How the COVID-19 pandemic affects one of the film industry’s more protected and versatile segments – international distributors – and how distributors can adapt effectively to a rapidly-changing landscape.
The novel coronavirus has accomplished what no industry strike or economic crisis has ever achieved: a near-total shutdown of the film industry. Under government social distancing mandates and widespread fear of the virus, movie theaters around the world have shut their doors indefinitely, Hollywood studios have become ghost towns, actors and film crews are struggling to stay afloat, and prestige film events have been moved online, postponed, or cancelled. While countries that got their infections under control or prevented large-scale outbreaks have begun cautiously reopening theaters and film productions, business hasn’t come close to resuming pre-COVID levels of productivity. Beijing’s June 13 outbreak and consequent reaffirmation that movie theaters would not reopen shows that the road to recovery will be long and difficult.
In this grim film industry landscape, international distributors are relatively fortunate. Advances in communications and screening technology allow them to communicate with international partners and close deals entirely online. Since they control the marketing and release of their films, distributors have a degree of flexibility in how they adapt their business plans, whereas movie theaters, below-the-line workers, and film-affiliated smaller businesses like caterers and prop houses face far greater challenges.
But this doesn’t mean that film distributors are immune to COVID-19’s economic ills. Cascading failures along the film value chain reach distributors in the following ways:
Disrupted film release schedules
Timing of marketing campaigns is thrown off, suppressing reach and impact
Lag in cash flow from screenings cripples ability to sustain business and reinvest in new projects, partnerships, and talent
Decimated screening revenue
Theaters and film festivals are shut down globally = no box office revenues and depressed view figures for data gathering / marketing / promotional purposes
VOD / streaming, even for major studio productions, doesn’t come close to recouping lost ticket sales. See Germany’s Kangaroo Chronicles: VOD release was distributor X Verleih’s most successful ever, but didn’t come close to projected $20mil in ticket sales
Worsening global economy = less spending on non-essentials or willingness to pay a premium on broadly-available services, i.e. increased threat of piracy and depressed ad spending eating into already-diminished profits as production/insurance costs increase
Abrupt shift in the mechanics / balance of film distribution
Cancelling or moving film festivals online eliminates key high-profile opportunity / organic format for sales talks, networking, cultivating talent/leadership, and marketing new films
Film productions stalled = decreasing amount of quality content available for circulation
Too many unknowns — huge variations among different countries in their health status and policy responses, both of which change day-to-day—make it difficult to predict future conditions in order to effectively adapt business plans
Bottom line: COVID-19 is devastating to the film industry, even in today’s high-tech, globalized marketplace. The health crisis itself must be brought under control as soon as possible in order to return the industry to robust, sustainable operation. However, actions distributors take now can mitigate damage in the meantime while global health systems work to get the disease under control:
Instead of simply postponing, recalibrate and move forward
Assume a minimum 1-year timeline of reduced capacity in all areas—film production, ticket sales, live events, consumer spending, ad revenue—and plan accordingly. Like many government reopening plans, marketing and distribution plans should have built-in triggers, aka x% of a marketing budget should shift from online ad-buys to high-impact IRL events at the point when local policy allows. Local policy and infection status will remain highly variable for an extended period of time while infections flare and cool and until a treatment is developed, so strategies should be agile with relatively independent location-based components.
Leverage any contract flexibility with existing acquisitions to plan smart, cost-effective COVID-era releases and marketing. This may mean moving around release schedules to account for film-specific story resonance, predicted audience reach / demographics, minimum necessary revenue, etc. to ensure films’ releases fit better within current environment. Films predicted to receive a smaller boost from ticket sales and in-person events, or whose marketing efforts have already been invested primarily in online methods, or whose message suits the current mood/moment, should be scheduled for VOD release earlier
Find ways to mimic the value chain-boosting effect of traditional theatrical windows
Rethink what makes a premium film event. Audiences are willing to pay a premium for theater tickets because of a range of incentives (higher picture quality, social aspect, red carpets, impatience, etc.) that add a premium to the viewing experience and work best in concert. Distributors can replicate some of these value-adding elements — exclusive online screenings / QAs, behind-the-scenes / extras, outdoor projection events, limited-edition memorabilia, VR, extending single-viewing rental VOD windows before allowing subscription-based VOD. Successful strategies will have buzz-building AND revenue-building effects
Case study: IFC Midnight opted to screen low-budget indie horror film The Wretched at drive-in theaters instead of simply releasing it VOD. Stir-crazy adolescents packed drive-in theater lots and drove the film to dominate the US box office, earning $1.3mil in 6 weeks
Look for the advantages of socially-distanced business practices, and seek out like-minded filmmakers
Quarantined audiences are stuck in front of their screens, looking for distraction and escape, sensitive to and curious about global issues, more easily emotionally activated, eager for social connection. These conditions create unique opportunities for specific stories (uplifting, activist, fantasy, educational, multicultural) and marketing strategies (tactile, social, audio) to excel more than they might have in the past. Find partners that recognize and build on these advantages.
Successful distributors won’t merely adapt to the current conditions, but look ahead to the changes that the future will bring. They will anticipate the changed conditions in a world with effective COVID-19 management (which may not mean eradication or even vaccination, as we saw with HIV and H1N1), and toward future paradigm-shifting events, including technology advancements, political upheaval, and climate change. The lesson of the current moment is that agility outweighs market share. International distributors need to be able to quickly shift gears, create new strategies for generating revenue, effectively leverage existing assets, and collaborate with others to expand opportunity for all instead of fighting over scraps. International distributors with cooperative global networks will have a distinct advantage in a globalized world with rapidly-changing on-the-ground conditions.