With every conflict, there are always casualties. As the nation and the world continue to slowly emerge from the COVID-19 pandemic, there will no doubt be many changes in our lives that might be permanent. As this is true for people, this is also true for many industries across the nation. In fact, there are possibly 3 major industries that could be forever changed due to the COVID-19 pandemic: movie theaters, department stores, and office spaces.
Movie theaters have been struggling for a while, even before the COVID-19 pandemic swept across the world. In 2019, Americans went to the movies less than at any time since the 1920s, as reported by Box Office Mojo. This trend coincides with the continual release of streaming services to the general public. Netflix and Amazon Prime are the first two streaming services that come to mind, yet there are multiple other services as well that are coming or are already here, including Hulu, Disney Plus, HBO Max, Apple TV, and others, all bringing in some form of original content. Universal released their animated film “Trolls: World Tour” directly to streaming instead of in movie theaters because of the COVID-19 pandemic, which proved a surprising smash hit. As these companies continue to explore different means of releasing their films, movie theaters could feel the brunt of these new changes. As theater chains were already struggling to bring in business, the COVID-19 pandemic is showing these companies that not all movies need to be released in theaters to find success. People are getting accustomed to watching movies in the comfort of their homes, and with the constant barrage of new streaming services and original content, movie theaters could be in deep trouble. The biggest question that remains for these movie theaters is in what capacity they could reopen when the time arrives. If they could reopen at somewhere near 80% capacity and full concessions, they could be able to bounce back enough with some blockbuster films releasing in the near future. Either way, the curtain may be falling for the movie theater industry.
As movie theaters deal with declining numbers compounded with radical changes that threaten their survival, so, too, do department stores face similar risks. Department stores had been struggling for some time prior to the COVID-19 pandemic, as people have begun to explore new online ways to buy clothes and other necessities. What has kept these stores alive has been the older generations, who had grown accustomed to shopping in stores and reluctant to change their ways. As the nation has shut down, people have been forced to shop online, giving these older generations a chance to explore the realms of internet shopping. This has begun to spell doom for the remaining departments stores who teeter on the edge of bankruptcy. Any edge lost could be detrimental. JC Penny recently announced their filing of bankruptcy, and Macy’s in now issuing $1.1 billion of notes to help repay its revolving credit facility. It is reported that their losses for the first quarter could range anywhere from $900 million to $1.1 billion. Be prepared for a flurry of “Sorry, We’re Closed” signs appearing on some famous department stores in the coming months.
There is one industry that might face some difficulty emerging from the COVID-19 pandemic that, unlike movie theaters and department stores, was not experiencing financial difficulty beforehand: office spaces. As more people are being forced to work from home, companies are beginning to realize that their productivity has surprisingly increased. Working from an office was always supposed to bring certain advantages, especially that of productivity, yet it appears during this crisis that the reverse has happened. This “mass experiment,” as Stephen McBride from Mauldin Economics describes it, has put millions of people to work in their homes, and the results have been fascinating. First, companies are learning that a great number of their employees do not need to work at an office and can complete their work from home, and second, with the increase in productivity aligned with working at home, they could save vast amounts of rent expense by reducing office space. Workers working remotely two or three times a week, perhaps more at times, could become a new normal. If so, this could be devastating to office spaces across the country, who could be seeing vast amounts of vacancy. Whether or not this trend will continue past the COVID-19 pandemic remains to be seen, but it has opened up many possibilities for companies that will surely be explored.
As we long for a return to “normal”, there is a good chance the “normal” we left might never return. Some major industries already facing devastating outlooks might be pushed to the brink due to the COVID-19 pandemic. Movie theaters might be closing, overtaken by streaming services; department stores could be losing some of their regular customers to online shopping; and office spaces could be facing vacancy as companies explore the possibilities of working from home. So yes, as we long to return to “normal,” what we return to may be something different entirely.