Futuresource: Coronavirus to Cut Global CE Revenue 5% This Year

With ongoing global concern about the potential coronavirus (COVID-19) pandemic, new data from Futuresource Consulting suggests the consumer electronics market could see a 2% to 5% full-year drop in retail value worldwide.

Most consumer electronics products are manufactured in China, the epicenter for the coronavirus, which has seen manufacturing and consumer demand scuttled. The Chinese CE market accounted for 22% of the $1 trillion industry in 2019, according to Futuresource.

At the same time, Johns Hopkins University said more than 100,000 coronavirus cases have been reported globally with the vast majority of infections and deaths (3,015) occurring in China.

“Having already faced disruption in 2019 due to the Sino-American trade war, COVID-19 has further highlighted the risks associated with over-reliance on Chinese manufacturing,” London-based Futuresource said in a statement.

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The research firm said while the full effects of coronavirus remain to be seen,  short and long-term effects on consumer electronics and media entertainment industries will be significant.

Specifically, supply chain disruption to hardware vendors reliant on Chinese manufacturing will struggle, with delays in the supply chain leading to product delivery difficulties and poor Q1 fiscal performance that could extend into Q2.

Futuresource expects the second half of the year to offset the difficulties with pent-up consumer demand translating into seasonality as opposed to an overall yearly decline.

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Meanwhile, digital media platforms such as SVOD, AVOD and transactional are benefiting from the crisis, with digital video, music, and gaming all seeing spikes in engagement, according to Futuresource.

Retail trends toward e-commerce are also accelerating, while collaboration technology and software is also a beneficiary of the crisis. Besides being a short-term effect, this could have implications in the long run, as consumers are likely to continue engaging with these platforms after the virus is contained.

“In a very short time period, COVID-19 has had a disruptive impact on individuals, countries and major companies alike,” Futuresource wrote. “[We] will continue to monitor the progression of the outbreak and provide further updates as the situation develops.”

 

Why Have Netflix, Apple, Google, Facebook and Others Nixed Events? Local Government Asked Them To

With a growing list of media tech companies canceling appearances at the upcoming South by Southwest (SXSW) Music Festival in Austin, Texas, and other public events due to concerns about the spread of the coronavirus (COVID-19), the decision by Netflix, Apple, Google, Intel and Facebook, among others, was apparently inspired by local government.

The County of Santa Clara’s Public Health Department this week updated its recommendations to “protect residents of the county” from the virus, saying local employers should refrain from exposing staff to “close contact with large numbers of people.”

Santa Clara County includes the cities of Cupertino, Mountain View, Palo Alto, and San Jose — corporate homes to many of the aforementioned companies. Amazon, Facebook and Microsoft have offices in the county.

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With six new coronavirus cases confirmed in Santa Clara County, bringing to 20 the number of people who have tested positive for the virus in the area, the Public Health Department said it was taking proactive steps to slow the spread of the virus and reduce the number of people infected.

“We understand these recommendations will have a tremendous impact on the lives of people in our community,” the county said in a March 5 statement. “Public Health is making these recommendations in consultation with Centers for Disease Control and Prevention (CDC), based on the best information we have at this time, to protect the public’s health. This is a critical moment in the growing outbreak of COVID-19 … when such measures can potentially slow the spread of the disease.”

Specifically, the county said companies should suspend nonessential employee travel; minimize the number of employees working within arm’s length of one another, including minimizing or canceling large in-person meetings and conferences.

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It urged employees to stay home when they are sick and maximize flexibility in sick leave benefits, and not require a doctor’s note for employees that are sick as healthcare offices may be busy and unable to provide that documentation right away.

Companies should also consider the use of telecommuting options for appropriate employees, and stagger the start and end times for workers to reduce large numbers of people coming together at the same time.

Earlier this week, Adobe canceled the live portion of the Adobe Summit 2020 confab — originally slated for March 29 to April 2 in Las Vegas — due to the virus. The 2019 event attracted 16,000 attendees and featured presentations by Reese Witherspoon and New Orleans Saints quarterback Drew Brees, among others. The summit will continue this year as an online only event.

