COVID-19 VS EVENT INDUSTRY
For 30 years we lived in a world where we produced more than we consumed, and this was a prerequisite for the monetary authorities to print money in unlimited quantities without inflation. During this period the service sector began playing a leading role in the global economy, and therefore it developed most dynamically. In developed countries, the share of services is up to 65–75% of the GDP and over 70% of the employment of the population. The share of services in Russia's GDP has increased from 32.6% to 69% since 1990.
Owing to the soft monetary policy and the “shower of gold” from the raw materials export, a layer of ideal conditions was formed for the development of the service market and the emergence of an army of Event and Marketing Agencies.
But today, everything is changing: we may be in for a very serious shortage of goods / services, and the economy will have to pay with serious global inflation for all the monetary actions of the past years.
Pandemics: how does it work?
The world used to pay no attention to pandemics. For example, in 1968 the Hong Kong flu went unnoticed for the economy, although it killed about 1 million people. In 2009 there was the Swine flu: right, the pandemic was smaller in terms of the number of people infected, but no less significant for the economy. But no one enforced any quarantine. Even if we imagine that we will receive a global epicenter, like in Bergamo (Italy), not more than 2 million people will die of the coronavirus. Whether it is a lot or few, everyone will decide for himself.
Coronavirus: the consequences.
Many people will lose their jobs now, a significant part of businesses will close, but nevertheless, when the pandemic ends, and it will end relatively quickly, since uncontrolled pandemics do not last for more than 1 year, the world will be ready for new growth, due to the fact that all assets will remain in place and will not disappear. There are no victims of material destruction, as distinguished from a war.
Regrettable as it may sound, but the main victims of the coronavirus are concentrated among the inactive part of the population: these are elderly people. This is a sad fact, and that is why we are now sacrificing the economy, but such losses will not have a big impact on the productive part of the population.
Until today, we have seen pandemics lasting for not more than 1.5 years that immunize the population. Central banks have already announced that they will provide as much money as needed. It is clear that the money will reach bankers, large corporations, but WILL NOT REACH medium and small businesses; therefore, we are in for big Reshuffling in the service sector and blurring of expertise in the “zombie industries” which include the entertainment industry, for example, Event.
In the basic version, for example, the drop in the revenue of our large international Partners in Europe, the USA and the RF over the year may amount to minus 30% (exclusion of the zombie sector). Although models of 2 quarantines of 3 months each with a summer break of 1-2 months are already being built behind the scenes. Therefore, it is very optimistic to expect the entertainment industry and the Event market to recover within the next 2 years.
But, to be fair, there are sectors that feel good during this period, and one may foresee tenders of 20 agencies for organizing New Year's events.
When will we recover?
The world economic crisis of 2008 happened within 1 year with the GDP decrease of 6%, and the recovery process took 6-8 years to the state of full employment of the population. In the current situation, the economic collapse will be worse, so the recovery may take a longer period of time. A 10-15% GDP drop will not bring about structural problems, as in 2008. Large countries are quite able to fill everything with liquidity of 10 trillion USD, and this is even more than the planned losses from the pandemic. These measures are sufficient to ensure the survival of all economies and faster recovery than after 2008; therefore, in the basic scenario we expect the entertainment and Event services market to recover in 2022.
Pandemic: a step towards change of values. Consequences.
All the epidemic will end with boosting inflation on a global scale, the coronavirus is practically a “war”, and the experience of all wars is the issued unsecured government debts and money. This is followed by inflation which will bring all these liabilities into line with the size of the economy. Given the strength of this phenomenon in the form of a biological, financial and psychological crisis, the basic instinct of the humanity - “procreation” - will take a back seat and will be replaced with the basic instinct of “survival”.
The second consequence is that traveling companies and their employees will not go anywhere in 2020-2021. A wave of opinions has formed in the world community that it was the travelers who spread the virus around the world, so the travel and international MICE events industry will be just toxic in the coming years.
The third consequence is that in the long run, the raw materials prices will seriously increase due to the global inflation, and by 2025 a “shower of gold” will pour again on the RF. In material terms, we are in for the brightest future: after coming out from the recession, companies will form new needs and set more complex tasks that can be solved only by multi or omnichannel agencies with their own capacities, for example, Event. Multimedia. IT.
The fourth consequence is that the “consumer” society will be a thing of the past and over the next 15 years we will come to the concept of “quality of life”. We will finally cease to endlessly stimulate the demand. The new slogan will be formulated in high-quality leisure, healthy nutrition, longer human life, but first there will be a trend to ban cash with the digitalization of the population. The transformation of the Event concepts in the RF will approach the western one, where networking is actively developed, and multimedia and digital technologies are an integral part of events.
Global challenge for the global entertainment and Event industry.
The expertise of the teams of most agencies, technical and highly specialized companies will be blurred to the level of “basic”. Companies will be forced to lay off people and/or completely switch to outsourcing. Due to the lack of Event orders, freelancers will have to retrain and change their occupation. Only multidisciplinary agencies capable of generating a cash flow without the Event business line in the next 1-2 years will be able to save the team and their expertise.
Together we all also have to go through the legal crisis based on a change of ownership or a change in the working conditions: venues, teams, restaurants, agencies, catering, hotels, contractors, etc. All the former merits of agencies and contractors can be zeroed offhand against this background.
Our experience of interacting with major Western clients has shown that it’s impossible to get away from classical events into online even with budgets of 1 million euros. Solving local HR or Marketing problems is a drop in the ocean for Event business. In addition, most agencies will be unable to fend even for themselves after the quarantine, not to mention the need for serious investments for the development of the IT sector, for example.
Does the Event market have a future?
Big corporate business is the main customer in the Event market and it will not stop hosting events. We observe the desire to find a quarantine exit window for events that have been canceled. Unfortunately, we will not see such major events as The International (the annual e-Sports tournament) live, they will completely switch to the online format. External and internal events of medium-sized businesses will be reeling from “let's do nothing, do everything inhouse” to “arrange a tender of 20 agencies”. Wedding events will stagnate as the person’s basic instinct of “survival” strengthens.
Industries that have become toxic: travel, the luxury industry, business for offices, passenger transportation, service companies, etc., will leave the Event market in the coming years.
Agencies with the main or only area of competence being the Event only, for example, will leave the market for the next 1-2 years. Agencies with multichannel competencies need to strengthen the geography of their presence in order to support international clients with on-site expertise. That is why during the crisis, our foreign part of the family appeared in the key world countries. EMI Agency is now represented in the USA, England, Switzerland, Israel, and the Netherlands.
Owners of companies, CEOs, directors, all employees must take off the crown and start selling, looking for new customers, formulating a new pool of competencies and services.
During this crisis we understood the most important thing: having all the blessings of the world, human life remains central. Stay healthy! Take care of yourself. Take care of your employees. It is very pleasant that for the first time in life, the world governments have accomplished something new and not usual, putting our life above financial stability.
Author of the article: Artem Bendak, CEO, EMI Agency - EVENT | MULTIMEDIA | IT
www.emi-agency.com | @emi_agency (Instagram)