only includes the impact on 2020 Q1, which was the very beginning of the pandemic. The GDP for 2020 Q2 will only be worse.
Figure 2: Percent change in U.S. GDP by quarter from 2016-2020. Source: Bureau of Economic Analysis.
From the consumers’ purchasing power point of view, there are two factors which will influence the consumption of entertainment products: one is consumers’ personal income and the other is how consumers’ are choosing to spend disposable income.
Personal income and disposable personal income’s percent change from the preceding month have shown a decline since the outbreak of Covid-19. As demonstrated in the chart below, consumers’ personal income is not only declining, but is declining at a faster rate, except for an outlier in April when there was a significant rise from -2.2 to 10.8 for personal income, and from -2.1 to 13.1 for disposable personal income. The peculiar April bump can be linked to the U.S. pandemic support payments. According to Jason Furman, a Harvard economist and former chair of the Council of Economic Advisers, “Incomes went up [that] month because of the $1,200 relief checks most U.S. adults are getting. Plus, the government tacked an extra $600 a week onto unemployment payments.” This statement is verified by data from the Personal Consumption Expenditure (PCE) shown in the chart below. Before May, the PCE was increasingly declining but then shows a sudden rise in May, from -12.6 to 8.2. This is due to the time lag of the implementation of the government policy and financial assistance.
Figure 3: Chart showing change in personal income, disposable personal income, and personal consumption expenditures for the first half of 2020. Source: Bureau of Economic Analysis.
The consumer spending drops dramatically in March and April, as collected by the U.S. Bureau of Economic Analysis (BEA). There is an increase in consumer spending in May, and this is probably due to the government providing financial assistance to citizens and corporations, plus the fact that the pandemic was under control due to the lockdown and citizens expecting a reopening in the near future, which boosted their confidence and made them more willing to spend.
Figure 4: Chart showing percent change in consumer spending. Source: Bureau of Economic Analysis.
From an investor’s perspective, the real gross private domestic investment on entertainment dropped significantly in 2020 Q1 from $86.7 to 85.1 billion. It is worth noting that, before the pandemic, there was a relatively stable trend of increase throughout 2019, and there would have been a much higher amount of investment (approximately around $87 billion) in entertainment if there were no pandemic. This does not account for the economic impact from that spending.
Figure 5: Real gross domestic investment on entertainment from 2019-2020. Source: FRED Economic Data.
From major entertainment companies’ perspectives, their well-being can be represented via their stock price change. Below are three large entertainment companies that represent three different types of entertainment companies. Netflix represents streaming companies, Walt Disney represents traditional Hollywood production companies, and AMC Entertainment Holdings represents traditional distribution and heavy-asset companies. Regardless of their differences, all three types of entertainment companies show a hit to their stock price due to the outbreak of Covid-19 from March 16 to March 20. Their situations differ, however, after the first hit by the pandemic in March.
To start with, as the majority of the stock prices drop tremendously, Netflix demonstrates an outstanding rise since the pandemic. Its stock price nearly doubles from September 2019. This is a very aggressive growth as Netflix’s original stock price in 2019 was already around 300, which is significantly higher than most of the entertainment industry companies. Netflix’s stock price sends out a signal that streaming platforms are doing better during the pandemic and are more adaptable to this disruptive event.
Figure 6: Netflix stock price. Source: Google Finance.
For traditional Hollywood production companies like Walt Disney, although their stock prices are not comparable to their pre-Covid values, they picked up relatively fast and stopped declining. Disney’s stock price may look prettier than other production companies as it has a more diversified business lines with streaming services, amusement parks, and sale of peripheral goods to compensate for its loss on production.
Figure 7: Walt Disney Co. stock price. Source: Google Finance.
For traditional distribution and heavy-asset companies like AMC, the situation is not as promising. It continues to break its own lowest stock prices and demonstrates a slower recovery rate compared to the previous two companies. What’s more alarming is that the trend of AMC is declining. This trend suggests that investors and the market doesn’t hold an optimistic view about its future growth and profitability.
Figure 8: AMC Entertainment Holdings stock price. Source: Google Finance.
3. Social factors
The social factors that may be included in a PEST Analysis are demographics and age distribution, cultural attitudes, and workplace and lifestyle trends. In this report we will focus on the cultural attitudes and workplace and lifestyle trends.
As demonstrated when discussing economic factors, there has been a dramatic decrease in consumer spending and consumer personal income. This decline suggests that consumers’ confidence in the market and their potential spending on entertainment products will be low. This phenomenon does not mean that consumers stops seeking any form of entertainment activity. Rather, consumers are expecting to consume more entertainment products due to the stay-at-home order and lack of engagement in workplace and communities.
However, consumers don’t have adequate disposable income and are reluctant to take risks to attend traditional offline events. Acknowledging this phenomenon, entertainment companies need to come up with solutions that don’t require consumers to spend too much money on one-time transactions. This is because consumers are more price sensitive than ever before, and sustainability is more important than anything for entertainment companies under the pandemic. A good example is the streaming platforms’ subscription fee, which is in essence a bundle sale as this fee gives audiences the access to numerous movies and TV shows simultaneously.
Streaming services’ large library of products to choose from, low investment relative to one-time transactions, and online consumption will be the trend in the future. Thus, there are opportunities for entertainment companies, but the only question is how to balance the threats this disruptive event brought and the opportunities that will come along.
4. Technological factors
The technological component considers the specific role and development of technologies within the sector and organization, as well as the wider uses, trends, and changes in technology. Although things like Zoom meetings and Google Hangouts can be substitutes for in-person communications and routine work (excluding shooting), the entertainment industry is still highly relying on human workforces being physically on site.
From the production perspective, it is hard to streamline all the processes and make productions into an automated form. From the performance perspective, it is unlikely to have computer configured avatar instead of actual human beings to perform in the near future. These two factors form the reason why the entertainment industry is severely impacted due to the pandemic as most of the productions have been suspended.
There are creative forms of performance that have emerged, such as drive-through live performances and TV shows shot at home and broadcast over the internet—but these innovations are more difficult for live audience-based TV. The future is optimistic since many giant technology companies are key players in the entertainment industry now, as shown with the rise of Netflix above. These companies can utilize their cutting-edge technologies and innovation to facilitate the usage of technologies in the entertainment industry.
Conclusion
The pandemic has left the entertainment industry “fearfully staring into an abyss of uncertainty.” What we are going through now is so world-altering that it could have been the plot of a blockbuster thriller.
“It's difficult to fathom just how massive an impact this epidemic will have on the world, especially the entertainment industry, a multibillion-dollar business built on a foundation of public gatherings and routine travel,” according to Variety. The situation is entirely unprecedented. There's never been a global epidemic that threatened so many core pieces of media conglomerates at the same time.
The only kind of player in the entertainment industry who is not as affected as the others in this market meltdown are streaming platforms like Netflix. The streamer's shares are up 12.5% since the start of the year through March 10 compared with S&P 500's 10.8% drop over that period. Investors see Netflix as relatively virus-proof, with virtually no exposure to epidemic-related revenue declines.
But even streaming companies have faced and will continue to face headaches in terms of producing entertainment content. The paradox of the increasing need for entertainment products due to the lockdown and the restriction of productions due to public health regulation put streaming companies in a hard position.
Live audience-based TV shows are even more affected by this situation since that content cannot be easily produced while following guidelines. An upcoming post will investigate the specific impacts of the pandemic on live audience-based TV in China.
Resources
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