Why Hollywood's Recession- Proof Days May Be Nearing an End

STV · 10/08/08 04:15PM

So it looks like we're back on the Depression's doorstep, with credit axed and markets capsizing here and abroad. But one growth industry continues to thrive reliably: Movies, where despite the ongoing threat of a SAG work stoppage, studios are sinking more than a half-billion dollars into productions for their 2010/2011 calendars. This after earning nearly $7 billion at the domestic box office through September (more than 10% of which came from The Dark Knight and Iron Man alone) and increasingly hedging their bets with financiers based everywhere from Manhattan Beach to Calcutta. While you may be panicking, and both Wall Street and Washington wonder where the bottom is, Hollywood is betting on its history as a recession-proof redoubt — one that was never sturdier than in the Great Depression. We can outlast anything! Sure, they're not the worst odds anyone's ever acted on, but history isn't everything. Or actually, when you crunch the numbers, it might be. Is the film industry's bullishness just heedlessly setting itself up for a crash?Hollywood floored it 80 years ago as well, greenlighting scores of films after the stock market bombed in 1929. Studios experienced a surge in net profits in the years before the crash (largely attributable to the advent of talkies) but had difficulty sustaining any of it when spending increased to establish sound on sets and in theaters. Moreover, box-office receipts plunged from 1930 to 1933, by one count dropping almost 38% to their Depression-era ebb at $482 million. Much of this could be blamed on the drop in screen counts, which would continue to erode by more than 35% until their 1935 low of 15,200. But grosses picked up along with ticket prices, with viewers paying around 28 cents each by the end of the '30s. Production spiked as well, which is where the contemporary parallels get messy. But bear with us: Hollywood distributed 622 films in 1931 and 672 in 2007. Last year's box-office grosses were a record $9.6 billion — adjusted for inflation, $100 million less than the the total gross in 1931. Worse yet, the average ticket price during that time would cost $3.06 today. That's less than half the current national average of $7. We could go on like this all day... throughout the '30s the average film cost around $6.7 million in today's dollars, Michael Bay is spending $225 million on Transformers 2, etc. etc. The National Association of Theater Owners has long insisted that its business is recession-proof despite jacking up prices for concessions and desperately plugging commercials into multiplexes — neither of which constitute especially reliable sources of income as both viewers and media buyers pare back. Studios themselves have leveraged their output through home video, VOD and international deals, but the numbers suggest that audiences just don't escape to new movies — at least not enough new movies — the way they did 70+ years ago, whatever the medium; 1930s Hollywood didn't have the Web, cable (or even TV for that matter) or video games to contend with. It also didn't face a looming SAG strike, which, for what it's worth, union president Alan Rosenberg says he has support for and could draw a vote within the next month. Studios have already called his bluff, but if he's successful, notes Variety, the stoppage could cost higher-budgeted films in production as much as $500,000 a day while a new contract is hashed out — a worst-case tailspin in an economy where even Steven Spielberg had to mortgage his future with an Indian media conglomerate. Yet the machine lurches along, as creatively financed as ever (déjà vu: Wall Street also invested heavily in the sound era as well before the 1929 crash severed that lifeline) and utterly sure — arrogant, even — in its confidence that audiences will pay between $9 and $13 to watch Seth Rogen in The Green Hornet. No pressure, Seth! You'll always have history on your side.

Did 'Times' Price Surge Trigger Circ Drop?

Maggie · 10/26/07 02:05PM

In the just-ended third quarter, the New York Times Company claimed a 22% decrease in newsprint costs. At the same time, they claimed that operating costs are down only 1.5%. We think that's fishy! Here's why. Newsprint and payroll are typically two of the biggest expenditures at a newspaper. The company is claiming an 8% savings based on "reduction in consumption." Cutting its page size might play a part in that, but isn't entirely responsible. We suspect circulation took a hit somewhere.