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HUB International 2021 Outlook

Entertainment Industry

 

Transforming Uncertainty into Opportunity

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A Pandemic-Era Production Mantra: ‘Adapt’

Entertainment industry looks for ‘normal’ as production and theater audiences stay home

As the film industry tries to restart after the pandemic, the kinds of hits no one wants arise at every turn.

Keeping locations and people safe from contagion is an expensive and frustrating struggle. In the U.S., production on “The Batman,” for one, had barely resumed in September from the COVID shutdown when star Robert Pattinson caught the virus and it closed again.

“An overarching common concern is the prospect of on-again/off-again production and its costs.”

Even so, the promise of escape from everyday lives draws audiences and keeps theatre doors open. “Tenet,” touted as the first blockbuster release of the pandemic, rang up approximately $53 million in overseas box office sales, including Canada. Point made. The lack of audiences has led studios to delay releases on a major scale, or pivot to their streaming platforms.

Meanwhile, film and television production started up again in Canada this summer, working with physical distancing, PPE for rehearsals and crew, and additional personnel for sanitizing and security. With 14-day quarantines, even American casts and crews were able to come to Canada for filming - as Ben Affleck’s new movie did this fall. Safety and adaptability are key: Documentaries, for example, use masked, gloved and physically distanced freelance directors across the country for interviews while producers manage the shoot through Zoom. Programming with smaller casts and crews are more realistic than others, so “Workin’ Moms” and “Kim’s Convenience” are back to work while others are still on hold. Still, an overarching common concern is the prospect of on-again/off-again production and its costs.

As the entertainment industry works toward a safe return to production, many factors need to be considered as planning moves forward. Insurance brokers and their risk management teams have an important role in guiding filmmakers and production companies as they ramp back up and helping them be prepared for the risks.

Here are the major industry influences we see for 2021.

“The entertainment industry, globally, is projected to lose USD$160 billion of growth over the next five years. ”

1. Prolonged financial hit raises executive liability concerns.

The entertainment industry, globally, is projected to lose USD$160 billion of growth over the next five years. In Canada, a shutdown that lasted from March through June was expected to lead to a loss of $2.5 billion, impacting 172,000 jobs. Companies tried to bolster their financials – shoring up their liquidity with secured and unsecured debt, for example. Others, like Disney and Netflix, benefitted from a quarantine-driven surge of subscribers.

The lack of audiences has led studios to delay releases on a major scale, or pivot to their streaming platforms.

“Independent productions, which make up the vast majority of Canadian films and programming, may be on hold until a COVID vaccine is developed.”

2. Independents on hold, awaiting a vaccine.

Since the shutdown was lifted in Toronto, roughly 400 film permits have been issued; and by October, more than 60 productions were in pre-production or filming in Vancouver. But many of these are bigger-budget films or advertising campaigns, which have deeper pockets and greater adaptability. Independent productions, which make up the vast majority of Canadian films and programming, may be on hold until a COVID vaccine is developed. Only a few have the budget to pay for the safety protocols and staff required to adhere to pandemic guidelines and few, if any, insurance companies will cover COVID-related risks for independent productions.

Some studios can obtain coverage for COVID-related losses, but with substantial retentions/deductibles. The independents, on the other hand, don’t have the ability to absorb this risk. Banks that make loans for independent filmmaking require insurance to protect against these types of risks. Banks also require completion bonds to guarantee funds to ensure a halted project can be completed on time and on budget. But without insurance or completion bonds for COVID-related costs, banks won’t make production loans. There aren’t a lot of options in this environment available to the independents, though some are looking to private investors or investigating governments that offer backing for pandemic risk. As a result, they will struggle to start production.

“In an effort to keep the show going on the industry has been creative in scouting locations.”

3. “Location, location, location” applies to show biz, too.

In an effort to keep the show going on despite the pandemic’s impact, the industry has been creative in scouting locations. Vancouver may be an attractive locale for some, with its relatively low case count. This has made other considerations grow in importance, like screening issues and provincial controls over COVID safety procedures and precautions, and proximity and access to medical facilities. Such strategies may also trump or reduce tax credits in choosing a location. When Affleck’s new movie chose to relocate to Vancouver, it did so in part because of the ease of virus testing and quick results.

It takes resilience to get through times like these, and some are better equipped than others for the challenge.

“Strategies for creating protective environments start with zero tolerance policies that are strictly enforced.”

4. #MeToo: Not gone, not forgotten.

Harvey Weinstein was convicted in March 2020 to 23 years in prison on charges of sexual misconduct against three women. Although this was an American case prosecuted across the border, it was also one of the highest profile examples of the abuse that’s endemic to the industry. Even here in Canada, the #MeToo movement forced entertainment industry professionals to change their ways and revisit sexual harassment protocols.

Brokers who specialize in entertainment can provide risk management assistance to formalize policies and procedures to support an improved workplace culture and develop strategies for creating protective environments start with zero tolerance policies that are strictly enforced. Advocacy programs should be shared so all employees are familiar with signs of sexual and domestic violence and the most effective intervention strategies.

Getting through the shifts in 2021

It takes resilience to get through times like these, and some are better equipped than others for the challenge. Studios have broadened their bases, owning or investing in consumer-preferred streaming video on demand. Their release schedules are prioritized accordingly. Still, increased health security and insurance costs have made production financing risky. While the studios are better positioned to manage through the shifts this may cause in the business, the independents probably won’t be that lucky. Until the uncertainties even out, the industry should enlist support where it can be found. Certainly, whether for continuity planning or contingency planning to get safely back into production, it’s important to have specialists in your corner to help you evaluate and get through the risks. In addition to the safety protocols offered in union white papers, HUB can provide a checklist to help production navigate through and verify that procedures are being followed.

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