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COVID-19 Crisis: Easing Lockdowns via Phased Reopenings

12 MINUTE READ | May 1, 2020

COVID-19 Crisis: Easing Lockdowns via Phased Reopenings

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Abby Long

Abby is PMG’s senior managing editor, where she leads the company’s editorial program and manages the PMG Blog and Insights Hub. As a writer, editor, and marketing communications strategist with nearly a decade of experience, Abby's work in showcasing PMG’s unique expertise through POVs, research reports, and thought leadership regularly informs business strategy and media investments for some of the most iconic brands in the world. Named among the AAF Dallas 32 Under 32, her expertise in advertising, media strategy, and consumer trends has been featured in Ad Age, Business Insider, and Digiday.

What an incredibly busy week this has been. I hope you have a chance to duck out early this afternoon, but before you do, here’s the week in review. 

  • Phased reopenings

  • Earnings and the future of media

  • Life after COVID-19

Heading into the weekend, over a dozen or so U.S. states and European countries (including Italy, Spain, and France) are easing lockdowns via phased reopenings. To keep public health and cleanliness at the forefront of brick-and-mortar operations, the CDC and other public health groups compiled new guidelines to help firms, shops, and restaurants open and prepare for customers in the era of social distancing. 

Related: Similar to several states, the federal guidelines encouraging people to shelter in place and avoid public activities expired last night, and the U.S. Administration is not planning to extend them into May. 

Simon Property Group, the biggest mall operator in America, plans to reopen 49 malls across the country in what will be the most suspenseful weekend for retail executives and business owners alike. According to the head of the U.S. Chamber of Commerce, when it comes to reopening stores, businesses across industries are fearful of legal action or a PR nightmare as recommended safety precautions to reduce the spread of disease run up against workplace protection laws

To mitigate risk and open as safely as possible, Simon Property circulated a detailed memo and presentation with illustrative examples earlier in April demonstrating what actions mall operators are required to take before opening. These include safety protocols, employee temperature checks, and social distancing measures like blocked off sinks and play areas. While shopping malls in places like Texas, Georgia, and Missouri are opening this weekend, not all storefronts in those malls will be open for business, including Gap brands and Macy’s, to name a few. 

Related: Not every business will make a comeback after COVID-19. Other than those on the verge of bankruptcy (or Administration in Europe), Harry & David, the gourmet fruit seller, announced this week that it would permanently close most of its storefront locations in the U.S. to focus exclusively on its e-commerce future. 

Simon Property Group Reopening Guidance — Source: The New York Times

Of those that will be open, the question on everyone’s mind is: If we open, will they come

As we reported on Wednesday, health concerns currently outweigh financial concerns in the U.S., with Deloitte reporting that roughly half of the consumers are concerned about their health compared to a quarter of consumers who are worried about their finances.

To help ease people’s concern in California, the city of Los Angeles plans to offer free coronavirus testing to all of its residents, whether or not they are displaying symptoms. Experts agree that testing en masse is crucial to getting life relatively back on track, but testing in the U.S. is still sluggish despite federal promises and slow ramp-ups. These delays are largely due to a lack of federal and local coordination, as well as a limited number of test kits available. As of now, < 2% of the U.S. population has been tested for the virus. 

Source: Axios

From Vox on the subject of testing and reopening, “Ultimately, without the proper testing abilities and social distancing measures in place, states that reopen prematurely could be at higher risk of spreading the virus — which could lead to the second wave of infections.” We’ll just have to wait and see what happens and if beefed up sanitation in public spaces can slow the spread of disease. 

In other news, “a ray of hope emerged this Wednesday as early U.S. trials for potential COVID-19 treatment remdesivir. The antiviral medication shows ‘a clear-cut, significant, positive effect’ in shortening recovery times, said Dr. Anthony Fauci.” Across the pond, Oxford leads the way as scientists at the Jenner Institute prepare for mass clinical trials with new tests showing their vaccine was effective in monkeys. 

