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Media and Entertainment in Post-COVID Japan

Entertainment of the Future

(Extract from “11 Investment Themes in Post-COVID Japan“)

With people confined to their homes, the way we consume media and entertainment dramatically changed during the pandemic. Online and at-home digital media such as television, movies, and online gaming is expected to continue growing significantly.

In contrast, external consumption models such as movie theatres, theme parks, and museums are suffering and business recovery remains slow, as social distancing habits take hold even after lockdowns are released.

Another trend is the emergence of digitally native replacements for many social interactions across sectors such as cultural experiences, hobbies (e.g.: fitness, music, art classes, etc.), civic and religious services. In-person events will increasingly be supplemented by online experiences and digital options. We can expect online social events to replace and supplement the house party, and new forms of social and family interaction to evolve.

Without physical sports, many have been playing video games for hours on end. In its Q1 report, Verizon Communications Inc. saw a 40% increase in video usage and over 200% up in gaming.13 Revenue from Tencent’s gaming business rose 31% to RMB 37.3 billion (~USD$5.25 billion) during China’s stay-at-home period in February and March 2020.14 The rise in e-sports, as well as greater use of VR and AR for entertainment, can be expected.

In the first quarter of 2020, Apex Legends’ maker saw an increase of up to three times its normal viewership. Online streaming platforms recorded nearly 495 million hours/week in end-March, a 43% jump in viewership compared to the beginning of 2020. Notably, Nintendo’s new Animal Crossing: New Horizons led all game sales in March 2020, trailing only Super Smash Bros. Nintendo stock went up 40% to near its 10-year high since mid-March when COVID-19 hit the market, against a 13% increase in Japan’s benchmark Nikkei Stock Average.15

Sporting events, organizations, and fans have had to deal with the reality of their favourite past-times being put on hold or seasons entirely cancelled due to COVID-19. But e-sports are thriving. There are even e-versions of F1 car racing on television, and although it might not be the same as traditional Formula 1 racing at the racetrack, it has been providing people a “sports” outlet. Unlike mainstream sporting events, e-sporting events can easily transition online. Similar to trends for live events, I predict more hybrid sports coverage where physical events will be complemented with digital offerings.

 

CHALLENGES

Lack of Community:
Social media and online gaming provide a sense of community, something that many TV and video streaming platforms still lack.

Virtual Status:
Mind shift to stop framing digital experiences just as tools for entertainment, and start thinking about them as platforms for status-accruing experiences with the rise of the virtual experience economy will be important.

Value Creation:
How will you create virtual experiences that consumers value — and want to share — as much as their real-world experiences?

Monetisation:
Most media outlets derive a significant percentage of their revenue from advertising, but the pandemic has brought advertising to a standstill in many sectors. More advertising options for digital platforms will need to be developed to improve the monetization of media and entertainment channels in a post-COVID world.

Cloud-Based Gaming Platforms:
For game console companies such as Nintendo, investors need to figure out whether the strength of its massive library of content can survive new cloud-based gaming platforms being offered by the likes of Google and Amazon. The ability to develop a device-neutral cloud-based gaming platform woven into its ecosystem will be critical.


Citations
13 “Verizon Communications Inc (VZ) Q1 2020 Earnings Call Transcript.” The Motley Fool. Apr 24, 2020. https://www.fool.com/earnings/call-transcripts/2020/04/24/verizoncommunications-inc-vz-q1-2020-earnings-cal.aspx
14 Sheng, Wei. “Tencent gets boost in Q1 as China turns to gaming during outbreak.” Technode. May 14, 2020. https://technode.com/2020/05/14/tencent-gets-boost-in-q1-as-china-turns-togaming-during-outbreak/
15 “Esports pull in more viewers as coronavirus halts live competitions.” The Japan Times. Apr 17, 2020. https://www.japantimes.co.jp/sports/2020/04/17/more-sports/esports-pull-viewerscoronavirus-halts-live-competitions/#.XtuFLG5uI2w

FULL PDF also available on Academia.edu and ResearchGate.edu

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