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Social Networks And Virtual Reality Could Save The Media And Entertainment Economy

Complete sectors of the media and entertainment ecosystem, like theaters and live sports, have been effectively shut down across the globe. At the same time, consumption of media and home entertainment are way up, as we crave news and content while we follow lockdown mandates. What will be the net economic effect on the industry?

The trends are evolving day by day and there’s lots of uncertainty about when the shelter-in-place orders will end. Nevertheless, here’s my humble prediction.

Short-term direct impacts

At the Outthinker Virtual Summit on Tuesday, Paul Krugman, Nobel laureate in economics and NY Times columnist, stated about the U.S. economy: “What we’ve done is we basically put a fraction of the economy, maybe 20 to 25%, into suspension; we put it into coma for the time being.”

For the U.S., I estimate a 15% contraction in the media and entertainment industry from the direct effect of the induced coma for live events, including theater exhibitions, live sports, musicals, and concerts. Then, considering the indirect effects below, it’s possible that the contraction for the industry will reach 20-25%, in line with Krugman’s prediction for the broader economy.

Indirect impacts

The direct impact is somewhat predictable based on the dire picture of empty stadiums, theaters, stages, and other venues. What’s less evident and will depend on how long we remain in lockdown, is the magnitude of the following side-effects.

Less spending. Krugman stated that unemployment levels in the U.S. could reach the levels of a great depression, and I fear this could be the case in other countries significantly affected by the pandemic. Consequently, many consumers are having

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