According to the Commerce Department, the U.S. GDP declined by a 4.8% annual rate in the first quarter of 2020, officially putting an end to America’s decade of economic expansion. However, most agree that 4.8% is “underselling the economic impact of the coronavirus pandemic as the real toll only began to materialize in the back half of March.” But one thing is clear, the drop was the worst since the Great Recession, with the understanding that the second quarter numbers will be much worse and likely overshadowing 2008. 

Estimates by the Congressional Budget Office suggest that it “could take until 2022 for the U.S. GDP to bounce back, though the Trump administration has been more optimistic.” Other experts claim that the scale of contraction will be 30 percent or more, likening the pandemic to the economic footprint of the Great Depression. 

This has been a tough week for businesses, for more reasons than one. Round two of the Paycheck Protection Program began on Monday with its $320B additional funds, but within minutes, the online application portal crashed, remaining inaccessible for much of the day. It’s the second technical hiccup for the program in its short one-month history, and unprecedented demand was the cause of the portal crash. This week, public scrutiny for companies that received the first round of funds only intensified, resulting in many big companies returning the money to the government for redistribution. As a result, the U.S. Treasury has vowed to audit any company that receives more than $2M in funding through the program.

This week, our favorite Big Tech partners shared Q1 earnings, and there were plenty of meaningful insights and takeaways to walk away with. To start, dividends for many S&P companies have been suspended in April, with many others reducing payouts. As we know, Facebook and Google earnings are a barometer for the health of the advertising industry, and their earnings reports had a lot to say. 

Sundar Pichai said Google hit “a significant and sudden slowdown in ad revenues” in the month of March due to the coronavirus pandemic. Alphabet had a strong earnings report with $41.2B in total revenue for the first quarter, up 13% from Q1 2019. Alphabet CFO Ruth Porat forewarned that the “second quarter will be a difficult one for our advertising business.” In anticipation of COVID-related headwinds, Google announced it would be cutting marketing budgets and rolling back hiring initiatives for 2020. 

From the report,

  • YouTube revenue rose by 33.5%

  • Google Cloud revenue was up 52%

  • Google Search (and other advertising revenue) was up 9%.

As to be expected, the impact on the bottom line for digital companies was softened because it hit late in the quarter. After a steep drop in ad sales in March, Facebook said advertisers are returning to the platform. According to the Wall Street Journal, Facebook CFO David Wehner said the average price of ads purchased declined by 16% in the quarter, a drop that was “largely attributable” to the latter part of March. 

TikTok had its best quarter for any app ever with more than 315M downloads in the last three months, bringing its total to 2B downloads, according to Sensor Tower. Spotify added subscribers but lowered its revenue guidance amid the pullback from advertisers, and Apple Services revenue hit $13.3B last quarter. Apple and Google also shared the exposure notification system is on schedule for a mid-May rollout. And in the popular game Animal Crossing, a rate cut is cause for concern for millions of players, signaling the rapid development of sophisticated metaverses that are mirroring the real world. 

Of course, Big Tech companies will weather the storm just fine. Amid the rapidly-changing world around us, many firms are using this time to make changes of their own, betting on the likelihood that the consumer behavior that emerged during lockdown will stick. 

I don’t have a crystal ball, but many of the news from this week helps us peer into the future of life after COVID. Travis Scott’s Fortnite debut (12.3M concurrent players, ~27M total so far via YouTube and re-streams) was a catalyst for what’s to come, and we’ll likely see hybrid (in-person events with mirrored digital experiences) in the not too distant future. 

In the headlines: 

  • The NFL draft reached 55M people over its three days.

  • SXSW virtual film festival launched on Amazon Prime Video.

  • Amazon renewed its deal with the NFL to stream football games for “Thursday Night Football” on Prime video for the next three years

Granted, some of these activities are a by-product of our current circumstances, but as virtual events become more popular, they’re also getting better.

  • Peloton reported its largest streamed class ever with more than 23k participants. 

  • Block by Blockwest music festival was staged entirely in Minecraft, but with so many people logging in (over 100k), it crashed the server. Now, BxBW is rescheduled for later in May. 

