Raising the curtain on entertainment risks in 2023
Discover the trends driving growth and shaping the risk landscape for the entertainment industry in 2023.
If 2020 was the year when the music stopped, the theaters went dark and soccer players scored goals to deafening silence or recorded cheers, the entertainment sector is hoping 2023 will be the year it can finally reclaim the collective experience of full houses, packed movie theaters, and booming arenas.
We had a very positive year in 2022 and a welcome recovery is definitely underway. But we’re not out of the woods yet. In the three years since the coronavirus first hit headlines, the world has changed. The sector must continue to evolve in line with new technologies, proliferating platforms, seismic shifts in patterns of consumption, and changes in the public mood, particularly among the younger generation. Meanwhile, economic and geopolitical pressures wait in the wings.
So what are the trends driving growth and shaping the risk landscape for the entertainment industry as it continues its recovery?
1. Inflation retains top billing
Our entertainment clients are still feeling the effects of inflation, with increased production and live-event costs, but it’s less of a shock. However, staffing costs have increased following the skills shortage that took hold in the wake of the pandemic, when many left the industry. We have yet to see much drop in demand from audiences, despite the pressure many must be feeling on their back pockets. However, venues are scarcer than they were because there are still many shows postponed from the pandemic in the pipeline in addition to new shows and festivals. Bigger events are thriving, while smaller events are more challenged by the costs of venue hire, transport and energy. I expect to see more consolidation in the industry, as smaller, struggling production companies and venues are bought by the larger operators.
2. Quality, not quantity
The sheer volume of content that is now being created and distributed makes quality a key differentiator in a crowded market. With only so many venues and facilities available and personnel resources under pressure, how long can the industry ride this wave before the volume of content flattens out?
Technology has lowered the barriers to entry for content creators, as almost anyone can upload to TikTok, YouTube or Instagram, while at the other end of the scale, the major studios and tech businesses are launching their own platforms.
Businesses need to know they have sufficient insurance coverage for sophisticated productions. Where costs increase, so, too do exposures because the costs are higher with each day of shooting, and this could be reflected in any insurance loss.
3. Getting vigilant about ESG
This year’s Oscars ceremony will see green dresses on the red carpet as the Academy partners with the women-led sustainability organization RCGD Global to encourage a more responsible approach to awards-season fashion. It reflects the growing influence of ESG on the sector. British band Coldplay has pledged to halve the carbon emissions associated with its current Music of the Spheres World tour, compared to 2016-2017, and has made a raft of sustainable commitments, including paying a surcharge for aviation fuel, sourcing ethical, sustainable merchandise, and planting a tree for every ticket sold.
The sector continues to face criticism about the slow progress on diversity and inclusion, however, particularly in the film industry. The Inclusion in the Director’s Chair report by USC Annenberg (January 2023) reveals that of the 111 directors hired to make the 100 top-grossing films of 2022, just 10 were women and only 20.7% were from an underrepresented racial/ethnic group.
The rise of intimacy coordinators on film sets reflects a growing understanding of the need to safeguard the wellbeing of actors filming intimate scenes, particularly in the wake of the MeToo movement.
4. The virtual future
With streaming now fundamental to the entertainment and media landscape, virtual conferences are a particular growth area. The global virtual events market size was valued at over $114 billion in 2021 and is expected to grow at a CAGR of 21.4% from 2022 to 2030.
Even without a live audience, virtual conferences still carry risks, including transmission failure because of a weather event, natural catastrophe, fire affecting the broadcast unit, or network issues impacting broadcasting infrastructure. Rented equipment and studio space can also be vulnerable to property and casualty liabilities.
Reality and live content are also continuing to grow, facilitated by on-demand services and social media platforms. Virtual reality (VR) is the fastest-growing entertainment and media segment, reports PwC, with global VR growth between 2021 and 2026 expected to bring the segment to $7.6 billion. Gaming is forecast to be 85% of total VR revenue by 2026.
In 2022, MTV introduced a new award category for the Best Metaverse Performance, which was won by South Korean K-pop band Blackpink for a performance hosted by the PUBG Mobile game. Fellow South Korean group BTS was nominated for the band’s Minecraft concert experience, alongside Ariana Grande for her Rift Tour in Fortnite, among others.
As the worlds of gaming, music and entertainment continue to converge, gaming platforms such as Fortnite and Roblox are increasingly serving as entertainment and social hubs, while gaming content is crossing over to social media and streaming platforms. HBO debuted The Last of Us, a video-game adaptation set in a post-apocalyptic world, in January 2023 to critical acclaim. Meanwhile, video games continue to develop as a spectator sport, with the total number of esports viewers worldwide possibly exceeding 640 million by 2025, according to a recent report.
5. Emerging risks on the scene
Now that we’ve experienced the COVID crisis, the industry needs to remain vigilant about its health and safety protocols. We don’t yet know if pandemics will occur more frequently or when the next one could strike.
Climate change is another cause for concern. We’re seeing more abnormal weather-related events, such as heavy storms in Europe and bushfires in California, for example. These inevitably cause havoc for live events, both in terms of cancellation exposure but also human safety, whether it’s extreme heat or flooding.
Influencer marketing has become a multibillion industry since 2021 and it is estimated that influencer earnings exceeded $16.4bn in 2022 — a market that is expected to grow.
Social media influencers, who are often entertainment celebrities, can wield massive power, but they can also be rogue. Without hands-on management or due process governing their actions online, they could unwittingly share confidential information, reveal a movie spoiler or plot twist, slander a fellow star, infringe copyright, or simply post content that is deemed inappropriate, leaving a promoter or production company vulnerable to reputational damage or litigation.
Michael Furtschegger has been Global Head of Entertainment at Allianz Global Corporate & Specialty (AGCS) since February 2021, based in Munich. The AGCS Entertainment line of business provides specialized insurance solutions for film productions as well as live events in sports, music or culture.
Opinions expressed here are the author’s own.
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