The war of entertainment: how streaming services and the pandemic may spell farewell to the cinema industry

Tuesday 7th July 2020

UK cinemas are now permitted to reopen their doors to the British public. However, it is uncertain whether we can expect a surge in ticket sales in the next couple of months – according to a recent YouGov poll, 74% of those surveyed expressed a fear of a second coronavirus wave after Boris Johnson announced the further easing of the lockdown on the 23rd of June for the 4th of July. While the big UK cinema chains, such as Vue and Cineworld have assured the British public that they will be implementing effective hygiene and social distancing measures to prevent a second outbreak, this may be far from enough to entice prospective customers. In particular, the British public’s appetite for streaming services since the start of the outbreak suggests that UK cinemas may have to wait a while until they see ticket sales return to pre-lockdown levels.

The main question this leaves us asking is whether reopening cinemas is an economically viable option at this stage of the pandemic. In the US state of Texas, where cinemas have already been given the green light to reopen, the seating capacity of movie theatres has been capped at just 25 percent. Tim Richards, the chief executive of Vue, has expressed optimism for the safe reopening of the chain in the UK, stating his plan to stagger screening times and to have customers purchase their tickets online. However, he admits that he believes it “will take around two to three months from reopening before customer demand returns to pre-coronavirus levels.”

A large differentiating factor for cinemas compared to digital entertainment platforms pre-lockdown was the exclusive period of time in which cinemas could show newly-produced films from world-renowned film studios before they became available on DVD or on streaming services. However, Universal Studios’ decision to release the film ‘Trolls World Tour’ directly online during the Covid-19 pandemic has stripped UK cinemas of this unique component. This sparked such anger among cinema chain Cineworld that they threatened to no longer show Universal Studios films, should the studio carry on with this behaviour.

Despite this, commentators from Forbes magazine believe that the lockdown is not all bad news for the cinema industry. More specifically, the backlog in movie screenings – the fact that cinemas have not been able to show movies that were originally scheduled for the months of lockdown – means that they are likely to fare better than other parts of the entertainment industry, like theatres for example, who can only give so much to their prospective audiences. Thus, according to Forbes, the second half of 2020 is likely to be a bright one for the cinema industry.

While there may be truth in this, it certainly cannot be denied that the cinema industry, regardless of the pandemic, has tough competition – streaming services. Netflix is a crucial one to zoom in on, considering the immense success of its Netflix Originals. Netflix’s plan to introduce 59 new original shows, movies, and documentaries to its service in the month of July, of which excludes any additional licensed content, should have the chief executives of UK cinema chains tremble with worry. The streaming service’s original tactic of filming its seasons far in advance, so that they can be released at once, coupled with its worldwide credibility permitting them to work in countries less affected by the pandemic, means that they are currently able to work on over 200 projects remotely.

In comparison, the leading UK cinema chains have not yet announced any new projects up their sleeve – Cineworld originally planned an acquisition with Cineplex, the Canadian cinema chain, in hopes to expand further. However, this was broken off by Cineworld earlier in the year after Cineplex reported a net debt of $625 million in February of 2020, a figure that was high enough for a ‘material adverse effect’ – this is “a materiality threshold” that is used in the process of mergers and acquisitions “to measure the negative effect of some event on the target business” (Thomson Reuters). Despite it being lower than the $725m debt figure Cineworld claimed they would withdraw the deal on, it was not a risk worth taking for the company. This is considering the rocky future predicted for the cinema industry amidst the Covid-19 pandemic.

A recent survey found that 25% of the British public are more likely to subscribe to a streaming service during the lockdown in comparison to before – in the first months of the pandemic, Netflix saw the number of new subscribers increase by 50% more than expected worldwide. As of May 2020, Netflix is the leading streaming service in the UK, with 12.4 million British subscribers, and Amazon Prime Video following with above 7 million subscribers. In just 6 months, Disney Plus acquired 50 million subscribers globally. It is reasonable to suggest that these figures will only increase, regardless of how many cinemas are willing to welcome us back. Its continuous release of new content (as discussed above), alongside the competitive “low cost and flexibility” (The Guardian, 2020) that these streaming services offer, appeal to all types of audiences. Most streaming services offer a one-month free trial, and standard monthly subscription fees for the most popular services, like Netflix, Amazon Prime Video, Hulu and Disney Plus come at the relatively affordable price of less than £10 a month. This is less than a single adult cinema ticket, in most cases. With the option to watch an unlimited amount of shows, movies, and documentaries for this fee, versus one movie, it is understandable why the general public has been going to the cinema a lot less since these services took off globally in 2010.

However, what about the social aspect of going to the cinema? With the ‘one metre plus’ social distancing measures applying to all customers but individuals of the same household, in line with the UK Government’s advice, it will still be difficult to enjoy the entertainment experience that cinemas offer. Worries regarding sitting in an enclosed space with strangers for the duration of a movie have further encouraged a move towards drive-in cinemas in the UK. Although, its unfamiliarity has made it difficult for it to set off, except in a few remote locations offering the space to do so.

Netflix’s introduction of the extension ‘Netflix Party’ additionally removes the social barrier of binge-watching shows in the comfort of our homes. BBC iPlayer’s recent launch of ‘BBC Together’ in May 2020 also enables its viewers to watch BBC programmes with their friends and family remotely.

With streaming services successfully replicating aspects of the cinema experience and offering more content than previously imaginable prior to their introduction, cinemas will have to think of innovative ways to catch up, and quickly.