Hollywood Braces for Coronavirus Financial Hit That Could Change the Industry Forever

Now that the gravity of a growing coronavirus pandemic has settled in and people are looking to safeguard their health and their livelihoods, the entertainment industry is grappling with three essential questions: How painful will the toll of shutdowns be on the industry’s lowest-paid workers? How high will the financial losses climb? And how will the business handle the unprecedented domino effect on Hollywood’s traditional calendar? The avalanche of hasty cancellations and delays to events and premieres that fuel the industry’s engines of commerce will spread the impact of the COVID-19 catastrophe well past 2020. The likelihood that a recession is looming in the U.S. will magnify the pain for major media conglomerates. Industry observers say the freefall of the Dow Jones into bear market territory has put an instant chill, at least temporarily, on acquisition and investment pacts.

In fact, top executives privately say that the one certainty on the horizon is that only the strong will survive the fallout. Weaker businesses and industry traditions that were already past their prime — notably a host of conferences and trade shows, film festivals and the springtime ritual of the network upfronts — will have a hard time enduring the blow of a sudden shutdown. And with dozens and dozens of productions forced to go dark unexpectedly, including at least two dozen pilots for the 2020-21 broadcast TV season, industry insiders predict the bubble on the Peak TV phenomenon may finally burst.

“This may have the effect of reining in a lot of things that have been out of control for a long time,” says a veteran studio executive.
The immediate casualties of the unexpected business disruption are, as ever, frontline employees who are no longer clocking in hours, like those at the shuttered theme parks operated by Disney and NBCUniversal, or the 50 employees of SXSW who got pink slips instead of paychecks earlier this month when the annual festival in Austin, Texas, was canceled.

With movie theaters being shut down in major cities like Los Angeles and New York as well as abroad, even more jobs will be in jeopardy. The North America weekend box office nosedived to $55.3 million, its lowest levels since September 2000. There is widespread fear among industry insiders that there could be sizable layoffs across Hollywood if the impact of the virus continues to disrupt businesses for a lengthy period.

The halt of so many film and TV productions that were poised to start, or were in full swing, will take a toll not just on the writers and producers but on the lower-rung staffers who were counting on stacking a few paychecks and gaining all-important credits to help land their next gigs.

As yet, there has been no clarity from studios, networks and streamers on how crews of shut-down productions will be compensated in the dark periods.

While the major talent agencies, management companies, public relations firms and studios have largely instituted work-from-home policies, and several shows are trying out virtual writers’ rooms, some assistants and support staff on productions that are still in business have been given no such option, they tell Variety.

Workers wearing masks walk past the Olympic rings near the New National Stadium in Tokyo. The games are scheduled to take place July 24-Aug. 9, shortly after Olympics rights holder NBCUniversal bows its Peacock streaming service.

“The workers who get paid the least, have the least-quality healthcare and the least ability to use it are being pressured to continue exposing themselves for the sake of showing up,” says one production assistant. “If we stay home, we can use sick days, but if we run out of sick days, we don’t get paid. … But my bosses have an attitude of ‘If you get sick, it’s your fault.’ In a pandemic, man.”

When the acute threat of the pandemic inevitably eases, the other massive challenge for the industry will be to reshape the annual awards, events and premieres calendar to make room for everything that was pushed into the back half of this year and into 2021. The Tribeca Film Festival, the National Assn. of Broadcasters conference, WonderCon, Hong Kong Filmart and the AFI Life Achievement Award are among the long list of events hoping to be resurrected later this year. Many predict that the Cannes Film Festival, which runs May 12-23, will either be canceled or rescheduled given the crowd restrictions recently imposed by the French government. Advertising and marketing festival Cannes Lions has secured alternative dates in late October in case the event is forced to move from its planned June 22-26 event.

The post-coronavirus world could see a “pretty dramatic” reduction in industry-related events, says Rob Gabel, CEO of video measurement firm Tubular Labs. “When there’s a recession, you get a thinning of the herd,” he says. “If you’re not a tentpole event, or No. 1 or 2 in your niche, you’re in trouble. It comes to the question, ‘Are a you a must-attend – or a nice-to-attend event?’ It’s survival of the fittest.” Every Man Should Read These 25 Books Before He Dies Some of the best books for men deal with themes of masculinity and fatherhood. Some are just plain, old fashioned page-turners. Ad By SPY See More

The prospect of an event of the scale of the Summer Olympics in Tokyo, scheduled for July 24-Aug. 9, moving to summer 2021 is but one example of a shift that would generate global ripple effects — for the athletes who have toiled to get there, for the International Olympic Committee and its partners, for advertisers and the TV outlets worldwide that pay huge fees for the rights to the games. Beyond that, the timing of the biennial Olympics fortnight affects everything from movie and TV premiere strategies to festivals and conferences.

