The EconomistApril 4th 2020 Business 571T
he emptyfreeways of Los Angeles look
like a scene from a disaster movie. For
many Hollywood bosses, that is how things
feel. With one in three people in the world
subject to social-distancing rules, box-
office takings in 2020 have collapsed. Tele-
vision is bracing for revenue-starved ad-
vertisers to rein in spending. Shooting on
productions slated for 2021 has ceased,
portending an unpleasant sequel next year.
Covid-19 comes at a tumultuous time
for show business. A five-year, $650bn in-
vestment binge was already reshaping it
for the age of video-streaming. Debts taken
on by giant media groups such as at&t,
Comcast, Disney and Viacomcbs—which
owe more than $350bn between them—
look less sustainable now that their sales
have sunk. Even Netflix, whose streaming-
only offering is less vulnerable to lock-
downs, is not immune. The pandemic will
leave scars. It may claim a few victims, too.
Theatrical releases, which studios use
to recoup blockbusters’ vast production
costs, have all but stopped. Disney’s “On-
ward”, out on March 6th, has grossed one-
fifth of its hoped-for $500m worldwide.
Many premieres have moved partly or
wholly online. Comcast’s nbcUniversal
will start streaming “Trolls World Tour” on
April 10th, the same day it opens in the few
unshuttered cinemas. Paramount Pictures
(part of Viacomcbs) has sold “The Love-
birds”, once scheduled for a cinema run, to
Netflix. Releases held until the pandemicends may find fewer cinemas to screen
them. amc, the world’s largest chain,
which lost money in two of the past three
years as audiences chose their couch over a
night out, is teetering. Cineworld, the sec-
ond-biggest, has said that in the (“unlike-
ly”) worst-case scenario it may fold.
The small screen has its own problems.
Nielsen, a research company, finds that in
past lockdowns, such as during Hurricane
Harvey, time spent in front of the tv rose by
up to 60%. In parts of Italy quarantine
boosted tv ratings, according to Auditel,
another research firm. Yet this may not
help networks. For one thing, they too face
a drought of content. itv, Britain’s biggest
commercial broadcaster, has stopped film-
ing its soap opera, “Coronation Street”, and
is airing three episodes a week, not the
usual six. American networks have built up
an inventory fearing a writers’ strike this
year, but it will only last until the summer.
Even if people tune in to reruns tv fi-
nances will be under strain. As their own
revenues evaporate and their customers
cannot shop, advertisers are pulling com-
mercials. Ad bonanzas have been post-
poned (Olympics) or cancelled (Wimble-
don). Suspension of live sport has deprived
pay-tv operators such as Disney’s espnand
Sky, a European giant belonging to Com-
cast, of their last big remaining attraction.
Some firms, like Sky, have allowed custom-
ers to pause sports subscriptions or offered
access to other paid programming in their
place. espn is airing repeats of classic
matches, plus offbeat fare like dodgeball
and arm-wrestling. Neither tactic is likely
to arrest the slide in the share of house-
holds with pay-tv, down from almost 90%
in 2010 to 65% in America.
Streaming offers some respite. Netflix’s
share price, up by 15% this year, looks bu-
oyant amid a market rout. It claims to have
enough fresh content to last a few months.
Subscription growth for all the big stream-
ers has soared by double digits from week
to week since lockdowns kicked in, esti-
mates Antenna, a data company. After its
European launch in March Disney’s new
platform, Disney+, was downloaded more
than 5m times in just days. at&tand Com-
cast hope for similar success when they
launch (paid) hbo Max and (ad-supported)
Peacock, respectively, later this year.
But an uptick in streaming revenue may
not offset the losses from other businesses.
Netflix, which has none, is running out of
new eyeballs to attract in the West; nearly
half of American households already sub-
scribe. Keeping those it has may require
serving up new shows—which it cannot
produce. Lockdowns are unlikely to bring
in new viewers in poorer countries, where
streaming remains a luxury, especially as
mass joblessness looms.
The revenue squeeze also comes after a
period of heavy borrowing by media firms,You thought the streaming wars were
disruptive?
Show business and the pandemic
Aaaaand cut!
Not singing in the rainE
ric xu, oneof Huawei’s three rotat-
ing chairmen, did not hold back.
“Nonstop pressure from the us govern-
ment, in a deliberate attempt to spread
disinformation, has put our company
under the spotlight,” he wrote in the
firm’s annual report, released on March
31st. This was meant to explain why the
telecoms-equipment giant missed its
revenue target of $135bn by $12bn.
America has barred exports of some
American technology to the Chinese
champion. It is threatening to impose
further sanctions soon and has tried,
with mixed success, to strong-arm Amer-
ican allies to reject Huawei’s next-gener-
ation 5g-networking kit.
For all Mr Xu’s outrage, the results
were rather impressive. Revenues rose by
19% year on year. They have more than
doubled in four years. Net profit rose by
nearly 6% to 63bn yuan ($8.8bn). The
firm’s cashflow from operations rose by
22% year on year, to 91bn yuan.
The firm responded to America’s
assault by redoubling its efforts at “indig-
enous innovation”, through which itsources and invents as much as it can in
China. This will not be easy. Though its
premium smartphones now have fewer
American parts, its overall use of Ameri-
can inputs actually rose last year to
nearly $19bn, from $11bn in 2018.
On the bright side, its kit remains
popular outside America. Although
American measures limited its use of
Google’s Android smartphone operating
system, its consumer-business group
increased sales by 34%, to 467bn yuan,
owing to strength in China and emerging
markets. Its 5ggear is more advanced
and less costly than offerings from Euro-
pean rivals, Ericsson and Nokia. Huawei
now boasts over 90 5g contracts world-
wide, half of them in Europe.
Duncan Clark of bda China, a consul-
tancy, likens Huawei to the villainous
robots in “Terminator” films: not just
indestructible but “able to rebuild itself
after any attempt to take it down”. Even
covid-19 may not slow it down. As more
people Zoom to work, governments
everywhere covet the sort of zippy mo-
bile networks Huawei helps build.Indestructible
HuaweiNEW YORK
Neither American hawks nor covid-19 can stop the Chinese tech titan