Bailout for the Business?
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I'm Matt Holzman with The Business Brief, a guide to what's happening in and around the business.
They say that the movie business is recession proof. And it is true that when people couldn’t run two dimes together during the great depression, the movie business boomed. And it looks like the same thing is happening today. Even though the economy is going to hell in a hand basket, movie ticket sales are up 17.5% this year to a whopping $1.7 billion according to the box-office tracking company Media by Numbers.
Alas, if the industry only made movies showed them in theaters like it did during the great depression, it would be in great shape.
But these days, the companies that own the studios have their fingers in all sorts of pies, and some of those baked goods have gone terribly stale. Stock prices of the big media conglomerates have gone down between 40 and 80 percent in the last year, considerably worse, on the whole, than the S&P, Dow or NASDAQ averages.
Not to put too fine a point on it, but it does seem that the more a company is about the movies, the better they seem to be doing.
GE owns Universal, but it’s also the most diversified of the media conglomerates. Not coincidentally, GE’s stock has faired least well. The fact that they own large finance companies certainly hasn’t helped. News Corp., which owns Fox, is also suffering, probably because Rupert Murdoch insists on buying more and more newspapers. And they say Viacom’s Sumner Redstone is nuts.
Viacom is actually near the top of the heap, since Sumner had the prescience to spin off CBS in 2006. With TVv ratings and ad revenue in the toilet, all the media companies with broadcast TV operations are probably wishing they had done the same.
Disney, which is the only pure-entertainment company of the lot, has suffered as well, but less than all the others. And I predict that it’ll stay on the top of the heap in the future.
That’s because they’ve been focusing on making PG-13 “Disney” movies instead of more adult fare, and in these trying times, happy movies will do well in theaters. And kid-friendly titles do better than most on DVD.
And that’s a huge leg up for Disney. Because at the same time the economy is tanking, sales of most DVD’s are drying up. And it’s the DVD that often puts the big budget studio picture into profit.
So will the government bail out the troubled entertainment industry? The MPAA tried to get some pork from Washington, but boffo box office in January doused their barbeque. Thirteen Senate Democrats ultimately joined the Republicans to kill a $246 million earmark. Damn you, Paul Blart: Mall Cop.
The lack of loot from Washington, and the strength of the dollar around the world, will certainly give the studios another excuse to send production abroad. State tax incentives may be the one thing that keeps them here, though wobbly state budgets may put always controversial incentives on the chopping block.
Ironically, six years after he moved from Hollywood to Sacramento, California’s thespian/governor signed a budget bill that finally included production tax credits -- $100 million to be exact. Only time will tell if the business will last long enough to claim them.
I'd love to know what you think. Send me an e-mail at TheBusiness@KCRW.org. You can download a podcast of this commentary, share it with a friend, or embed it on your blog with the click of a button from our new media player at KCRW.com/TheBusinessBrief. For KCRW, I'm Matt Holzman.