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Entertainment in the Time of a Pandemic

Among other aspects of our lives, the current pandemic has had profound impacts on the way entertainment is consumed which are likely to last beyond when governors elect to reopen states. Nearly all sporting events have been canceled, and movie theaters and concert venues are closed.

In mid-April, rumors emerged that AMC, the country’s largest theater operator, was in talks to hire a bankruptcy law firm. Any imminent restructuring was likely avoided or delayed when the company announced a new $500 million debt offering and stated they had sufficient cash on hand to survive a suspension of operations through the end of the summer.

Still, when stay at home orders are lifted, it’s unclear how quickly people will return to crowded movie theaters. The same can be said for casinos, sports arenas, and concert venues.

We are all aware of the proliferation of streaming services over the last several years including Netflix, Hulu, Disney+, ESPN+, YouTube TV, and HBO Go, among others. With the unprecedented number of people stuck at home this trend has never been more relevant. However, at the same time streaming services offer one of the few viable forms of entertainment, it is increasingly difficult to provide original content. Other than horse racing, live sporting events have been canceled, and the production of tv shows and films have been postponed.

This places an increased focus on the quality of companies’ existing copyright portfolios as well as their backlog of unreleased content. Entities that are able to effectively adjust release schedules and find creative solutions for developing new content are most likely to emerge from the current economic environment (relatively) unscathed.

As an example, the first two episodes of the documentary series, ‘The Last Dance,’ which is based on the career of NBA Hall of Famer Michael Jordan, and produced by ESPN (a subsidiary of Disney), were aired on April 19 as opposed to the original release schedule in June. These two episodes generated the highest ratings of any documentary in ESPN history.

Nielsen data showed the first two hours of the series airing Sunday averaged 6.1 million viewers. The previous record holder, ‘You Don’t Know Bo,’ about baseball and football star Bo Jackson, was watched by 3.6 million viewers in 2012. The audience counts TV viewers only and does not include streaming platforms.”

“’The Last Dance’ was the number one trending topic Sunday on Twitter and, at one point, 25 of the 30 trending topics were related to the show. Nearly every interview subject who appeared in the first two hours — including former presidents Barack Obama and Bill Clinton and NBC Sports broadcaster Bob Costas — were trending.”

Sports leagues including the National Basketball Association and Major League Baseball have also explored creative solutions to avoid canceling their seasons. Even if games are played in empty arenas, there is a massive economic incentive to resume play which can be streamed to the public from home.

As an indication of the magnitude of the incentive, the NCAA Men’s Basketball Tournament, which lasts three weeks and has already been canceled, generates nearly $1 billion in estimated advertising revenue a year. Perhaps no greater measure has been taken than that by the UFC where President Dana White insists he is creating a “Fight Island.” This would theoretically increase competitor safety and reduce the time before events can resume. In mid-April, “UFC’s immediate parent company, filed 22 trademark applications. The various trademark filings cover the phrase “Fight Island” and “UFC Fight Island” for applications ranging from an actual mixed martial arts event to t-shirts to towels and even jewelry.”[6]

As the “streaming wars” continue, the one constant is change; and, as Bill Gates said in 1996 “Content is King.” For entities with content portfolios, this places a renewed focus on the valuation of their intellectual property in order to extract fair value in the current economic environment.