The spread of coronavirus has wreaked havoc on daily life, grinding most of
our routines and plans to a halt.
Schools and universities around the world have canceled classes,
professional sports leagues have suspended their seasons, Coachella was
postponed and candidates are canceling their campaign rallies.
Major tech conferences around the world are scrapping their events.
As of early March, the economic impact of these cancellations had
surpassed 1.1
billion dollars.
And since that time, the number has only increased, as more events are
canceled every day.
Facebook announcing that it is canceling its F8 developer conference.
The mayor of Austin announcing that he's issuing an order that effectively
cancels South by Southwest.
These major tech conferences in particular have a large economic footprint,
as attendees are a huge boon for the host city's hotels, restaurants and
small businesses. Oftentimes hosting a major conference involves hiring
hundreds or even thousands of part-time workers.
Now, these workers may find themselves out of a job and the cities and
companies themselves are facing major financial losses.
Some major tech cancellations include South by Southwest in Austin, Texas,
Google I/O and Mountain View, California, Facebook's F8 event in San Jose,
California, and the Mobile World Congress in Barcelona, Spain.
This news comes as cases of the new coronavirus, COVID-19, have slowed in
China, but grown rapidly outside the country's borders, throwing
international and domestic markets into turmoil.
Take a look at this ugly, ugly day on Wall Street.
The Dow and S&P back on track for their worst month since October of 1987.
You don't see days like this very often, Brian.
Major cities from San Francisco to New York have banned large gatherings as
diagnoses in the U.S.
have soared. It's undoubtedly a smart move for public safety, but all
these cancellations, particularly of major conferences, are taking a huge
financial toll.
C OVID-19 can be characterized as a pandemic.
Canceling large gatherings, both domestically and abroad, is now par for
the course. This helps promote social distancing.
It's a main strategy that the CDC recommends to avoid catching or
transmitting the virus.
We're at a point now where every large in-person event in the next few
months, no matter how significant, is likely facing cancellation.
But that does come at a major cost.
One of the largest major tech events to get canceled due to COVID-19 is
Mobile World Congress, the world's biggest exhibition and conference for
the mobile industry.
The GSMA, the organization behind the annual Barcelona-based event,
officially called it off on February 12th, a little under two weeks from
its supposed start date, after a number of exhibitors and companies had
already pulled out. This event typically generates nearly half a billion
euros in revenue for the city of Barcelona , draws a crowd of over 100,000
from over 200 countries and generates over 14,000 part time jobs.
And it costs a fortune to put on.
In the financial year 2017 to 2018, the last year for which the
information is publicly available, the GSMA paid the Trade Fair
Organization Fira de Barcelona $40 million dollars for its services and
$2.6 million dollars to exhibition hotel management services around the
city. But they likely won't get any of that back.
GS MA's event insurance, as well as the insurance policy for individual
exhibitors, do not provide coverage for these, quote, exceptional
circumstances, in which a communicable disease makes cancellation
necessary. This means GS MA probably just can't afford to issue refunds to
exhibitors, sponsors or other attendees, since most of its annual revenue
comes from the event itself, 97 percent according to the organization's
latest publicly available financial data.
That's bad news, since a standard admission ticket costs the equivalent of
872 U.S.
dollars. It's a huge blow, but they're far from the only ones facing this
reality. For many, the news that Austin's South by Southwest festival
would be canceled may have come as the biggest shock of all, as it's a
staple on the cultural calendar.
The annual 10-day-long event features film, music and interactive tech.
There are live concerts, film screenings and endless presentations and
panels to attend, scattered throughout the city of Austin itself.
Last year, the event drew a crowd of over 4 17,000 people.
It is the single largest, from a revenue generation perspective, the single
largest event for the hospitality industry in the city of Austin.
But on March 6th, just one week before it was slated to begin, the city of
Austin called it off.
After careful deliberation, t here was no acceptable path forward that
would mitigate the risk enough to protect our community.
We didn't learn that until four o'clock on the Friday before we were
supposed to start delivering foods and stuff to the volunteers and the
South by South workers, which is who we fed.
These two weeks in March represent 2, 3, 4 months, even more in revenue for
the year. Between 25 and 30 thousand dollars is about what we were
anticipating, and what we're not going to be making anymore.
Austin will lose about $355 million dollars in revenue.
But in terms of impact, the bigger hit could come to the festival itself,
which may not be able to recover after losing tens of millions of dollars
due to the cancellation .
As was the case with Mobile World Congress, pandemics are not covered by
the event's insurance.
And while event organizers hope the show will go on in 2021, the
festival's co-founder told The Wall Street Journal that he's unsure how to
make it happen. Unfortunately, they have already made some layoffs.
