Extra! Extra! Read all about Hollywood’s declining recession-proof reputation, threatening to dim the lights on entertainment and media exchange traded funds (ETFs).
Despite a global credit crunch, financial institutions going under and jobs being lost, one area is still thriving: movies. As of right now, Hollywood is bullish on its industry, as $500 million is being pumped into productions for the 2010-2011 schedule. This year through September, more than $7 billion was brought in at the box office.
Even financiers domestic and abroad are still placing their bets on Hollywood. And Hollywood is still banking on its ability to dodge the perils of recession, STV for Defamer reports.
But is Hollywood really so immune to the woes? Looking back at the Great Depression, Hollywood greenlighted a number of films after the crash. But box office receipts plunged from 1930-1933, while production spiked.
In 1931, Hollywood distributed 622 films; in 2007, it was 672. Last year’s box office gross was a record $9.6 billion – adjusted for inflation, it’s $100 million less than 1931’s total gross. And even more telling is that the average ticket price then would cost $3.06 today. Hollywood also faces a number of issues that didn’t exist back then, including cable television, Netflix and the internet.
While a number of theater owners are saying that business is brisk, recession or not, one wonders why concession prices are skyrocketing and the pre-movie ads seem to run longer than the movies themselves. Hollywood also faces a strike by the Screen Actor’s Guild (SAG) that could wind up costing $500,000 per day.
Is the bullishness just wishful thinking?
- PowerShares Dynamic Media (PBS): down 43.8% year-to-date; CBS Corp. (CBS) is 4.61%; Walt Disney (DIS) is 5.5%; Viacom (VIA) is 4.7%; Dreamworks Animation Inc. (DWA) is 3.1% (black line)
- PowerShares Dynamic Leisure And Entertainment (PEJ): down 37.2% year-to-date; CBS is 5.8%; Disney is 5.4%; Dreamworks is 3.1% (green line)
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.