Hollywood may not be able to handle hard times

April 29, 2008

With "Iron Man" set to blast off Friday and jump-start the high-flying summer moviegoing season, Hollywood is tuning up to launch into a spirited chorus of "We're in the Money!"

The expected outpouring of box office dollars comes just in the nick of time. Year to date, only one movie, Fox's "Dr. Seuss' Horton Hears a Who!" has topped the $100 million mark. Although total domestic grosses for 2008 are running just 2% behind last year, that's thanks to the Christmas releases; the spring slate actually lagged 18% behind last year's numbers. Meanwhile, the specter of recession is bearing down on the United States, gas prices are rising and consumers are feeling the pinch.

But as folks consider cutting back on their Starbucks lattes, Hollywood is convinced that movies will ride out the down times.

"In the past four decades, there have been seven recession years in this country, and box office climbed strongly in five of those years," John Fithian, president and CEO of industry trade group the National Assn. of Theater Owners, said last month. "Consumers cut back on expensive purchases during recessions but also typically shift what discretionary spending money they have left to affordable activities, such as going to the movies."

But, brother, can you spare a dime's worth of straight talk? Ginger Rogers might have put a happy face on hard times as she pig-latined her way through the lyrics of "We're in the Money" in "Gold Diggers of 1933," but by then Hollywood was truly whistling in the dark.

In fact, Hollywood was not immune to the Depression at all. Box office and studio profits, which were riding high in 1930 as audiences flocked to the talkies, plunged precipitously by 1932 and hit rock-bottom in 1933 as the combined studios posted net losses and several were forced into bankruptcy.

Theaters responded by cutting ticket prices -- from about 25 cents in 1929 to 24 cents in 1935. (That might sound like chump change, but 24 cents in 1935 dollars is the equivalent of $3.74 today.) They were forced to resort to gimmicks like dish giveaways to lure moviegoers back to the Bijoux.

Now, nobody is predicting that the current economy is about to plunge over a Depression-era cliff. But last week, market research company NPD Group reported that 37% of Americans expect to spend less on entertainment products and devices in 2008 than they did in 2007. Big "tentpole" pictures still might enjoy hefty openings, but if thrill-seekers do start parceling out their dollars, it certainly could impact the repeat business that used to fuel the biggest blockbusters.

Will the fanboys who rush to "Iron Man" go back for a second viewing or opt to spend their spare cash on "Grand Theft Auto IV," which arrives in stores Friday? Will nostalgic boomers who shell out for the new boxed DVD set of the previous "Indiana Jones" adventures -- which also hits shelves Tuesday -- pay more than one visit to "Indiana Jones and the Kingdom of the Crystal Skull" when it hits screens May 22? The movies face a much more competitive landscape -- of Hollywood's own devising -- than existed during previous recessions.

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