A decade of change in six months…

Taking my regular cycle route to the top of Alexandra Palace in north London recently it was impossible to miss an enormous stage being constructed on one of the car park spaces. It turned out to be set-up for a two-week run of Puccini’s La bohème by the English National Opera dubbed “ENO Drive & Live” that operated like a drive-in cinema but with a live opera performance. 

ENO’s Drive-in production at Alexandra Palace

Like the rest of the leisure industry – even the ENO is on its uppers and experimenting. With the ability to only drive very limited revenues from its central London home, it devised this clever plan to generate money from paying customers showing up in their cars and for car-less opera buffs it had struck a deal with Uber whereby vehicles could be hired for the evening. But the key (cash generating) element in the plan was no doubt the recording of one of the performances for broadcast on Sky TV. 

Although such a move was very much driven by covid-19, it also plays into broad underlying trends. People are increasingly watching content such as films, theatre and opera at home. The virus has absolutely accelerated this but the appeal of streamed content and switching a trip to the cinema for one on the sofa at home instead was already gaining traction. 

Even with the ongoing torrent of bad news out there, the announcement that Cineworld had closed the doors to its 127 UK venues – possibly permanently – and that Vue was shutting a quarter of its sites midweek was a great shock. But maybe it should not have been. Between 2015 and 2019 revenue generated from global film releases rose 8% to $42bn but this was dwarfed by the rise of the home/mobile market that jumped 62% to almost $60bn, according to the Motion Picture Association. And the direction of travel was clear, judging by attendance numbers in 2019, which dropped 4.6%. 

Amid this turmoil, US activist investor Daniel Loeb with his Third Point hedge fund has jumped on to such structural changes and is pressuring Disney to move away from producing big theatrical films for box office release and, instead, further embrace the streaming of its content. He has likened the move away from cinemas to “horse-drawn carriages when the automobile was first introduced”. 

With covid-19, we are seeing a decade of change concentrated into a mere six-month time-frame. Clearly, the ramifications of this are enormous and also massively painful – especially when flip-flopping government enforcements seriously muddy the waters. It could be argued that even if a vaccine was developed and distributed tomorrow, the new direction of travel has already been set in motion. There is no going back to what we had back in early March, whether we like it or not.

Consider delivery. When people are enjoying their streamed content at home, what is most associated with this? It’s undeniably the home-delivered pizza. It’s clear to all that delivery is a major beneficiary of the acceleration in trends we are now seeing. The reality is that pre-covid-19, food delivery was a bit of a pain for many in the foodservice industry – it ate into margins and potentially cannibalised dine-in trade – but it quickly became a lifeline during lock-down and is now a vital component of most of these businesses.

It represents an ever more meaningful percentage of total turnover and any new physical unit (remember those) opening today will invariably have a delivery element factored into its location, design and operational practices. The industry’s wariness over dark kitchens has also receded somewhat and they are now looked on much more positively. This is indicative of a changing relationship. The reality is, we all need friends right now. We’ve moved on from what was an all-too-frequently confrontational situation and on to one where both parties are working more closely together to develop a mutually beneficial economic arrangement that also ultimately better services the end consumer. 

It really is stating the blindingly obvious that many areas of the leisure and hospitality industry have been upended by covid-19. Some of this represents significant structural change but much of it is not as obvious to identify as streaming and delivery at this early stage. It will, however, all become apparent. Certainly, the acceleration of the trends we are seeing will be massively difficult to deal with in the short term but what it is ushering in will, ultimately, describe the landscape in the long term.

Glynn Davis, editor of Retail Insider 

This piece was originally published on Propel Info where Glynn Davis writes a regular Friday opinion piece. Retail Insider would like to thank Propel for allowing the reproduction of this column.