"It's not that the cinema business is completely immune to recessions," said John Fithian, chief executive of the National Assn. of Theater Owners. "But the industry appears to be recession-resistant. If there are decent movies, people are going to come out."
This year movie attendance is down nearly 4% from 2007, and the reverberations are beginning to ripple across the studios. Third-quarter domestic ticket revenue was down by double digits for three major studios -- 20th Century Fox, Paramount Pictures and Walt Disney Studios, according to Bernstein Research.
Though the box office makes up a small portion of media companies' bottom line, movies are important because they propel other segments of the business, such as DVD sales. Studios rely on DVDs to turn a profit on many of their movies because ticket sales often are not enough to offset production and marketing costs. Disc sales are down 9% for the third quarter, and purchases of new releases fell a more dramatic 22%, according to Nielsen VideoScan.
Studio executives attribute the slump to fewer blockbuster DVDs released in the third quarter.
Industry observers say home entertainment sales traditionally hold up in a down economy, as consumers seek more-affordable entertainment options. Videocassette tape rentals took off during the 1981-82 recession, and DVDs underwent explosive growth during the 2001 slowdown, said Tom Adams, president of Adams Media Research. That gives studio executives optimism that the latest technology, Blu-ray, will take off despite lower consumer spending.
Holiday sales should shed light on the prospects for Blu-ray. Other segments of media, such as basic cable TV subscriptions and movie rentals, are expected to remain healthy. Most people, particularly those older than 35, view home entertainment as affordable and even indispensable. A night on the town for a couple who hire a baby sitter, dine at an upscale restaurant and pay for parking and a movie can easily cost as much as the monthly cable bill.
Cable companies realize that they are not immune from household budget cuts.
"Subscriptions get pared down," said Forrester Research analyst James McQuivey. "This means cutting extra movie channels, reducing premium channel packages and taking mobile TV [on cellphones] out completely."
Video game sales slumped in September, down 6% from a year ago, when Microsoft Corp. released its blockbuster Halo 3, which drove $228 million in sales. Game sales would be up 22% for the month if the mega-hit were removed from the equation.