The scope of the damage caused by the COVID-19 menace is still hard to measure, as the number of confirmed cases grows and the economy stutters. No sector of media and entertainment has been spared amid the cascade of cities and states imposing bans on large public gatherings and employers urging — and in some cases, ordering — staffers to work from home. There’s no precedent in the modern era for NBA, NHL and NCAA games to be suspended midseason, let alone a delay to the upcoming Major League Baseball season. For now, the NFL, which doesn’t begin games until September, has said its season will start on time.

“When there’s a recession, you get a thinning of the herd. If you’re not a tentpole event or no. 1 or 2 in your niche, you’re in trouble.”
Rob Gabel, Tubular Labs CEO

“With [nearly] every major sports event either suspended or canceled, we are likely to see almost a large-scale experiment that is likely to lay bare the economics of the legacy television business,” wrote Barclays analyst Kannan Venkateshwar in a March 12 research note, who called live sports the “last remaining anchor” for linear broadcast and cable outlets.

The scramble to switch release dates for movies and TV programs will cost millions in global marketing and promotional dollars. Production entities will rack up bills on unexpected dark weeks for projects that were in the full swing of lensing. The task of rescheduling music tours and other performing arts shows that are often booked years in advance will be a labyrinthine process of sorting through artists’ schedules and venue availabilities.

To wit, the hasty shuffle of Universal’s “Fast and Furious 9” from a planned May 22 bow to April 2, 2021, is expected to result in millions in marketing redos. Moreover, it throws off by at least one year the carefully plotted schedule of “Fast and Furious” releases. The ninth edition moved into the slot reserved for No. 10 in the franchise.

Disney was forced to bump its long-anticipated “Mulan” live-action feature from March 27 to a date that’s yet to be determined. MGM and Universal led the pack in the decision to move the latest James Bond pic, “No Time to Die,” from early April to late November. Paramount Pictures pulled “A Quiet Place Part II” just a week before it was set to land in theaters.

“Pushing into 2021 or beyond could prove to be tougher because of Disney’s schedule normalizing relative to the dip in previously scheduled Disney releases this year in both number and profile of titles,” says Venkateshwar. “This could force a search for other alternatives to monetize these titles, especially those which may not be released widely or [that] have smaller budgets.”

For smaller players like Lionsgate, MGM and STX, the inability to get finished movies into theaters could create short-term revenue and cash-flow issues, if exhibition shutdowns persist in major territories. There’s no telling when theaters in the nation’s two largest markets — New York and Los Angeles, ordered shut by mayors Bill de Blasio and Eric Garcetti — will reopen.

Disney postponed the release of live-action remake “Mulan,” starring Yifei Liu, despite having held a red-carpet premiere for the film, which had been set to open March 27.
Courtesy of Disney

“There’s a long-term shock to the business and a short-term shock to solvency,” says James Angel, professor of finance at Georgetown University. “For businesses that are cash-flow constrained, if they’re depending on cash and suddenly don’t have that cash, they could end up defaulting on debt agreements. You could see a ripple effect through the economy.”

Exhibitors are also on the front lines of the economic crisis caused by the outbreak. Jeff Logan, owner of Logan Luxury Theaters, who has three venues in South Dakota, described the public health threat and the potential for lost business as “scary.” If ticket sales sink, the company will have to consider scaling back to skeleton crews, he acknowledges.

“Everyone is concerned,” he says. “We’ll see how bad it gets. Truthfully, it’ll vary theater to theater, depending on how much overhead they have. If you’re self-financed and don’t owe money, it’s a different operating expense.”

Beyond the tentpoles, there are other casualties of timing. Sony Pictures’ Vin Diesel action-adventure vehicle “Bloodshot” was made largely on the hopes of capitalizing on the star’s appeal in China.

