In the wake of the COVID-19 pandemic, several trends in technology have accelerated. It comes as no surprise that consumers and corporations continue to adapt to these advances. Join me, as I examine 2 top trends I’ve been watching while the world slowly reopens.
Entertainment: Streaming and gaming
Amid the global COVID-19 lockdowns, demand for online entertainment has boomed and is expected to remain high as viewer habits become locked in. Netflix added more than 36 million new subscribers in 2020, and 5.5 million in the first half of 2021, bringing the global total to over 209 million. The streaming platform also spent more than $17 billion on new content in 2020. With a projected growth rate of more than 10% in spending in 2021, the company may very well grow its lead over other streaming and traditional rivals in terms of original content. As the trend of cable cutting grows stronger, it is clear why streaming services such as Netflix continue to dominate the market.
Participation in online gaming also surged during lockdown. Twitch, Amazon’s livestreaming interactive e-game platform, saw 100% year-on-year growth in hours watched in April, to 1.65 billion. To put that in perspective, the 2018 NFL season monthly average was 1.6 billion hours watched.
Gaming remains one of the least expensive forms of consumer entertainment, with significant potential to capture a greater share of discretionary spending. Cloud gaming – which provides access to any game, anywhere, on any device – has emerged as the next major platform in video games. It will be interesting to see which companies benefit from this shift.
New technologies in the service industries
Social distancing demands the adoption of new technologies, particularly in the service industries. The early adopters have been better positioned to weather the periods of lockdown that began in March 2020. A solid example is tech-savvy Domino’s Pizza. As an early adopter of the digitization of technologies (such as app-based ordering, online tracking, user profiles, and voice ordering), the pizza maker’s digital business has grown rapidly and now accounts for approximately 65% of its orders. Even traditional fast-food companies like McDonald’s are using delivery platforms such as UberEATS and transitioning to an at-home delivery model in addition to their long-established drive-through and restaurant services.
Similarly, for the $700 billion-a-year U.S. grocery industry, technology and e-commerce companies are changing the landscape through innovative product and service offerings. Amazon’s purchase of Whole Foods in 2017 along with its subsequent expansion of grocery delivery to its massive subscriber base, put the e-commerce giant in a better position to manage the surge of online grocery demand brought about by the pandemic. Amazon’s online grocery sales in the second quarter of 2020 tripled year over year. While the accelerated pace of the change is largely due to social distancing measures, the shift remains a positive trend for what has historically been one of the most stubbornly brick-and-mortar industries.
While the spread of COVID-19 and lockdowns may have caused smaller companies to put the brakes on IT spending, market leaders who possessed scale, essential relationships, and strong digital capabilities fared much better during the pandemic. That said, certain smaller, specialized players (such as Zoom and Shopify) gained prominence as demand for their e-services increased. For the long term, it will be necessary for enterprises to continue to adapt and improve – but also accelerate their digital transformation efforts – or be left way behind.
Written by: Daniel M. Song, CFA®, Westfield Financial Planning