At least since the Great Depression, when Hollywood discovered that Americans would go to the movies even in the worst of times, the entertainment industry has enjoyed a reputation as an economically resilient business.
"Whether you are talking about cable TV, theatrical box office . . . or a Rolling Stones concert, entertainment seems to hold its own," said Dennis I. Forst, a senior entertainment analyst at Security Pacific Merchant Bank. "People always have a need to get away from reality."
Hollywood's reputation may endure--and many financial experts besides Forst believe the industry is recession-resistant. But 61 years after Americans first became infatuated with the "talkies" that replaced old-fashioned silent pictures and catapulted the nascent film business into a multibillion-dollar enterprise, some observers are beginning to question the optimism that surrounds the industry.
"I don't think the entertainment industry has ever lived up to its reputation as being recession-resistant in terms of the economy having no impact on it at all," said David Wilkofsky, chairman of an economic consulting firm in New York. "Entertainment is an important basic staple of life . . . but I expect to see some declines," he said.
"The big question this time around is whether the movie industry will be impacted by" new and cheaper forms of entertainment that didn't exist a decade ago, added David Wyss, research director for DRI-McGraw Hill, an economics consulting firm in Lexington, Mass. With cable TV and home video, he said, "movies are no longer the cheapest form of entertainment . . . and may be more affected by this recession than they have been in the past."
Among those now evaluating their spending amid the looming recession are consumers like Los Angeles resident Sean Randle.
Since losing his job as a stockbroker in June, Randle has cut back in on many forms of entertainment, including going out to concerts, buying recorded music and attending movies.
"I don't buy as much music or go out to movies like I used to," Randle said. "It's cheaper to entertain (guests) at home. They can kick off their shoes and watch a video and we can eat in."
In 1929, when sound was introduced to movies, theaters had relatively little entertainment competition. What's more, movies were inexpensive and Americans flocked to them in such great numbers that the net profits of the major film studios jumped 100% or more within a year. But today, with theme parks, recorded music in several formats, cable TV, home video and video games all vying for consumers' disposable income, it's a lot more competitive in Hollywood.