But the movie landed in the Middle Kingdom on March 13, at a time when quarantines and theater closures are tanking that nation’s box office.

With so many big titles looking for new dates, there will be a drought leading into the all-important summer period, followed by a bottleneck at the box office by year’s end and into next.

Meanwhile, upheaval on the festival circuit is a big setback for producers looking to generate sales and awards buzz for artsy fare.

Producer Christine Vachon, co-founder of Killer Films, had the Elisabeth Moss thriller “Shirley” set to unspool at this year’s Tribeca Film Festival, which was to have run April 15-26. As of March 13, Vachon says she was still in production on the Ryan Murphy Netflix series “Halston,” starring Ewan McGregor as the famed designer.

“Given the circumstances, Tribeca didn’t have a choice,” Vachon tells Variety. “Even though it’s horribly disappointing for filmmakers that had a movie at SXSW or Tribeca premiering, it’s too soon to tell how we’ll pivot. I don’t really know.”

The inability to predict when working conditions may return to normal also means that studios can’t get a jump on rescheduling shoot dates. That’s sure to lead to a chaotic period of sorting out the schedules of in-demand actors, producers, showrunners and myriad crucial production personnel. Industry insiders predict that some projects simply will be scrapped. Some movies that were on the verge of heading into theaters will probably wind up heading straight to streamers. And some TV pilots and series that were abruptly shuttered will not be resurrected, at least not immediately.

“This is a situation where good behavior will deliver great returns.”
Peter Liguori

The turmoil will force companies to scrutinize spending on festivals, conferences, trade shows, promotional events and marketing partnerships. This hard look hits at a time when media’s largest conglomerates are coming off a burst of M&A activity that brought on more debt and more pressure to generate synergistic savings from enlarged operations.

“If things are zeroed out this year and if they incur losses, you won’t see them come back to budgets,” says a senior executive at one of the industry’s largest conglomerates.

Some may see the impact of all of these production delays, cancellations and premiere postponements as frivolous amid a nationwide public health crisis. But even the glitziest movies are built on the backs of hardworking crew members, writers, directors and studio employees who suffer when business comes to a standstill, when layoffs loom on the horizon.

Georgetown University’s Angel asserts that the only question about whether a recession is on the horizon is when, not if. Even when the coronavirus crisis eases, a recession will put a big dent in consumer discretionary spending just as Hollywood is making the direct-to-consumer pivot to focus on new subscription streaming services. Advertising expenditures will fall in the classic boom-and-bust cycle that a frothy economy has avoided for more than a decade. But as evidenced by the wild swings of the stock market so far this year, a correction has been long in coming.

“Think of it as a wildfire that comes through. The conditions build up, and there’s very dry brush at the end of an economic cycle,” Angel says. “We’re ready for that now. And suddenly, after the fire, everybody starts to rethink ‘Do we really need to rebuild the same house in the same spot?’”

Even before news about the COVID-19 virus hit last month, economic jitters were forcing companies to make tough choices about where to allocate resources. Media and entertainment companies are already in the throes of transition, exemplified by the shift from linear to streaming platforms. The three biggest conglomerates in the sector — Disney, Comcast and AT&T — are still realigning themselves in the wake of massive mergers and acquisitions.

But the public response to the growing coronavirus outbreak has left industry leaders with a feeling of whiplash. The pace of shutdowns accelerated the day after President Donald Trump announced in a somber live address to the nation on March 11 that the U.S. would suspend travel from Europe as a preventive measure.

People dashed to buy everything on grocery store shelves in a bid to prepare for social distancing and even self-quarantines. In the past few days alone, the panic has grown exponentially, shifting the focus from FYC events and pilot season to stockpiling and public health measures. The 180-degree turn in the collective level of alarm is as palpable on Wall Street as it is on Main Street.

“Markets hate uncertainty. The coronavirus is creating as much global uncertainty as we’ve seen in a couple of decades,” says Erik Gordon, assistant professor at University of Michigan’s Ross School of Business.

“Bloodshot,” which aimed to take advantage of star Vin Diesel’s popularity in China, arrived when theaters in the nation were closed.
Courtesy of Sony

Among legacy entertainment players, the impact of an outbreak-induced recession ranges from bad to worse.

