Instead of throwing its traditional lavish Christmas party (complete with skating rink) on its back lot, Paramount Pictures held a more subdued tree-lighting ceremony and served refreshments.
Warner Bros. abandoned its longtime ritual of sending holiday turkeys out to a host of actors, executives and agents. Instead, the studio sent virtual Christmas cards via e-mail.
Jon Feltheimer, chief executive of Lions Gate Entertainment Corp., a studio that specializes in low- and mid-range-budget films, said the economic downturn would force Hollywood to cut back on more than mere parties and perks.
"It's a great wake-up call to ask ourselves if we're operating as smartly and strategically as we can," said Feltheimer, whose Santa Monica-based movie and TV studio recently eliminated 41 positions, or 8% of its head count. "Times like this force us to reexamine our operating plans, look at where we're spending money and where we're getting returns."
Confronted with rising costs and diminishing returns, studios are reining in costly talent deals that can leave them in the red while stars walk away with millions. For example, Warner negotiated a deal with "Yes Man" star Jim Carrey -- the first comedic actor to break the $20-million benchmark -- in which he deferred his usual upfront fee for an ownership stake in the movie.
This is occurring against a backdrop of declining DVD sales, which have propped up studio profits for years. Consumer spending on DVDs, already slowing, is believed to have dropped about 5% to 7% in 2008, according to Adams Media Research, which projects a similar decline for this year. The slowdown in DVD sales reflects the maturity of the business, which began to slow in 2005, but is now exacerbated by a drop in overall consumer spending that began a few months ago, said Tom Adams, president of the research firm.
Moreover, sales of the high-definition Blu-ray discs have been brisk, but not brisk enough to offset declining DVD sales. Adams estimates overall spending in the home entertainment sector, including Blu-ray discs, will still have dropped 3% to 5% for 2008.
Meanwhile, broadcast networks -- already grappling with rising production costs, lackluster prime-time ratings and a loss of viewers to the Internet -- face a very difficult year as automakers and other big TV advertisers slash spending.
