Recession Hits Hollywood

Although the glittery display and overblown hype we've all come to expect during Oscar season is unlikely to be affected, the truth is that the recession has come to Hollywood just as much as it has come to Wall Street and Main Street. Box office figures for 2008 are similar to those for the previous year, but most observers are not convinced that results for 2009 will keep pace. The more optimistic of industry insiders are quick to point out that going to the movies is still a relative bargain and, besides, everyone needs to get out and find some entertainment for themselves, and their families and friends, no matter the leanness or fatness of one's wallet. But the worry is palpable for the thousands of people enmeshed in the film production industry. Warner Brothers, for one, is planning significant layoffs and even offshore outsourcing initiatives to deal with budget problems.

One bright note can be seen on the technology front, where the use of digital projection in cinemas across the U.S. and even abroad indicates an innovative, even potentially revolutionary, trend in film exhibition and distribution. Additionally, the increasing popularity of 3D movies, like "Bolt" the animated feature from Disney, is a driving force in the change-over from traditional 35mm projection to digital equipment. The costs are steep but big savings are also possible, as the motion picture studios will be able to transmit film offerings by digital means instead of by providing expensive, specially processed film for traditional big-screen presentations. Most of the major Hollywood studios are backing digital conversions of all U.S. and Canadian theaters. Interest in digital technology is lower in Europe, but is elsewhere, including in Brazil and Japan, attracting considerable attention.

Another positive signal for the industry is the continuing and even expanding practice of granting tax incentives to movie production companies working on location in various states. Movies are, of course, very expensive to make, so taking advantage of incentives, even encouraging rivalry between neighboring states to ensure the best deal, is a sensible business decision. States like Michigan, Louisiana, New Mexico, Colorado, Massachusetts, Connecticut, and New York appreciate the job creation associated with the production of feature films. However, some critics note that such jobs are temporary at best and that the funds spent to back movie projects are, right now anyway, needed for essential services. Still, incentive-rich welcome mats for film companies are avalable in most states and even in Canada.

For a more sobering reality check, a look at the Sundance Festival may be informative. Fewer films debuted and fewer distribution deals were struck this year at the noted annual celebration of independent filmmaking. Risking millions on interesting projects with unproven appeal and/or unknown actors is apparently not as popular this year as in the recent past. Lower prices for new works and alternative openings, including cable pay-per-view release instead of theatrical presentation, may herald the coming attractions for the duration of the current recession.

Perhaps we movie-goers should take heart from the fact that some of the best and most popular movies of all time were created during the Great Depression, including "All Quiet on the Western Front," "Frankenstein," "Grand Hotel," and "King Kong." Perhaps this current recessionary era will yield some notable movies too.

Adam B. Vary, "Thinking Outside the Box Office: What We Learned In 2008", Entertainment Weekly

"Hollywood not immune from economic woes", UPI NewsTrack

"Warner Bros. outsourcing jobs to India and Poland", Los Angeles Times/Entertainment News Buzz blog

"Studios Reach Digital-Cinema Upgrade Deal", PC Magazine Online/Reuters

Michael Cieply, "States' Film Production Incentives Cause Jitters", New York Times

Lauren A. E. Schuker, "Slowdown at Sundance?", Wall Street Journal

John Horn, "Sundance is a buyer's market", Los Angeles Times/The Envelope entertainment blog