Today’s media companies are largely vertically integrated and keep irons in various fires. That means diversification and less reliance on one particular business. That also translates to taking potentially devastating knocks in a number of different segments. If nothing else, the COVID-19 scare has reinforced the depth and breadth of the global marketplace for media and entertainment.

Take Comcast, whose holdings include internet and cable communications, NBCUniversal’s broadcast and cable networks, European satcaster Sky, a movie studio and theme parks. The studios and parks are most likely to feel the pain, says MoffettNathanson analyst Craig Moffett. Both of Universal Studios’ domestic theme parks are closed through the end of the month, in a bid to prevent the spread of the disease among large crowds — throwing a wrench into spring-break season in Florida.

The potential for the Olympics to move out of its regular summer slot would be bad for NBCUniversal, which holds the rights to the games through 2034. It would also have repercussions for NBCU’s foray into the streaming wars with its Peacock platform, which is set to launch July 15, a week before the games are slated to begin.

“If the Olympics get canceled, Comcast doesn’t just lose all of that revenue and all of the marketing that they’d planned to do around the Olympics — they also lose the cornerstone of their Peacock launch strategy,” says Moffett. “They’ll have to rework Peacock around something much less unique and potentially less fulfilling.”

Assuming that the economy dives into a full-on recession, the consequent growing household sizes — kids moving back in with Mom and Dad, people taking on more roommates in order to pay rent — would additionally deliver a hit to Comcast’s broadband internet business.

Then there’s the Walt Disney Co., whose position as a doyen of the entertainment industry is a double-edged sword.

Disney’s decision to temporarily shutter the doors to Disneyland for the time being starting March 14 was made just prior to Universal Studios’ decision regarding its domestic parks. Disney’s Florida and Paris parks soon announced their intent to close, meaning that all Disney parks worldwide would be shuttered through March. Disney Cruise Line will also suspend new departures.

A slew of theme parks soon followed suit. The revenue-crushing decisions are being made in an effort to prevent the spread of the illness.

“This is a situation where good behavior will deliver great returns,” says Peter Liguori, former Fox Entertainment chairman and former Tribune Media CEO. “This is not a situation of trying to create damage control. This is a business-continuity challenge.”

The impact to Disney’s balance sheet will be significant. Theme parks, experiences (like cruises) and consumer products made up nearly half — 45% — of the company’s operating income last year. Every day that Disney’s domestic parks are closed costs the company $20 million to $30 million, estimates Barclays’ Venkateshwar.

WarnerMedia parent AT&T, like Comcast, has a big streaming platform launch set for May with the dawn of HBO Max. With AT&T, there’s also the problem of debt. Of all the major companies with media holdings, AT&T is the most heavily leveraged.

“It’s problematic because they don’t grow,” says Moffett. “They were a shrinking business even without a recession. In a recession, their commercial wireline business, which is about the same size as the entire company of WarnerMedia, is highly cyclical and is likely to shrink rather aggressively.”

And AT&T’s DirecTV would have to face off against a bevy of low-cost streaming competitors, something it has not had to do before in times of budget-tightening. That’s not all. Aside from TNT missing out on the benefit of hosting NBA games, “your movie studio is now facing months of empty theaters, and you’re preparing for the launch of HBO Max, which you’re counting on to have a premium price point at a time when your competitors are launching at a fraction of the price and where now customers may be facing real economic stress,” says Moffett. “So it just seems like every part of AT&T’s business is positioned awkwardly at the moment.”

Possibly the only bright spot for these companies is that with the increasing citywide gathering bans and more people working from home, the newer streaming services — Disney Plus, HBO Max and Peacock, for example — are likely to be getting more uptake.

Meanwhile, the timing of the pandemic panic has been horrible for ViacomCBS, which was already facing an uphill climb in convincing Wall Street that the enlarged company has a sound strategy for future growth. The wallop to global equities markets in recent weeks wiped out more than half of ViacomCBS’ $30 billion market capitalization on Dec. 4, the day the long-awaited Viacom-CBS merger was completed. With pandemic fears driving the end of Wall Street’s 11-year bull market, the climb out of the trench just got that much steeper. ViacomCBS shares fell below $20 for the first time since December 2010.

But even as the sea of red ink rises, companies would do well at this moment to keep the spotlight on the human toll of the public health crisis. “Trust is the only thing that means everything,” says Liguori. “Acting transparently and honestly will pay dividends in the long run for these big consumer businesses. Having that EQ and focusing on the people who are in fact the business — that’s going to be the right thing.”

