Hollywood starts '09 with little to celebrate

As for box-office revenue, the studios saw nearly as much money generated in 2008 as they did in record-setting 2007, although that was due to ticket price inflation. Attendance was off an estimated 5% from 2007's 1.4 billion admissions. Hollywood nonetheless saw a last-minute surge over the long Christmas weekend, thanks to such hits as family films "Marley & Me" and "Bedtime Stories," the latter starring Adam Sandler.

"If you have good movies, people tend to come even during down economic times," said John Fithian, president of the trade group National Assn. of Theatre Owners. Fithian said that in 2005, when the economy was booming, "we had the worst year we've had in decades because the movies were terrible."

Nonetheless, Fithian acknowledged that if the recession dragged on, it could affect moviegoing at a time when consumers are getting more of their entertainment at home with their big-screen TVs, video games and the Internet. A recent study by market research firm Parks Associates found that nearly 66% of U.S. consumers altered their spending habits in the fourth quarter of 2008 as a result of the bad economy.

Such changes could prompt the studios to speed up their efforts to distribute entertainment via the Internet, cellphones and other new outlets.

"The recession will accelerate the transformation of the entertainment industry from traditional media to tomorrow's reality of new media," said Jerry Nickelsburg, a senior economist at UCLA.

The downturn has hurt the local entertainment economy in other ways. Commercial production, which accounts for about 12% of on-location film shoots in L.A., was expected to have dropped 20% in the last quarter of 2008 as the major car companies and other advertisers cut back.

"It's the first signal that the nation's economic problems are really starting to hit the entertainment industry directly," said Paul Audley, president of FilmL.A. Inc., the nonprofit group that handles film permits.

Feature film activity also was down in the quarter, thanks to the front-loading of production that occurred earlier in 2008, when studios rushed to finish movies by June 30 in anticipation of a possible walkout by actors.

Production is expected to pick up early this year, barring an actors strike. Although most studio executives don't think SAG members will authorize a strike, they've crafted contingency plans such as scrapping so-called pay-or-play deals, in which stars are guaranteed their paydays even if their movies are canceled.