And perhaps the biggest digital versus real-world development was the dispute between Universal Pictures and AMC Theaters. From The New York Times

“Universal Pictures took a victory lap over “Trolls World Tour” on Tuesday morning, saying that the film’s successful video-on-demand release had proved a new business model. The studio vowed to make more movies available without an exclusive theatrical run, even when theaters reopen. AMC Theaters, the largest theater operator in the world, took the studio’s assertion as a declaration of war. Adam Aron, AMC’s chief executive, told Universal late on Tuesday that it would no longer book any of the studio’s films.” 

The pandemic has accelerated the decline of the movie theater industry, which was already under siege from the rise of streaming services before the outbreak. Adding fuel to the fire was the Academy Awards announcing that streamed films will be eligible for this year’s Oscars, a move that likely will not be reversed. 

In the weeks to come, several virtual commencement ceremonies will take place, featuring A-list celebrities and famous athletes as everyone pitches in to celebrate the class of 2020. From People

“Stephen Curry, Kevin Hart, and Serena Williams are joining forces to virtually celebrate the Class of 2020. On Saturday, the three stars will speak at Chase’s “Show Me Your Walk” event honoring this year’s graduates, all of whom were left out of physical celebrations at their schools due to the coronavirus pandemic.”

Oprah Winfrey is scheduled to give a commencement address on Facebook Watch and Instagram Live. The event was organized by Facebook and will feature Awkwafina, Jennifer Garner, Lil Nas X, Simone Biles, and more, plus a performance by Miley Cyrus. The festivities kick off May 11th across the two platforms. Similarly, LeBron James will be a part of a prime-time TV special for graduating high school seniors. 

Cloud computing, digital media, and wireless firms all help people stay connected and are crucial during this time for people working from home and students continuing virtual learning. According to Reuters, AT&T, Verizon, T-Mobile, and Comcast have extended through June 30th their commitment not to cancel service or charge late fees to customers affected by the coronavirus pandemic. More than 700 companies have voluntarily committed to similar actions. 

The global public health community has all but guaranteed that the coronavirus disease will be back in some form of a second wave, likely in the fall of 2020 for America and Europe. So, what does life look like until we reach herd immunity, or more effective treatments become more readily available? The answer may be found across the Pacific in Trans-Tasman territory. Australia and New Zealand have always been close (best friends, actually), but since the majority of commerce, trade, and travel occurs between the two Antipodean countries, life can shift into a relative sense of normalcy with a travel bubble. With community spread essentially contained, a travel bubble would allow the two economies the opportunity to recover to pre-virus levels much faster. 

American Airlines and other airlines are to require face coverings on passengers moving into the summer season. Summer vacations are as vital to the hospitality industry as Black Friday is to retail, so we’ll continue to see more announcements from companies trying to keep customers safe and ease concerns as they reopen or encourage consumer spending. One such development is the return of Nascar without fans. Returning to races isn’t too difficult a feat when you consider each driver is isolated in their own car and has a small pit crew team to aid them. With temperature checks and no fans, the events can be run effectively (and safely), giving sports fans and sports programming something to look forward to

Further north, Hong Kong and South Korea hit a significant milestone of no new community cases, and Prime Minister Boris Johnson, who just recovered from the virus himself, announced that Great Britain had passed its peak but won’t be relaxing social distancing measures anytime soon. But while the disease continues to sicken people around the world, the economic effects of the pandemic and lockdown threatens food security and the financial well being of millions of people, so returning to work is a necessity for nearly everyone. 

It’s for this reason that reopening the economy has become a political battleground for government officials heading into the 2020 Election, especially as unemployment claims hit 30M this week in the U.S. Workforces that are able to do so will be slow to return to the office — a place that will likely be redesigned to comply with social distancing. In digital and tech, returning to work will reportedly be “staggered and incremental” according to Google, and many other firms will likely follow the search giant’s lead. 

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Regardless of how work will look, public life will be full of change. As of now, the use of Mastercard’s contactless transactions increased over 40% in the quarter that ended in March, according to the company. “Our recent consumer insights indicate that habits are being created today,” Mastercard President Michael Miebach said on the company’s earnings call. “They will last beyond the current situation.”