US & Global Economic Impact Analysis and Forecasts

Freedonia analysts and economists are sharing their insights on how major events are impacting different parts of the US and global economies.

How Movie Studios Are Reacting to the COVID-19 Pandemic

States are taking a variety of steps to help curb the spread of COVID-19, from limiting the size of public gatherings to shutting down movie theaters and other entertainment spaces. This has caused the nation’s two largest theater chains, Regal Cinemas and AMC Theaters, to temporarily shut down all of their theaters in the US.

Unsurprisingly, theater closures are bad for business for the nation’s movie studios. Theatrical releases are scheduled up to a year in advance, and theaters are the main revenue generator for movies that cost hundreds of millions of dollars to produce and market.

Some studios have opted to delay releasing big-budget films until later in 2020, with the hope that the COVID-19 pandemic will be contained and consumers will feel more comfortable congregating in theaters again. NBCUniversal, however, is taking a slightly different approach. In addition to delaying some its releases, the studio also announced that it would release select movies as a digital rental, priced at $20, at the same time as or recently after its theatrical release.

Granted, the movies that NBCUniversal has selected so far are not among its biggest revenue generators, so the risk of lost sales is not as large. However, for an industry that has long resisted altering its business model even as consumers have changed how they view most of their entertainment, this shift is significant and could have a long-term impact on the theaters that support movie studios’ revenue.

Basically, businesses must address this uncertain environment by considering how they can continue to reach and serve customers, even if they have to use avenues they had previously resisted.

For more information see Freedonia Focus’ Motion Pictures & Video: United States and Recreation: United States reports. Freedonia Custom Research is available for questions requiring tailored market intelligence.

  Covid-19      Freedonia Focus    

US Federal Reserve Makes an Early Rate Cut

On March 3, 2020, the US Federal Reserve cut its target interest rate by 0.50% to 1.00%-1.25%. The move was the first to occur outside the regularly scheduled policy meetings that take place every 6 weeks since the 2008 economic crisis. The Fed did not want to wait as concerns about the spread of the coronavirus in the US caused strong volatility in the US stock market. The move signals that the bank will take rapid, significant steps to counter effects of the virus on the economy. If it continues to spread, consumers and companies may limit gatherings and unnecessary interactions, which will reduce consumer activity as well as economic output in the markets they support.

Reduced interest rates could help many sectors. For instance, borrowing funds to buy a house, a car, or other large durable goods will be less expensive. In addition, companies will be able to obtain lower-cost loans to help them through a period of reduced economic activity or supply chain difficulties. However, the lower interest rates might hurt the banking industry, as commercial banks generate a significant portion of their revenues from interest on loans.

For more information on these sectors, see the relevant publications from Freedonia Focus Reports: Air Transport Services: United States, Commercial Banking: United States, Housing: United States, Motor Vehicles: United States, Recreation: United States, Restaurants & Foodservice: United States, and Water Transport Services: United States.

  Covid-19      Freedonia Focus