How will the recession affect Hollywood?
How will the recession affect Hollywood? -- Movies, videos, television, books, and gadgets could take a hit from the soft U.S. economy
You won’t see the cast of thirtysomething wearing potato sacks or Madonna going around trying to justify the $18.98 price of her CD. But the U.S. recession will affect — sometimes subtly and sometimes in a big way — the movies, videos, and TV shows you’ll see, the music you’ll hear, the books you’ll read, and the audio and video gear you’ll be able to buy this year. ”Everything’s going to be hit — the recession’s going to be very democratic,” says James L. Brooks, an executive producer of The Simpsons and director of the movies Broadcast News and Terms of Endearment. The downturn may be a lot less democratic to performers: Big stars will probably get off easy, but the movies and albums of those a notch or two below the top may well feel the pinch when consumers tighten their belts.
The tough times have at least one cheery aspect, however: Some attractions are already getting cheaper. Disneyland this winter slashed prices for the first time so that adult Southern Californians now pay $20 per ticket, or one-fifth less than out-of-towners. As analysts see it, entertainment consumers will feel the recession ripples in other surprising ways:
MOVIES AND VIDEOS
Hollywood honchos love to reassure themselves by noting that people kept going to movies during the Depression because they wanted to escape from their financial problems. And movie-ticket sales climbed steadily in the last two recessions — from $1.9 billion in 1974 to $2.1 billion in 1975, and from $3 billion in ’81 to $3.5 billion in ’82. But things are likely to be a bit different this time, now that video rentals have become stiff competition and movie-production costs have gone haywire, helping raise ticket prices. (There is no graph for video rentals and sales because few historical figures are available.) At Disney Studios, which spent an estimated $70 million on Dick Tracy just last year, chairman Jeffrey Katzenberg recently spelled out his fears in a confidential, 28-page staff memo, which made its way into the press and fast became the talk of the town. In it, Katzenberg warned that the recession ”will be quite devastating to our industry” and that the studio should cut costs by developing new talent and not paying stars ”unreasonable salaries.” (A subsequent anonymous parody — on Disney letterhead — had him declaring, ”By reducing employees’ salaries by 88 percent we will establish a platform to launch the next round of good times.”)
Many analysts, in fact, think the public will save by cutting back on movies (at $5 to $7.50 a ticket, plus popcorn) in favor of videos (99 cents to $3 and cheap snacking). A recent poll by the Conference Board, a New York-based research group, found that 39 percent of consumers called video rentals a ”good” value, while only 9 percent felt the same about films.
Fewer movies might become blockbusters: Adults will be less likely to go see a movie again and again as they did with Ghost and Pretty Woman, says Martin A. Grove, film analyst for The Hollywood Reporter. MCA President Sidney Sheinberg thinks consumers, wanting their money’s worth, will shy away from movies that aren’t certifiable hits. ”The recession won’t affect the No. 2 grossing movie much,” he says, ”but the No. 42 movie might feel it.”
The studios haven’t yet given up on extravaganzas — Tri-Star Pictures will reportedly bet $42 million on Hook, its Peter Pan remake with Dustin Hoffman, Robin Williams, and Julia Roberts — though the trend will be toward more, but less pricey, films. Paramount plans to spend the same amount on its 20 movies this year, $420 million, as on the 15 it released last year — an average reduction of 25 percent for each picture. ”I think you’ll see a spate of romantic comedy and love-triangle type films, the modern versions of the old Rock Hudson-Doris Day movies,” says Paul Kagan, a Carmel, Calif., media analyst. ”You don’t have to blow up cars or travel to international locations, and that’s great for the economics.”
Although video rentals could well rise by 6 percent this year, says Kagan, even that business won’t go unscathed. Since some retailers won’t have the cash to buy enough copies (at about $60 each) of the new high-priced hits to satisfy all their customers, renters may have to make extra trips to the video store to get ahold of a hot title like Postcards From the Edge. But experts expect buoyant sales for sell-through videos ($30 and under) like The Jungle Book, since kids tend to view them repeatedly. CBS/Fox reportedly will bring out Home Alone at a sell-through price this year.
The soft advertising market has the networks scouring for ways to cut production costs, so don’t expect to see many new hour-long, weekly dramas with big casts. The TV execs will be more likely to put on cheaper, reality-based programs like NBC’s investigative half hour, Exposé, and Fox’s upcoming TV-verité series about a suburban Illinois high school, Yearbook. Some popular shows will start weaving recession themes into their plots. Bernie Kukoff, executive producer of The Cosby Show, says one episode will probably focus on the impact of harder times on one of Dr. Huxtable’s patients, a member of ”a younger family, where the wife’s pregnant and the husband’s just lost his job.” Over at thirtysomething, says supervising producer Scott Winant, Michael and Elliot’s advertising agency ”may accept a few accounts that would normally be considered beneath them,” a classic thirtysomething riff on tough times. (Simpsons creator Matt Groening sees a still milder effect on his show: no layoffs at Homer’s nuclear power plant, but ”Marge won’t be able to afford haircuts as often, so her beehive may get even bigger.”)
Cable TV observers think the times will lead some subscribers to cancel premium channels like HBO and Showtime. Tele-Communications, the largest U.S. cable operator, says that only 42 percent of its basic subscribers took a pay service in late 1990, down from 50 percent at the beginning of the year. The current credit crunch will also delay some cable start-ups. The Sci-Fi Channel, scheduled for a first-quarter launch, has put off its debut until later this year at the earliest.
As in the last recession, the music business seems in for a rough stretch. Fourth-quarter ’90 sales of CDs, tapes, and albums were flat compared to 1989, and the industry is rife with new labels, like Charisma, Giant, and Hollywood, trying to sign new talent and catch hold just when consumers are getting cautious. Companies are laying people off or cutting down on promotion and tours. At PolyGram’s Island and A&M record divisions, about 75 employees have left or been axed since summer — 17 percent of the company’s work force.
Mirroring the movies, the top acts are not expected to feel much of a hit. If a kid has his heart set on a Madonna disc, ”he’s going to find the money to buy it somehow,” says MTV CEO Tom Freston. But lesser-known acts will find it tougher to get record contracts or make videos, and performers who are past their heyday could suddenly find themselves without a label. Capitol Records may have had more than music on its mind when the company recently combined two of its rock acts, Crowded House and Tim Finn, into one.
Publishers are looking especially eagerly for sure-selling hardcovers and are also printing extra copies of more affordable paperbacks. Says Stuart Applebaum, vice president of publicity and public relations for Bantam Books: ”Authors of the stature of Robert Ludlum and Danielle Steel are going to be recession-proof, but sales overall are vulnerable because people can share books.” Joni Evans, executive vice president for Random House, adds that topical books — about, say, Saddam Hussein or the S&L crisis — will still be big draws. Hard times may well be a boon for softcover books, however. Jack Romanos, mass-market division president for Simon & Schuster, foresees consumers ”trading down” from $19.95 hardcovers to paperbacks.
In the last recession, sales slipped for such big-ticket items as TV sets and stereos. It looks like the same will happen again, even though manufacturers are anxious to roll out such newfangled high-tech lures as Digital Audio Tape players and teeny-tiny 8 mm camcorders. ”Most consumers are not feeling adventurous,” notes Jeffrey Logsdon, an analyst at Seidler Amdec, an L.A. securities firm. But if you are one of the few who do feel adventurous, there is an upside to the sluggish economy. ”A recession tends to drive prices down on big-ticket items,” says Logsdon. ”So those people who have been saving up for a laser disc player or a larger-screen TV should be able to find a good deal.” As the saying goes: If you’ve got lemons, might as well try to make lemonade.