Rebecca Rubin, Ramin Setoodeh and Todd Spangler contributed to this report.

Reopening Hollywood: Here Are The Pandemic Problems Studios Are Trying To Solve Before The Restart

Editor’s Note: As Deadline continues its Coping With COVID-19 Crisis series on the struggles of people in the entertainment industry impacted by the coronavirus-related shutdowns and layoffs, today we launch a new series, Reopening Hollywood, focused on the incredibly complicated effort to get the industry back on its feet while ensuring the safety of everyone involved. We intend to examine numerous sides of the business; if you have suggestions about things to consider, please leave a comment.

On Tuesday, Gov. Gavin Newsom unveiled a six-point guide to how California will reopen its economy as officials weigh lifting restrictive orders designed to curb the spread of the coronavirus. Entertainment is a major portion of the California economy and, with the production shutdown just crossing the one-month mark and layoffs, furloughs and paycuts implemented by reeling studios, there has been a growing discussion among executives and producers about how to ease back into production, along with the big challenges a return poses — from keeping everyone safe to securing an insurance policy, filming crowds and exteriors, and determining what content is appropriate to show in a society changed by the coronavirus.

Related Story MTV Revives ‘Club MTV’ With One-Night Musical Special Amid Coronavirus Crisis We are still months away from cameras rolling — studios’ most optimistic projections are for July-August production restarts, and the more realistic ones are aiming to be up and running by September. California is still under a stay-at-home order, which currently expires on May 15. There are many different issues we will cover, starting today with the resumption of location and soundstage shoots.

Getting up and running again in this brave new world is going to be very difficult to navigate. For one thing, insurers are unlikely to cover productions for COVID-19 cases when business resumes, according to multiple sources in the know. Producers all over filed multimillion-dollar claims triggered when civil authorities —governments — prevented filming from continuing and forcing production shutdowns. When the business starts up, that will now be considered an identified risk, and insurers will not cover it, sources said, just as CDC is warning of a second coronavirus wave.

What does that mean? Most likely, everyone on a film or TV production will be required to sign a rider, similar to ones they sign covering behavior codes in areas like sexual harassment, to indemnify the productions. “You acknowledge you are going into a high-density area, and while we will do our best effort to protect you, nothing is failsafe and if you contract COVID-19, we are not liable,” said a source involved drawing up these guidelines. “There is no other way we can think of to address this. If you don’t want to sign, don’t take the job.”

Conversations about how to return to production began ramping up late last week amid stabilizing levels of new COVID-19 cases and deaths in Los Angeles County, boosted by an encouraging drop in new infections over the weekend. Unfortunately, the optimism was short lived — Tuesday and Wednesday brought record spikes in deaths– but discussions continue because the business cannot begin to recover until an industry goes back to work.

So far, there are no protocols on which studios have settled, but active discussions continue, including with the film commissions in New York and Los Angeles, we hear. AMPTP and IATSE are leaning in hardest here to map lists of safety concerns and solutions, and every major studio in Hollywood has top people trying to figure out every scenario that needs to be addressed before shows can get up and running. The same conversations are taking place in other areas that touch the business, from the offices where people work and congregate, to hotspot eateries and movie theaters.

Nothing will happen until jurisdictions relax regulations that currently don’t allow gatherings of 20 or more people. Anticipating that will happen in a month or two, here are some of the key issues that are being figured out right now in film and TV production:

There will be no ideal way to ensure a completely safe set, but this is what might happen right away. Everyone will be tested before they are allowed onto a set. While not as accurate as traditional swab tests that take days to process, rapid antigen tests are the best possible option as they provide results within 15-20 minutes. Their daily use on sets is predicated on the availability of testing kits without taking them away from first responders and hospitals. Additionally, productions are expected to employ, when possible, antibody tests that detect immunity if a person had already had the virus.

There will be a health questionnaire, a temperature check and hygiene training (sneeze into the crook of your elbow), and health professionals will be hovering to check for fever or symptoms, with those who exhibit them subject to quarantine. This process is expected to add up to an hour and a half to each person’s arrival time, though those whose antibody tests show they have some immunity, it is possible they won’t have to be tested every day.

