Digitization in fast motion: In the USA, the pandemic is changing some industries forever

New Hollywood films are launched in the living room instead of in the cinema. Many Americans now visit the doctor via the iPad, and former home office opponents like Facebook are opening up for homework.

Netflix’s business model, which relies entirely on subscription fees, pays off in the corona crisis.

More and more communities in the United States are loosening the rules after about two months of statehouse arrest. But the reality in which citizens are now returning has changed massively in the weeks of house arrest. In several industries, the pandemic has accelerated digitalization like a time-lapse. 

Acceptance of home office

Facebook of all people in Silicon Valley was previously known for the fact that employees were not allowed to work from home, and colleagues had to travel overseas for meetings. A few days ago, Facebook and Google announced that the employees could work in the home office until the end of the year. Twitter went one step further: its 5100 employees can now work permanently from home or in a café, a mountain chalet, or wherever they want. Only those who want to or who are forced to do so for professional reasons can return to the office in September. By 2021, however, all personal meetings would have been canceled anyway, said the head of HR. “Reopening the offices is our decision, when and if our employees come back is up to them.” Each employee was given $ 1,000 for office equipment.

“My opinion of the home office has changed completely in the past two months,” tweeted the head of the real estate platform Zillow, Rich Barton. Before the pandemic, just 2% of the company’s 5000 employees worked permanently at home. Now Zillow has extended the possibility of working from home for the entire workforce until the end of the year. “I expect that this will have a long-lasting impact on the work of the future – and the home.”

Also, for cost reasons, “work from home” – or as the slang is said: WFH – is likely to develop into a broader trend. In a recent survey conducted by market research firm Gartner among chief financial officers in the United States, three out of four said that at least part of their workforce would continue to work from home. One in four even noted that an additional 10 percent of the workforce would be working from home if they hadn’t done it before. “The data shows the lasting impact that the coronavirus crisis will have on the way companies work,” said Alexander Brant von Gartner. “The CFO sees an opportunity here to realize savings through a remote workforce.”

Digitization of work

Millions of workers have had to learn what Zoom, Slack, or teams are all about in recent weeks. Because of the corona crisis and the forced homework have digitized more and more work processes. This benefits smaller companies, such as the video conferencing software provider of the same name Zoom, whose share price has increased by 150% since January, and by Docu Sign, a company based in San Francisco for digitally signing documents. The Slack communication platform has also grown to the extent that the co-founder and CEO Stewart Butterfield recently described as “pretty incredible.” Throughout the last quarter of 2019, the company had gained around 5,000 new customers, and this spring, it was a proud 7,000 within six weeks. It currently feels like this, said Butterfield.

On the other hand, the technology groups also got a tailwind: Microsoft reported in mid-March that the demand for its collaboration program, teams, had grown by more than a third within a week to 44 million users a day. Crews are on the phone for 900 million minutes every day. “We believe that this sudden, global shift to homework is a turning point in the way we work and learn,” wrote Jared Spataro, responsible for the Microsoft 365 software package. Google reports something similar: its video conference program Meet was used 25 times more in March than in January, and the software Classroom also seems to have been created for the crisis.

The pandemic had served as a technological leveler, Nadja Yousif of the Boston Consulting Group in London told CNBC: “People were more patient learning and trying out new technologies simply because they had to be. We all develop new skills in practical work. » The communication channels are also likely to change in the long term if not all of them work together in one office, says Yousif: video conferences would increasingly replace meetings, more would be communicated via email and chat services such as Slack. Ironically, this technological change could also affect Silicon Valley, wrote Margaret O’Mara, a fellow at the Silicon Valley think-tank joint venture,  in an analysis. Technology developed in the valley could allow more companies to realize that their employees no longer had to be located there.

The power struggle between Hollywood and cinemas escalates.

Even before the corona pandemic, cinemas had a hard time attracting guests. With 3D or even 4-D films, karaoke performances, or disguise evenings, many operators tried to make the film experience and lure people from the couch to the cinema. The success was moderate; on average, one American went to the cinema four times a year. From the big Hollywood studios, the business with cinemas is anyway less profitable than the rental through digital platforms. With cinema operators, the studios have to share the sales in half, with platforms like Amazon Prime or Apple TV they can keep 80% of the sales.

