The Great Acceleration: Let Us Entertain You? Sports and Entertainment Struggle

August 26, 2020

ROI Properties The Great Acceleration

Let Us Entertain You? Sports and Entertainment Struggle

Our new blog series, The Great Acceleration, focuses on trends that have been pushed forward in commercial real estate sectors, from retail and office, to multifamily, hotels  and industrial properties. To ensure that you are alerted when new articles come out, make sure to follow R.O.I. Properties on LinkedIn.

If there’s any era in which we could all use a little entertainment, it’s surely the age of COVID-19. Many brick-and-mortar entertainment businesses, however, have discovered the need for muddling through, burning cash, and leaning on loans. For the hundreds of Arizona movie theaters, bars, gyms, and water parks shuttered in June, new guidelines released by the state in August offer a path forward on the process for reopening. For professional sports franchises, it’s about playing to empty seats until the crowds can return at some unknown future date.

What’s Driving the Great Acceleration in Sports and Entertainment?

Prior to the arrival of coronavirus, Americans were already spending more time and money on entertaining themselves at home. With better, larger, and cheaper big screens plus ever-expanding choices of streaming media, the “cocooning” instinct may have been the strongest it’s been since that phrase was coined by futurist Faith Popcorn back in 1981. Here are a few of the trends at play behind how we play:

Rise of online content. Why battle the crowds and risk possible infection when you can access a world of content from the comfort of your couch? To cite a few examples of how the landscape has changed: Netflix added 26 million paid new subscribers in the first two quarters of 2020, just 2 million less than they added in all of 2019. Disney+, which launched in November 2019, already has more than 60 million paying subscribers.

Tarnishing of the silver screen. Theater chains did not have a particularly good 2019, with ticket sales dropping by 4% from 2018 and a decline in frequent moviegoers. Still, you can bet that they would trade this year for that in a heartbeat—as would Hollywood, which had to delay all of their summer releases. Overcoming concerns about interpersonal contact will continue to be an issue, although some have worked creatively around the issues. Within a few weeks of social distancing rules, pop-up drive-in theaters began appearing as a way to adhere to social distancing rules while still enjoying the “togetherness” experience of viewing movies together. Locations have included Harkins Theatre in Chandler, Schnepf Farms in Queen Creek, the Digital Drive-In AZ in Mesa, and WestWorld of Scottsdale, which also featured a July concert with country star Blake Shelton.

No roar of the crowd. Greater Phoenix is one of only 13 U.S. cities with all four major professional sports. While attendance at Arizona Coyotes home games has improved somewhat in recent years, the Arizona Diamondbacks were down 5% in 2019 and the Phoenix Suns have experienced some of the smallest crowds in the NBA. A few weeks ago, the Arizona Cardinals announced that there would be no season tickets this year, just single-game sales—if fans are even allowed to attend. The issues extend to collegiate sports such as Arizona State University football and basketball, since the Pac-12 has delayed all competition till January 2021 at the earliest.

Beyond the stadiums and entertainment venues themselves, the ripple effect extends to the entire commercial real estate ecosystem—including the fortunes of nearby restaurants, bars, and retailers that require foot traffic to survive. Will pent-up demand explode when conditions improve? Fingers crossed. Even optimism needs to be balanced against two caveats: 1) whether businesses can be profitable at 50% capacity or less for an uncertain period and 2) that discretionary spending tends to decrease during rocky economic periods and in light of job security concerns.

Read previous articles in the Great Acceleration series:

Due to the coronavirus and other economic factors, the Phoenix real estate market is rapidly changing. To put an expert advocate on your side for buying, selling, or leasing residential and commercial real estate, contact R.O.I. Properties at [email protected] or 602-319-1326.

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