Now, there are legal hurdles and privacy issues that come into play in all of this, but it’s envisioned that whether you are above or below the line, you are going to have to submit to this scrutiny before you are handed masks and gloves to put on while you are on the set.

“No one will want to, or should, report back to any environment they don’t feel safe in,” a top TV producer said.

The set you enter will be different from the pre-pandemic sets. You will not be allowed to share hand tools of any kind, so if you are building a set, there won’t be communal saws, screwdrivers or hammers. You’ll need your own.

Craft services used to consist of a cafeteria-style meal, and snacks like communal bowls of peanuts and M&Ms. That will be history. Meals will only be doled out in single-serving pre-wrapped fashion, and there will be no shared utensils. Lunch breaks will have to be staggered, to cut down on density.

There will be an extra level of protection built around actors whose health is crucial to keeping a production going and a crew employed. They are irreplaceable and, because of the nature of their work, actors cannot be in front of the camera wearing protective equipment. To keep them safe, below the line personnel coming into contact with actors or directors will have to wear masks and gloves at all times.

Offices and bathrooms will no longer have doorknobs or handles that need to be touched to open them; it will be swinging doors, from now on. The sparkling water cooler? It requires the push of a button so that won’t work. And since no one wants to be responsible for an accumulation of plastic bottles, boxed water is the most likely option.

You will not be allowed to share cell phones, and a crew will be hired to disinfect the set each day.

There is talk of productions commandeering entire hotels to create safe zones where those working on a movie or TV production can stay and congregate. Even then, the rigorous testing process will have to be done at the start of every week, since those working on series and films will go home to families, and maybe to bars and restaurants.

The hope is that the testing will allow actors to engage in intimate scenes, but crowd scenes that call for a multitude of extras to be sandwiched into a frame — around the movie or TV show’s star — will be a major issue. One possibility is the more liberal use of LiDAR for visual effects. A city can be digitally re-created, down to the last cobblestone, and actors can be green-screened into a frame, into that crowd of extras. The priority will always be to keep the stars of TV shows and movies from getting sick.

Filming Generates $33 Million to local Santa Clarita Economy

Santa Clarita wrapped up 2018 as yet another robust year of location filming, which generated an estimated economic impact of nearly $33 million to the local economy.

“It’s been another great year of filming in Santa Clarita,” said Mayor Marsha McLean in a prepared statement.

By the end of last year, the Santa Clarita film office recorded 547 film permits and 1,376 location film days, all which contribute to what is generated locally. The non-reported numbers by the department include film days and economic benefit from filming that takes place on certified sound stages since they do not require a film permit.

Television production, alone, made up more than half of the filming days in 2018. These shows were mostly those based in Santa Clarita, including “Future Man,” “Good Trouble,” “Goliath,” “Mayans MC,” “NCIS,” “Santa Clarita Diet,” “Shooter,” “S.W.A.T.,” “Untitled Suits Spin-off” and “Westworld.”

Numerous feature films also took advantage of local film areas, such as “A Quiet Place,” “Bird Box,” “Call of the Wild,” “Captain Marvel,” “Ford vs. Ferrari,” “Once Upon a Time in Hollywood,” and “Vice.” Commercials for Under Armour and United Healthcare, as well as music videos, still photo shoots and online content also shot in Santa Clarita.

Evan Thomason, economic development associate with the city of Santa Clarita said these figures, resulting in an average of $30 million in economic impact, has remained consistent over the last several years and believes “2019 is also looking strong.”

What has helped Santa Clarita establish itself as a filming destination is a list of features such as having more than 20 sound stages and 10 movie ranches, affordable permit fees and expedited permit processing and having film-friendly locations “that can be dressed up to play different locations around the world,” said Jason Crawford, the city of Santa Clarita’s economic development manager.

The area is also located within the film industry’s 30-mile zone. The city’s own film incentive program and Movie Ranch Overlay Zone have also continuously appealed to filmmakers. The Santa Clarita Valley has also benefited tremendously from the California Film and Television Tax Credit Program as numerous approved projects have filmed and continue to do so on location in the area, according to the film office.

“It’s no wonder why our city is one of the preferred destinations for film production and location filming in the Los Angeles area,” said McLean. “Filming remains a critical part of our business community and local economy by supporting high paying jobs and companies involved in the industry.”

Filming generates $33M to local economy