The Reel Blog

Nobody wants an economic downturn, but since it seems we're in one, everybody seems to be wondering how the movies will do.

It comes as no surprise to theater owners that hard times send people to movie theaters. Movie-going remains the least expensive form of out-of-home entertainment, as these charts show:

But wait, there's more, considering your ticket dollar in terms of time spent:

Source: ¹Intl’ Laser Tag Assn.    

Source: ²United States Bowling Congress / Mischel & Co. (ave. price/open game)

Source: ³NATO

The L.A. Times weighs in with the tantalizing suggestion, " If you're struggling to pay the bills, why not let Angelina Jolie take your worries away?"

Marketplace follows with an on-air interview on the subject with yours truly.

 And the Times of London speculates on the forthcoming summer season with an economy in the doldrums:

“In the past four decades there have been seven recession years in this country, and box office climbed strongly in five of those years,” said John Fithian, the president of the National Association of Theatre Owners.

“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.” This economic anomaly was first observed during the Great Depression, when even the Dust Bowl refugees used what little money they had to pay for admissions to monster movies and Marx Brothers comedies.

 Let us know: where will you be spending your money this summer?

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Our friends in the U.K. are running a cinema trailer compiling scenes from some of the big movies hitting the theater this summer. Courtesy of the Film Distributors Association.

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 Get cracking, people. We've got a $4 billion summer to beat.

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Or is it the cart before the horse?

While the 3D grosses of Beowulf and Hannah Montana have distributors and theater owners hungry for more 3D content and seem to be driving the appetite for digital cinema installations, NATO's president, John Fithian, suggested at the National Association of Broadcasters' Digital Cinema Summit, that 3D may actually be a speed bump instead of an accelerator.

With at least ten 3D features slated for next year, including James Cameron's Avatar and DreamWorks Monsters vs. Aliens, Fithian noted

"We are at an extremely critical juncture in the transition to digital cinema, but the (deployment) deals have to be done. (...) We are at an impasse over the financials."

The deployment deals generally rely on a virtual print fee model through which studios contribute an agreed fee per screen, per movie to offset exhibitors' installation costs.

"Unless digital cinema deals are made in the next one to two months, we will not have time to (deploy the screens) for 2009," Fithian said.

Despite that, some of my friends at the studios are insisting that they should pay lower VPFs (in current negotiations) than they did in the first round of deals," he said, asserting that the model worked in the first round. "3-D cannot be an excuse for lowering VPFs."

There are currently fewer than 1,000 3D screens in North America. It is estimated there will need to be more than 4,000 to support 2 major 3D releases at the same time. There are currently only 4,600 digital cinema screens in the region.

Whatever the potential for additional box office for 3D - and it is, currently, just potential (Hannah Montana's $67 million on just 680 screens may be less of a demonstration of the power of 3D than it is the power of 9-year old girls.) - the one certain financial benefit of the transition to digital cinema is the roughly $1 billion dollars per year the studios will save on prints forever, infinity-eleven.

In a separate panel at NAB, NATO's D cinema consultant Michael Karagosian pointed out that none of the VPF agreements have been signed by all studios, possibly increasing exhibitors' share of the latest round of VPFs from 20% to 32% or more, depending on how many digital releases come from non-signatory studios. Furthermore:

(t)he costs for an exhibitor to transition to digital cinema compared with film is 200%-300% higher in a 25-year period, Karagosian estimated. This includes the costs of installation, maintenance and other operational expenses.

There are some problems to be solved if there are going to be enough 3D screens to support the studios' ambitious plans for 2009 and 2010. If they aren't solved soon, there won't be enough time to install the screens - even if Jeffrey Katzenberg installs them himself.

Variety's take is here.

 Update, 8:21 pm: Dave Poland gets it.

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Michael Brush, financial analyst for MSN Money, takes a historical look at box office performance during hard times and, despite what some analysts conclude, comes up with some hard numbers:

Some industry analysts, including Hal Vogel of Vogel Capital Management, dispute the link between economic pullbacks and rising movie attendance. But for me, the evidence is strong:

• In 1974 and 1975, as the economy contracted 0.5% and 0.2%, respectively, after 5.8% growth in 1973, the annual box-office take rose 25% and 11% as Americans sought refuge from reality in hits like "Jaws," "The Towering Inferno" and "Blazing Saddles." Movie-theater attendance rose 16.9% in 1974 and 2.2% in 1975.

• In 1982, the economy contracted 1.9%, after 2.5% growth in 1981. Box-office takes shot up 16.4% as hits such as "E.T.: The Extra-Terrestrial" and "Porky's" offered escapes. The number of moviegoers was up 10%.

• In 2001, economic growth slowed to 0.8% from 2000's 2.7%, but box-office spending on movies such as "Monsters, Inc.," "The Mummy Returns" and "Ocean's Eleven" rose 9%. This was also the year the "Harry Potter" and "Lord of the Rings" film franchises were launched. Then, the box-office take rose 14% in 2002 as economic weakness lingered, growing only 1.6%. Movie-theater attendance went up 4% in 2001 and 11% in 2002.

All told, box-office spending went up during five out of the seven recessions or pullbacks over the past 40 years, according to the National Association of Theatre Owners. The pattern is so consistent that you can't write it off by saying moviemakers just happened to release better films.

If it is not the particular mix of films that accounts for the upswing in box office during recessions, what does? Sony's Jeff Blake suggests

"Movies offer something completely separate from what you are dealing with day to day. So they really become worth the money when money counts."

Lionsgate's Michael Burns concurs, saying

"When things are tough it is nice to be able to go into a dark theater and get lost in great entertainment, to be moved or scared and all those great things."

So weigh in if you're so inclined. Why do movies do well in bad economies? Is it the movies? The price? A desperate need to escape a stack of bills on the kitchen table?

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Disney's 3D concert feature "Hannah Montana/Miley Cyrus: Best of Both Worlds Concert Tour" set box office records ovewr the weekend. It's $29.1 million bow was the highest ever for a super bowl weekend, for a 3D film and for a film opening in less than 1,000 venues.

According to Variety, Disney intends to extend the one week limited release another week, and possibly two in some markets.

The weekend, aided by strong grosses from Oscar nominees, was up 37% over the same weekend last year. It is the seventh consecutive up weekend. YTD box office is running 19% ahead of 2007 and admissions are up approximately 13%.

 So is 3D for real? It is this weekend.

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