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Archive for November, 2010

postheadericon Is Cinema Recession Proof?

After the financial blow-up the question of whether cinema was recession proof quickly became a topical one on the telephone lines in our office. It is tempting to say the answer is yes, and leave it at that. After all, cinema endured the great depression of the thirties and, in normal times, it is impossible to find any evidence of economic cycles in cinema attendance (though the economic cycle does have a big bearing on investment in new sites).

In the last couple of weeks the question, for me at least, raised its head again. The reason for this is that I was finishing a new report, Cinemagoing Southern Europe 2010, wondering whether the forecasts in it were really sustainable in the face of the crisis in Ireland and, more pertinently, the forces marshalling to attack Portugal, Spain and Italy, in what looks likely to be a real life manifestation of the domino theory.

As it happens, the decision was made to let the forecasts stand, mostly on the grounds that this was the last of our European reports this year, and it seemed desirable that it should be written against the same background assumptions as the others. Even so, the forecasts in this particular report are not very optimistic. They look forward to a lengthy period in which exhibitors will be fortunate to do more than grind out flat admissions, and the best way to lift profits is likely to be a continued process of consolidation or, in plain English, buying up other cinemas.

But it may be right to question the conventional thinking on the relationship between the economy and cinema. Most of the time, cinema ignores the economy. The Argentinian default of 2001, for example, left the cinema business virtually untouched (though not exporters of films to Argentina, who found themselves being paid in devalued pesos). On the other hand, Latvia’s austerity measures hit its cinema market hard: 2009 admissions were down over 17%, and a doubled rate of value added tax on tickets took a further chunk out of industry revenues.

In the short run forecasting the cinema business is still all about product, most noticeably demonstrated over the last year by Avatar, but also by a whole raft of animated pictures like Ice Age: Dawn of the Dinosaurs and  Toy Story 3 and, as I write, by the latest episode of another long-running franchise, Harry Potter and the Deathly Hallows: Part 1. While this flow of product continues – and there are numerous instalments of a number of heavy-hitting franchises in the works – the proposition that cinema is recession proof is probably not going to be seriously tested in any but marginal, poorly established markets. But with some Western European consumers about to be hit hard as governments wrestle with the ongoing debt crisis, a few months without a good picture may well produce a scare.