Will downturn hit Hollywood?

The box office may not be recession-proof this time.

The upward march of ticket prices may halt. The growth of premium movie houses – with their reserve seating and gourmet food – could slow. There may be fewer new movies, and each one may stay for a shorter time in theaters before moving to DVD, cable, and satellite.

The domino effect of the economic crisis hitting Wall St., then Main St. USA, may now be arriving at Cinema Alley, say industry watchers. Conventional wisdom has long held that the entertainment industry is "recessionproof," under the theory that people always seek to escape their worries.

Escapism may be as popular as ever. But just as people in the Depression-hit 1930s began to buy radios instead of dropping a precious half dollar at the movies, this year more people may choose to rent a film, view it on cable, or skip it entirely rather than pay for parking, popcorn, and ever-escalating ticket prices.

"The impact of today's downward-spiraling economy is going to be in slow motion, just as it was with the 1929 crash," says Douglas Gomery, professor of the economics of cinema at the University of Maryland.

Just as in 1932, when studios and movie theaters were eventually reduced to cutlery and china giveaways to lure people in – it was also the year that the double feature was invented – today's studios will soon be reeling from a one-two punch, he says.

Studios need loans to make movies, especially the big, special-effects-laden ones, says Mr. Gomery. But as this recession works its way through the economy, "it's going to be hard for anyone to get loans and people will be less inclined to spend their own hard-earned money going out."

Fewer movies may be released

Box office is down 1 percent and attendance is down 4 percent. At least three major independent labels have shuttered this year: Paramount Picturehouse, NewLine, and Warner Independent all axed 90 percent of staff.

The silver lining in the black cloud of economic news could be that studios will reduce the number of movies they make, reducing the competition that zaps each's income.

In 1978, 191 films were released for an average ticket price of $2.34, whereas 603 films were released last year for an average ticket price of $6.88, according to the Motion Picture Association of America.

Last weekend alone, no fewer than seven major releases hit theaters, each competing for a dwindling number of patrons.

"The number of releases is way up and that is a problem because it raises the average cost," says Chris Lanier, president of Motion Picture Intelligencer, a firm that tracks and analyzes the box office. "The cost per unit is up and the number of units has more than doubled in five years. Ticket prices are up but attendance is down so revenues have clearly not kept up."

Mr. Lanier says the only solution is for films to significantly raise their entertainment value, which he says flat-lined more than four years ago.

"We need an Irving Thalberg [an Academy Award-winning film producer in the early years of motion pictures], or a Hal Wallis [a legendary producer for Warner Bros.]. Those guys had a talent that worked like gangbusters. It's amazing how well they worked," he says.

Don't count the movies out yet, counters Paul Dergarabedian, president of Media By Numbers which also tracks box office trends. Following a two-month downward trend in box office revenues, he says, the past two weeks – with $29 million openings for "Beverly Hills Chihuahua" and "Eagle Eye" – show that trends may be more positive than they seem.

Movies do well in most recessions

Indeed, figures provided by the National Association of Theater Owners show that since 1965, theatrical box office revenues actually increased in five of the last seven recession years.

The largest of these increases in box office receipts was more than $650 million in 2001. By comparison, the largest box office decline in a recession year was $219 million in 1991.

"This period just means that studios are going to have be on their 'A' game," says Mr. Dergarabedian. "Money means a lot more to people right now, it's harder to get and hold onto. So when they do go, the message is, this better be good, or we're not coming back again."

Katie Mullen, assistant manager of the 12-screen multiplex Broadway Cinema in Eureka, Calif., says the West Coast chain of 30 theaters has not yet cut popcorn prices or resorted to product giveaways.

But because traffic is "down" especially during the week, they've cut back employee hours by 30 percent.

"We're cutting back on employee hours since the end of summer," she says.

The chain is crossing its fingers for a good slew of holiday movies that could turn the season around, she says, especially if one is able to reproduce the attractiveness and staying power of a "The Dark Knight," which has done over $525 million in business since opening in spring.