by John M. Curtis
(310) 204-8700

Copyright June 22, 2005
All Rights Reserved.

eeling from an 11% drop in theater attendance in 2005, Wall Street wonders whether the once untouchable film business is now vulnerable to today's economic malaise. Box-office receipts have been down every month since February compared with 2004. Soaring pump-prices have put a dent in the pocketbooks of even the most ardent moviegoers. Consumers spend on necessities first before entertainment. Once viewed as recession-proof, analysts are hard-pressed to explain Hollywood's sudden doldrums. Mel Gibson's “The Passion of the Christ” raked-in a whopping $370 million, making 2004 a tough year to follow. All things considered, film industry experts believe there are still systemic problems plaguing Tinsel Town. Some speculate that enhanced in-home entertainment systems running DVDs [digital video discs] have hurt the theatrical film business.

      All businesses run in cycles, including Hollywood. Not since 1985 has the industry witnessed such a stubborn downturn in revenues. If current trends hold, 2005 will be the third consecutive year of declining box-offices—a drop not seen since 1962, when John F. Kennedy occupied the White House and Sean Connery debuted in the first James Bond film “Dr. No.” Despite the run-up in ticket prices now averaging $10 nationwide, box-offices receipts are down 7% in '05, according to Nielsen EDI, a service that tracks box-office performance. “There's not much separation between the theatrical release and the video release. It suggests that the movie is become the trailer for the DVD” said Jeff Berg, chairman and chief executive officer of International Creative Management, one of Hollywood's most respective talent agencies, blaming the slowdown on DVD sales.

      Crunching the numbers, it's tempting to over-analyze bits of data, when the answer lies in the bigger picture. Faced with spiraling gas prices, ordinary consumers have less discretionary income to spend on frills than last year. Bare necessities trump minor luxuries like entertainment. Blaming current moviegoing trends on bereft remakes or sequels doesn't account why these same films succeeded in years past. Escalating ticket prices also doesn't explain away soaring gasoline prices, stretching the family budget to the breaking point. Early DVD releases and fancy home entertainment centers can't account for the precipitous downturn in moviegoing. Whether the White House likes it or not, their laissez faire approach to oil markets has now boomeranged, threatening the overall economy—certainly the film business. Sooner or later, soaring gas prices take a toll on ordinary consumers.

      Hollywood always hopes for “Titanic”-like blockbusters. Booming successes and abysmal flops have always averaged themselves out. Turnkey movies like “Batman,” which cost $150 million and earned $72.9 million in its first weekend, can't be expected to bail out an industry with too many flops and too few cash-cows. “Going to the movie theater use to be a unique way of seeing a movie and carried with it a romantic notion—it was as special forum you shared with a group of people,” said Terry Press, the chief of marketing for DreamWorks, an upstart studio owned by director-producer Steven Spielberg, executive Jeffrey Katzenberg and record mogul David Geffen. Press forgets that all bets are off if moviegoers lose the extra allowance needed for discretionary spending. Spiraling gas prices rob consumers of the capital needed to pay for frills like going to the movies.

      Blaming Hollywood's current box-office slump on cable TV, satellite dishes or fancy home entertainment centers is like blaming today's pump prices on cost of tea in China. Improved technology or consumer electronics doesn't change the experience of getting out of the house, driving to the theater, eating popcorn and experiencing the “willful suspension of disbelief” that comes from watching the “big screen” in a dark, crowded places. It's doubtful that recent pre-show advertising discourages people from going to the movies. Whether a recent AOL/AP poll showing that 73% of adults prefer watching movies at home has meaning is anyone's guess. No entertainment industry—whether gaming, restaurant or travel—needs more than 25% market share. Many people prefer popping TV-dinners in the microwave over going out but that doesn't kill the restaurant or fast-food business.

      Hollywood's recent box-office slump aren't due to systemic problems within the film business or, for that matter, significant changes in the moviegoing audience. Blaming today's problems on a sudden drop creativity, originality or picture quality also doesn't explain the same factors affecting previous years. Whether admitted to or not, consumers haven't yet adjusted to exorbitant gas prices, now robbing would-be moviegoers of the money needed for weekend entertainment. “Like any business that has a little bit of a downturn, you can't panic because of six months,” said Dan Fellman, president of domestic distribution for Warner Bros., doubting whether anything fundamental has changed in the movie business. It's not rocket science to figure out that spending an extra $50-$100 more every week on gas is bound to take a toll on consumers' spending habits.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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