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Hollywood feeling pinch amid economic worries

Hollywood feeling pinch amid economic worries

Hollywood is feeling some impact from the economic downturn, but its famous resilience to recession is kicking in, and analysts remain optimistic.
Even between 2000 and 2001, during the downturn following the Sept. 11 terror attacks and the dot-com boom, consumers' movie spending _ box office, rental receipts and home video purchases combined _ rose 10 percent, to $28.4 billion.
Between 1989 and 1991, movie spending rose 8.5 percent to $16.8 billion, and between 1980 to 1982 as VHS tapes hit the mass market for the first time, it rose a whopping 47 percent.
Consumers' movie spending has been flat for three years, but the stock market is where Hollywood studios seem to be suffering the most, and none of the six largest studios is independently owned so the market's censure includes lots of factors unrelated to movie spending.
Between Sept. 12 _ the last trading day before Lehman Brothers declared itself bankrupt, it's a rough starting point for the current downturn _ and Wednesday, the S&P 500 fell 28 percent. Time Warner Inc., Sony, Viacom Inc., News Corp., General Electric Co. and The Walt Disney Co. _ fell an average of 32 percent in those six weeks.
Many other companies that rely on consumers' discretionary spending saw their share prices drop by half or more.
As for financing, even if some outside sources fall away or turn to other investments, executives and analysts are confident in the studios' ability to keep churning out big budget movies, which are their biggest money makers.
"As the private money dries up it's going to be more internal sources and internal credit facilities," said Fitch Ratings analyst Jamie Rizzo.
For example, Paramount Pictures owner Viacom Inc. also owns cash-steady cable networks MTV, Nickelodeon and Comedy Central, which provide a buffer to the sometimes hit-and-miss nature of moviemaking, where revenue can vary dramatically, Rizzo points out.
"These (cable networks) throw off billions of dollars in cash flow," he said. "That was the whole part of bringing these movie studios in house into a big conglomerate, to take away some of that volatility on the movie studio side."


Updated : 2021-05-10 07:59 GMT+08:00