“Over the past few weeks, we have been closely monitoring and evaluating the situation around COVID-19 to ensure we are taking the necessary measures to protect the health and wellbeing of Adobe Summit attendees,” Adobe said in a statement. “As a result, we have made the difficult but important decision to make Adobe Summit 2020 an online event this year and to cancel the live event in Las Vegas.”

Google canceled its Cloud Next event in San Francisco, while Facebook nixed its F8 developers confab in San Jose.

Meanwhile, tickets for the Netflix Is a Joke Festival live stand-up comedy event across 20 venues, April 27 – May 3 in Los Angeles, went on sale March 4.

 

Apple, Netflix, WarnerMedia Pull Out of SXSW Media Festival

Apple (Apple TV+), Netflix and WarnerMedia Entertainment are the latest high-profile media companies to cite the threat of the coronavirus (COVID-19) for nixing plans to attend the annual South by Southwest (SXSW) Music Festival, slated for March 13-22 in Austin, Texas.

Founded in 1987, South by Southwest is an annual conglomeration of film, interactive media, music festivals and conferences increasingly attended by major media companies, including studios, to announce products, content, including home entertainment. Organizers say upwards of 200,000 people attended the event in 2019.

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Netflix was set to unveil five films at SXSW, including LA Originals, a documentary exploring the culture and landmarks of the Chicano and street art movement. The SVOD pioneer also had March 15 panel scheduled for “#BlackExcellence,” a family comedy series starring Rashida Jones and based in part on series creator’s Kenya Barris’ life.

Netflix’s decision comes about a month ahead of its branded stand-up comedy “Netflix Is a Joke Festival” in Los Angeles.

Apple was slated to screen upcoming Apple TV+ content, Beastie Boys Story, from director Spike Jonze; Sundance acquisition Boys Slate and series, “Central Park” and “Home.”

The companies join a growing list of media organizations opting not to send staff and talent to public events as a precaution. France’s annual MipTV 2020 confab in Cannes has been cancelled due to a government current order prohibiting large-scale public events.

California Governor Gavin Newsom March 4 declared a state of emergency following the death of an elderly woman near Sacramento. There are now 160 reported coronavirus cases in the U.S., with 11 deaths.

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Austin Public Health, which is testing one possible coronavirus patient, contends the risk to exposure at SXSW and within Austin remains low. Texas has 12 confirmed cases of the virus thus far.

“Today the threat of community spread in Austin remains low, however, we are prepared for it to happen here,” Dr. Mark Escott, interim medical director and health authority for Austin Public Health, said in a press conference.

“Right now, there is no evidence that closing South by Southwest or other activities is going to make this community safer. We are constantly monitoring that situation.”

Escott said Austin Public Health would continue to evaluate situation, adding that any evidence that the community would be safer by closing down public events, “we’ll do that.”

CNN just launched a pop-up podcast, “Coronavirus: Fact vs Fiction,” with CNN Chief Medical Correspondent Dr. Sanjay Gupta, covering the latest news of the COVID-19 virus and what people can do safeguard themselves.

Meanwhile, with increased numbers of events being cancelled due to virus concerns, the airline industry reported it expects to lose $63 billion to $113 billion in revenue from global passenger traffic in 2020.

The news nixed brief Wall Street gains with the Dow Jones Industrial Average losing 500 points and the S&P down more than 1%.

Amazon Studios Pulls Out of SXSW as Calls Grow to Cancel Annual Media Festival

Amazon Studios has become the latest media company to pull out of the annual South by Southwest (SXSW) Music Festival, March 13-22, in Austin, Texas.

Amazon joins Facebook, Twitter, Mashable, TikTok, Dell, Intel, China Gathering and other companies that are dropping out of SXSW over concerns of the coronavirus’ possible impact on company employees.

To date, more than 91,000 people globally have been infected with 3,100 deaths attributed to the disease. There are more than 100 confirmed cases in the United States, including nine deaths.

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Amazon, which just disclosed that an employee in its Seattle headquarters had contracted the COVID-19 virus, had planned to unveil several projects through its Prime Video unit, including a co-promotion with Entertainment Weekly.