They laid off about a third of their employee base, I think it was about
50 people. So for them especially, it's very devastating financially.
The organization is reportedly scrambling to find additional sources of
income to keep from running out of money by this summer.
While it likely can't afford to offer refunds, it's instead allowing
ticket holders and sponsors to defer registration to a later year.
Most of the Bay Area and Seattle-based tech events like Facebook's F8,
Google I/O, Apple's W WDC and Microsoft Build have been canceled as well
or moved to an online-only format.
And at this point, it seems like merely a matter of time before any other
tech events still scheduled for the following months follow suit.
The first U.S. case of unknown origin was reported in Solano County on
February 26, and the following day Facebook announced that it was
canceling the in-person component of its annual developer conference F8,
which was to be held in San Jose in May.
This is a place where Mark Zuckerberg has in the past, showcased some of
the virtual reality and augmented reality features in the works.
While F8 was more modest in size than something like Mobile World Congress,
the conference is still nothing to scoff at.
Last year, it drew over 5,000 attendees and the price of admission was
$595 dollars.
After the cancellation, the company announced it would be doubling its
annual donation to $500,000, prioritizing organizations serving the San
Jose area. While that's certainly appreciated, the economic toll for both
San Jose and Facebook extends far beyond this figure.
PredictHQ estimates the direct losses to be 12.2
million dollars, a figure that includes losses to hotels, airlines,
restaurants and transportation providers that would normally profit from
the F8 conference.
And people who rely even on tips, I think, when you have a big business
event like that, you know, you could you could have your biggest, you
know, day a year because of something like this if you have a few big
corporate dinners. This figure doesn't include the unknown losses that
Facebook is incurring from planning for an event that won't happen or the
amount that Facebook would have made from hosting it.
While Google initially indicated its own annual developer conference,
Google I/O, would proceed as planned, it too ended up canceling the
Mountain View-based event, making the official announcement on March 3rd.
That conference draws over 7,000 attendees and the direct economic loss
for the cancellation is estimated to be about 19.5
million dollars.
Our small businesses, our r estauranteurs, our retailers were really
looking forward to that extra foot traffic.
The company says it will make a $1 million dollar donation to the city of
Mountain View to help small businesses recoup the losses and support
computer science education in the community.
And unlike many other companies, Google is able to offer full refunds to
attendees who paid $1,150 dollars for a general admission ticket.
Following these cancellations, Apple and Microsoft also announced that
their respective developer conferences will now be online-only.
Apple's June event was set to take place in San Jose, and it too will
donate $1 million dollars to the city, though like the other events, this
only represents a fraction of the revenue that would have been generated.
Microsoft's May event was set to take place in Seattle, one of the areas
that's been hit hardest by the outbreak.
Amid these announcements, the spread of the virus has worsened and city
officials have been banning large gatherings altogether, even as they
struggle with the inevitable economic fallout.
One business restaurant owner mentioned that they had lost 70 percent of
their business. Ultimately, health officials hope that these protective
measures will decrease the total number of coronavirus cases.
But even if that doesn't happen, event cancellations and social distancing
can slow the rate at which the virus spreads.
This matters a lot, because if too many people become sick at once, it
will overwhelm our health care system, u ltimately leading to inferior
care and preventable deaths.
For its part, economic activity is starting to pick back up in China as
strict quarantine measures have proven effective.
So I think we can keep an eye on other markets that have been affected and
just see how they rebound, and that might give us an indication.
And if China continues the way it is now and we follow in that path, and
that's a lot of ifs, but that might indicate that things really do improve
in the next couple months.
But while we exist in this period of uncertainty, every major gathering, no
matter how important or economically impactful, is being called into
question. Perhaps most devastating of all is the uncertainty surrounding
the 2020 Olympics, set to begin this July in Tokyo.
There's been talk of holding the Games without fans, which could cost the
Olympic organizers about $850 million dollars in ticket refunds.
In the worst case scenario though, the Games would be cancelled
altogether, a devastating blow to the athletes who have been training for
years to represent their countries and the millions of fans looking
forward to tuning in, and the city of Tokyo itself.
It would also be a major financial hit to NBCUniversal, CNBC's parent
company, which expects to surpass $1.2
billion dollars in ad revenue for the 2020 Games.
It's over 7,000 hours of content.
So that's like across TV and digital, a nd then some stuff is on Twitter.
So that's just, the scale of how much advertising that is is insane.
For now, the Olympic Committee organizers are remaining optimistic, though
President Trump suggested the Games may need to be postponed.
As with everything else right now, we just have to wait and see.
From a business perspective, I don't think we will have ever experienced
this or hopefully we'll ever experience again.