However, all attempts to wrest the exclusive film rights from the cinemas have failed in recent years. Until the corona crisis came: For the first time in April, a large Hollywood studio did not launch a film in the cinema as planned but switched to digital platforms at short notice due to the pandemic. Viewers were able to watch the Trolls World Tour universal studio production at home for $ 20 for 48 hours. The offer hit like a bomb: Within three weeks, Universal Studios earned $ 100 million with the animated children’s film, more than it had made in five years with the first «Trolls» film in five months in cinemas.

Inspired by this success, Universal Studios recently announced that it would continue to experiment with such digital releases after the pandemic ended. This is further bad news for cinema operators, who are already in a deep crisis due to the corona pandemic. The world’s largest cinema operator, AMC, has had to send all employees, including the CEO, on forced leave in the past few weeks. AMC now threatens to stop showing universal productions if it does not get the exclusive film rights again.

The coming months will show how the power struggle continues. But the crisis has shown that consumers are quite willing to pay as much money for films on their home screens as they do for a cinema ticket.

Netflix wages in “streaming war.”

For a long time, Netflix founder Reed Hastings was criticized for not showing any ads on his streaming platform. Given the growing digital advertising market, it seemed like a lost source of income. When Netflix increased its subscription prices last year, some observers predicted the beginning of the decline of the world’s largest streaming platform.

But in the Corona crisis, Netflix’s business model, which relies entirely on subscription fees, pays off: the currently slumping advertising market is not affecting the streaming service at all. But the demand from viewers has exploded: Around 16 million people subscribed to Netflix in the first quarter; the company itself had expected 7 million new subscribers. A total of almost 183 million viewers worldwide now pay for the streaming service. Netflix’s last quarter earnings of $ 709 million are more than double that of the previous year, and the stock has risen 50% since January.

But Netflix believes that the wave of success will subside as soon as citizens have more leisure options than permanent television. He expects the number of viewers to decrease, said Hastings recently when presenting the quarterly figures. 

However, a recent Morning Consult poll found 80% of respondents said they would use their Netflix subscription at least as much, if not more, once the crisis is over. This value was only slightly lower for the competitors Disney + and Amazon Prime. The streaming platforms have grown very dear to viewers in recent weeks.

The streaming business is booming even in the crisis.

Telemedicine

The possibility of medical care via telephone or video calls has been around for decades. Still, the corona crisis has given the offer enormous tailwind, as several hospitals and telemedicine providers report. The decisive factor was probably that health insurers had adjusted the rates for virtual consultations to those of regular visits. They also include the major state insurers Medicare and Medicaid, for the elderly and the needy, which covers a third of Americans. Many insurers previously paid less than half, doctors report. The federal government in Washington has, for the first time, allowed medical professionals to treat patients via telemedicine in member states in which they are not licensed. 

Ohio and Florida-based Cleveland Clinic hospitalized 60,000 virtual patient visits in March, down from an average of 3,400 previously, reports Kaiser Health News, a health-related news service. Similar reports are published by several platforms that arrange video consultations between doctors and patients: The Virginia-based CareClix platform reported a 50 percent increase in March, as did the New York-based provider Teladoc. Other companies, such as Zipnosis from Minneapolis, dispense with direct contacts between doctors and patients. Instead, the patient fills out a questionnaire that the doctor evaluates and then makes a diagnosis based on. In an emergency, the patient is advised to go to a clinic.

The high demand for telemedicine can be explained firstly by telemedicine’s symptoms of Covid-19 can be determined relatively easily by telemedicine, including a characteristic cough. Insurers and doctors had asked the population to resort to telemedicine for milder symptoms. Secondly, many patients with different complaints were afraid of being infected with coronavirus when they went to the hospital. Virtual appointments with psychotherapists are also in higher demand. 

In a McKinsey & Company survey conducted in early May, 13% of respondents said they had used telemedicine for the first time or more since the outbreak of the corona crisis. The consulting firm writes that the number of users for physical complaints has increased by 178% and for mental illnesses by 125%. In the long term, this development is likely to benefit mainly rural regions in America, where there is often a lack of specialists.



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