“Due to health concerns Amazon Prime Video has decided to pull back from the festival and will be cancelling all activities, including the Blue Room Photo/Video Studio over the weekend and the Entertainment Weekly party on Sat evening,” the publication said in a statement. “We regret any inconvenience this may cause. The health of our team members and guests is our priority. Thank you for your understanding.”

Despite an online petition and calls from some, including Twitter CEO Jack Dorsey, to cancel this year’s festival, organizers say the show will go on. Indeed, the show actually pushed-back with the March 2 announcement of new big-name speakers, including former U.S. Secretary of State Hillary Clinton and former Democratic Presidential candidate Beto O’Rourke.

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In a statement on its website, organizers said they are working “closely on a daily basis” with local, state, and federal agencies to plan for a safe event.

“As a result of this dialogue and the recommendations of Austin Public Health, the 2020 event is proceeding with safety as a top priority,” SXSW said in a statement. “We hope that people follow the science, implement the recommendations of public health agencies, and continue to participate in the activities that make our world connected.”

In addition to festivals, Sony Pictures shuttered three offices in Europe (Paris, London and Gdynia, Poland) due to coronavirus concerns.

Microsoft canceled its “Most Valuable Professional (MVP) Summit,” slated for March 16 in Seattle. The Google I/O developers conference, May 12-14 in Mountain View, Calif., also has been canceled.

 

Disney Cancels Glitzy Euro Disney+ Launch Event Due to Coronavirus Concerns

Disney has canceled a high-profile media launch event for proprietary subscription streaming video platform Disney+ slated for March 5-6 in London due to concerns over the spread of the coronavirus (COVID-19). The virus has reportedly infected more than 90,000 people and killed almost 3,000.

The move comes the same day Disney announced a distribution deal for its SVOD service with Comcast-owned Sky in the United Kingdom and Ireland.

“Due to a number of media attendee cancellations and increasing concerns at the prospect of traveling internationally at this time, we have decided to cancel our Disney+ launch events scheduled to take place on Thursday and Friday,” Disney said in a media statement.

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Instead, Disney will focus marketing on social media, online media and press releases to hype its over-the-top video competitor to Netflix and Amazon Prime Video. A planned demo of Disney+ to the press on March 6 will continue as scheduled.

Disney+ is slated to launch in Europe on March 24.

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Warner Cancels ‘Superman: Red Son’ New York Premiere Over Coronavirus Concerns

Warner Bros. Home Entertainment March 2 canceled a screening of the animated film Superman: Red Son slated for March 16 in New York over concerns regarding the spread of the COVID-19, aka coronavirus disease 2019.

Based on the DC Comics “Elseworlds” graphic novel from 2003, Red Son takes place in an alternate reality where the spaceship bearing the last survivor of Krypton crash lands in Stalinist Russia instead of rural Kansas, resulting in Superman becoming a hero of the Soviet Union during the Cold War. The film features the voices of Jason Isaacs as Superman and Diedrich Bader as Lex Luthor.

The film premiered in Los Angeles Feb. 24 and was released through digital retailers Feb. 25. Warner Feb. 28 announced the New York premiere would be held March 16, the day before Red Son’s March 17 release on Blu-ray Disc, DVD and 4K Ultra HD.

The first case of COVID-19 in New York City was confirmed March 1.

As of March 2, there have been about 90,000 reported cases of COVID-19 worldwide, with more than 3,100 deaths from the illness — the vast majority occurring in China. Around 100 cases have been reported in the United States, with six deaths in Washington state.

“As the impact and spread of the coronavirus (COVID-19) continues to evolve, Warner Bros. is placing added emphasis on the health and welfare of its employees, talent and fans. To help minimize risk of exposure, Warner Bros. has opted to take preventative measures and cancel the New York premiere,” the studio announced.

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Warner had planned a red carpet event at New York’s Directors Guild with a screening and Q&A for members of the press, with a limited number of tickets available to the general public. The Guild theater has a capacity of 436.

Among those announced to be in attendance were executive producer Bruce Timm, director-producer Sam Liu, screenwriter J.M. DeMatteis, and castmembers Amy Acker (voice of Lois Lane), Vanessa Marshall (Wonder Woman), Roger Craig Smith (Batman) and Sasha Roiz (Hal Jordan).

