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Economic damage from shutdown continues to spread.

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Image courtesy of Adobe Stock.

Summarized below are a few of the recent articles pointing to expanding economic damage from the shutdown. Destruction in the movie business is noticeable in recent days:

  • Second largest movie chain in the US closes all its theaters
  • Wonder Woman director worried the entire theater industry may die
  • Disney restructures in order to increase focus toward direct-to-consumer distribution channel and away from theatrical release
  • Sales tax collections in San Francisco collapse
  • Passenger cruise ships are getting scrapped

10/5/20 – Wall Street Journal – Regal Cinemas Suspending Operations at All US Locations – The chain with the second largest number of theaters in the U.S. has closed all of its US theaters after having reopened only two months ago. Article does not indicate when any of the theaters will be reopened.

Article says release dates for a dozen movies have been postponed.

Wonder Woman was moved from October to Christmas. The newest James Bond movie has been moved to April 2021 from November 2020 and that is after having already been bumped back from April 2020.

The studios are quite hesitant to release movies now after seeing a movie with $200M budget grossed a mere $45M in the U.S. It grossed $262M internationally.

CEO of one theater chain said they are in a situation of a grocery store that doesn’t have any fresh produce or meat to sell.

10/8/20 – CBR – Wonder Woman Director Patty Jenkins Fears Theater Shutdown May Kill the IndustryWonder Woman 1984 has been postponed to Christmas 2020. Other “tentpole” movies have been postponed from this summer or fall into unspecified dates in 2021.

Regal Entertainment has closed all of its theaters for the duration as mentioned above. AMC said it will keep its theaters open in those locations where it is allowed to do so.

The pandemic, high fear level, and economic shutdowns in various states has devastated the theater industry. It cannot be predicted when theaters make an reopen nationwide and it cannot be predicted when people will start returning to the theaters even when they are reopened.

Director of this movie is concerned the entire industry could be lost. Thought process is transitioning many movies, especially including the tentpoles, to streaming could possibly do to the movie industry what streaming and downloads did to the music industry. In her description transition to streaming would reduce even the highest profile movies down to something that can no longer make money.

Ponder the potential damage to the entire entertainment industry –

  • Old option:  drive to the theater, park, go to the movies with your two children (four tickets at $12 to $15 each) and buy a bunch of refreshments ($5 or $10 each person, maybe $20 for a teenage boy).
  • New option: gather in the living room, maybe with your extended family or a couple of close friends and their kids (anywhere from 4 to maybe a dozen people), cook some popcorn, set out some candy and sodas (one-fourth or one-tenth the cost of stuff from the concession stand), and watch a streamed, just-released tent-pole ($30). Oh, the kids can watch the movie again in the morning.

That new option might become far preferable rather quickly.

To prove the point, Disney is reorganizing to increase their focus on streaming and direct-to-consumer distribution…

10/12/20 – CNBC – Disney says its “primary focus” for entertainment is streaming – announces a major reorg – Impact of the worldwide economic shutdown on the theatrical distribution channel has been crippling, in the words of the article.

As a result, Disney is restructuring its internal operations to focus on direct-to-consumer (now abbreviated DTC) distribution channel and away from theatrical distribution. Responsibility for Disney+, advertising sales, and content distribution will be gathered together in one division.

The CEO said this shift was going to happen, but the timing was accelerated by the pandemic. He knows this will reduce staffing, but says reductions will be less than what happened at Disneyland last week, when 28,000 furloughed staff were permanently laid off.

Article discusses postponed release of multiple movies.

Other signs of economic damage…

10/9/20 – Fox News – San Francisco tax revenue plunge points to resident exodus – The city’s sales tax revenues have dropped 43% since the start of the pandemic compared to the prior year. According to the city’s senior economist this is due to people leaving the city more than reduced economic activity.

One of the large national moving companies indicates requests to move out of the city are 128% higher than the national average. More than twice as many people are moving out of San Francisco then the average across country.

Another report indicates median rent prices have dropped 20% this year.

10/11/20 – ABC Australia – Cruise ships dismantled for scrap metal as coronavirus pandemic sinks industry A company in Turkey that turns ships into scrap metal is currently disassembling five cruise ships with three more in line to become scrap.

Usually the company is disassembling container ships but has shifted to cruise ships with the devastation in the cruise industry. The company has 2,500 workers taken apart the cruise ships.

Article quotes a manager saying it takes six months to fully disassemble a passenger ship. The shipyard is planning to increase from 700K tons of salvaged steel in January to 1.1M per month by the end of 2020.

Oh, article contains a link to Our World in Data site with graph of cumulative cases since the 100th case. The data is presented on a logarithmic scale. The staggering results, which you won’t hear from many (any?) government officials, is almost every country saw extremely fast growth and within 20 to 60 days saw the growth curve go flat or a slight angle up. If you were to draw a composite curve trying to tell a story of the 15 countries listed, the growth curve is nearly straight up for about 30 days and then goes flat.

In other words, the virus infection rate sure does seem to have stabilized on its own. It is now roughly flat in every country except India.

For this flat level of infections, we are destroying the world economy, devastating education of children around the world, driving down health indicators, increasing poverty across the planet, and accelerating the number of deaths from overdose, suicide, heart attack, and undetected life-threatening disease.

Written by Jim Ulvog

October 13, 2020, 8:48 am at 8:48 am

Posted in Economics, Pondering

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