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AMC Theatres Closes Select Screens in Italy; Looking to Partner With SVOD Services

As a precaution against the spread of the coronavirus (COVID-19) in Italy, AMC Theatres had shuttered 22 theaters for a week in Northern Italy starting three days ago. The company, which operates 47 theaters in the country, said the fiscal impact on the week-long closings range from $500,000 to $1 million per theater.

The Italian government has confirmed that more than 600 nationals have been infected with COVID-19 thus far.

Speaking on the Feb. 27 fiscal call, CEO Adam Aron said world’s largest theatrical chain thus far has not been impacted significantly by the virus, which has killed about 2,600 people and infected more than 87,000 — largely in China.

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“There is an increasing view in Milan that there may be an overreaction [about the virus spread] in and around [the city],” Aron said. “AMC Entertainment does not have movie theaters in China nor in South Korea nor anywhere in Asia. AMC does not have movie theaters in Iran.”

In addition to China being the epicenter for the virus, South Korea and Iran have a reported combined 2,200 cases. Japan has more 800 reported cases.

At the same time, Aron said he is fully aware that should the virus become an issue in the United States and Europe, the impact on AMC would be significant.

“It goes without saying that we are vigilantly monitoring reports and advice from governmental authorities in the United States and throughout Europe as well as from medical experts,” he said.

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As an exhibitor, Aron said AMC has a responsibility to its workers and consumers to provide a safe environment to watch movies.

“We will be a responsible player here … looking broadly at our circuit of 1,000 theaters across 15 countries,” he said. “So far so good.”

Separately, Aron said the company’s Stubs A-List ticket subscription service has between 900,000 and 1 million paid members, representing from 15% and 20% of the chain’s total U.S. admissions. Overall A-List contributed more than $20 million of incremental operating income to AMC in 2019.

“It’s increased loyalty to AMC. It’s benefited our theaters, our studios and our premium format partners,” Aron said.

While dismissing burgeoning over-the-top video consumption by consumers, Aron said AMC is looking to work with studio-backed streaming services such as HBO Max, Disney+, Hulu and Peacock to use theatres as marketing vehicle for streaming.

Aron said the company had just hired a former 20th Century Fox executive as new SVP of strategy based in Los Angeles and tasked with forging partnerships with streaming services to create value for the benefit of all parties, “but especially to create value for us here at AMC.” The new executive will be announced on March 2.

Aron said that rather than looking at theaters as competitors, he contends SVOD players should utilize theatrical exhibition to create “tremendous value” for their content and for their shareholders.

“Studies have indicated a clear and strong positive correlation between those who stream movies and those who also like to go to theaters to enjoy movie watching in person on a big screen with powerful sound and the smell of buttered popcorn,” Aron said.

 

Best Buy CFO: Coronavirus ‘Very Fluid Situation’ Impacting First Half-Year Results

Best Buy Feb. 27 said it expects interruptions from the global coronavirus outbreak to impact first half-year store results.

Like many retailers, Best Buy generates much of its product inventory from China, which, as the epicenter of the COVID-19 virus, has seen many manufacturing facilities shuttered over worker safety concerns.

“This is a very fluid situation, which makes it difficult to determine exact financial impacts from disruptions in supply chain,” CFO Matt Bilunas said in a statement.

The CFO said the retailer views the situation as a relatively short-term disruption that would not impact Best Buy’s long-term strategy and initiatives.

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“Our guidance ranges for both Q1 and the full-year 2021 [upwards of 2%] reflect our best estimates of the impacts at this time,” Bilunas said.

Separately, the nation’s largest CE retailer disclosed that fourth-quarter (ended Feb. 1) same-store entertainment sales in the United States fell nearly 22% to $1.1 billion compared to a 2.7% increase to $1.3 billion in the previous-year period.

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The entertainment segment includes DVD/Blu-ray Disc movies, video game hardware and software, books, music CDs and computer software.

The nation’s largest consumer electronics retailer said entertainment represented 8% of $13.8 billion domestic revenue, down from 10% of $13.5 billion in Q4 of 2019.

Internationally, same-store entertainment sales dropped nearly 17% to $94 million from a 2.7% drop to $117 million during the previous-year period. Entertainment represented 7% of international revenue compared to 9% in 2019.

Overall, domestic revenue increased 2.6% versus last year. The increase was driven by comparable sales growth of 3.4%, partially offset by the loss of revenue from store closures in the past year.

The largest comparable sales growth drivers were headphones, computing, appliances, mobile phones and tablets. These drivers were partially offset by declines in the gaming category.

Domestic online revenue of $3.52 billion increased 18.7% on a comparable basis due to higher average order values, increased traffic and higher conversion rates. As a percentage of total domestic revenue, online revenue increased to 25.4% versus 21.9% last year.

COVID-19: A Boon to Home Entertainment?

The sudden spread of the Coronavirus disease (COVID-2019), an incurable infectious disease that has killed more than 2,200 people, into Italy, Iran, Austria, Spain, Croatia and South Korea, has sent global markets on a downward spin.

The Dow Feb. 25 reported its worst two-day slide in history in part on the impact of the disease as the Centers for Disease Control and Prevention in Atlanta issued a report saying it was “inevitable” the disease would infiltrate the United States.

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The news had one Wall Street analyst proclaim a potential upside for Roku, which pioneered the subscription streaming media market with Netflix, and now controls the streaming device market as well.

Needham & Co. analyst Laura Martin, in a note, believes Roku could be a stock that benefits should COVID-19 expand into the United States.

Specifically, Martin contends that should the virus spread domestically, consumers would more likely opt to stay home to be entertained rather than going out to the movies, concerts and other public live-event venues.

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In other words, consumers would increasingly opt for home entertainment choices such as subscription VOD, ad-supported VOD, DVD/Blu-ray Disc rentals and/or purchases.

Indeed, Redbox affords users the ability to rent discs online for quick pick-up at the nearest kiosk. The vendor also enables consumers to rent/buy digital titles online.

Walmart-owned Vudu.com and Amazon Instant Movies do the same, while Movies Anywhere platform directs consumers interested in purchasing or renting titles from one of eight digital partners, including Vudu and Amazon.

Movies Anywhere is available free on Roku players and Roku branded televisions, with the digital hub eliminating the need to surf Roku channels and Apple products looking for new-release movies.

Roku-enabled streaming devices top the market, including Apple TV, Google Chromecast and Amazon Fire TV, with 25% of all connected televisions sold in the U.S. being a branded Roku TV.

“That would boost hours viewed and available ad units above projections,” Martin wrote, promoting investment in Roku as a defensive strategy. She lists Roku with a “Buy” rating and a $200-per-share price target, which is 71% above what the stock closed at on Feb. 25 — and up 3% from the previous day.

Apple Cites Coronavirus for Revised Fiscal Outlook

Apple has become one of the first tech/media companies to attribute revised fiscal projections due to the ongoing health crisis in China.

Cupertino, Calif.-based Apple Feb. 17 issued a regulatory filing citing the Coronavirus (COVID-19) for slowdown in production of iPhones, Mac computers, iPad and Apple Watch, among other products.

In a statement, Apple said its quarterly guidance issued on Jan. 28 reflected the “best information” available at the time as well as its best estimates about the pace of return to work following the end of the extended Chinese New Year holiday on Feb. 10 — the latter due to government concern about the spread of the respiratory virus that has killed more than 1,000 people.

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“Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” the company wrote. “As a result, we do not expect to meet the revenue guidance we provided for the March quarter.”

Specifically, Apple said its worldwide iPhone supply would be temporarily constrained due to the shutdown of manufacturing partner sites located outside the Hubei province.

“While all of these facilities have reopened — they are ramping up more slowly than we had anticipated,” the company wrote. “The health and well-being of every person who helps make these products possible is our paramount priority, and we are working in close consultation with our suppliers and public health experts as this ramp continues.”

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In addition, Apple said demand for its products in China has been negatively affected as consumers there worry more about the spread and containment of the virus than buying the latest consumer electronics device.

“All of our stores in China and many of our partner stores have been closed,” Apple said. “Additionally, stores that are open have been operating at reduced hours and with very low customer traffic.”

The company said retail operations are “gradually reopening” and would continue to do so as “steadily and safely as we can.”

Apple said its corporate offices and contact centers in China are open, and that online stores have remained open throughout the health epidemic.