Worries about tanking economy could help entertainment industry: experts

The owners of movie theatres, rental stores and video-game companies are banking on increased revenues during this tough economic period, and believe consumers will budget some of their discretionary income for entertainment as they have during past recessions.

Even during the Great Depression, theatres did brisk business as movie-goers scrounged together some nickels and dimes to see a film and forget about their troubles - albeit fleetingly.

"I wouldn't say that movie-going is recession-proof but it seems to be fairly resistant to downturns in the economy," said Charlie Keil, an associate professor and film industry expert with the University of Toronto's Innis College.

"Oftentimes people choose to find refuge in entertainment when things are tough economically."

Revenues at movie theatres are up about 2.3 per cent so far this year compared to 2007, despite the economic black clouds that have been hovering for months, said Pat Marshall, spokeswoman for Cineplex Entertainment (TSX:CGX.UN), which has 130 theatres across Canada.

A strong lineup of movies slated for the beginning of 2009 and a history of good box office performances during recessions give the company hope that it will profit even in a prolonged downturn, she added.

"Historically (during recessions) the industry has actually done very well as compared to most other industries, and it actually has done better than the gross domestic product in five out of the last seven recessionary periods," Marshall said.

"In difficult times people need escapism more than ever, and while they will most likely downgrade some of their more expensive entertainment offerings like going to (a sporting event) or a concert, two hours in a movie theatre for $10 is a very affordable form of escapism."

Ask representatives from video stores like Rogers Plus (TSX:RCI.B) or Blockbuster and they'll say their companies are also well positioned to make money in a recession by offering entertainment for only $5 or so.

"We actually experience a bit of growth when times get tougher," said Rogers spokesman Harold Simons.

"Our volumes do go up (during recessions) ... we think our retail stores are in a good position to support folks through these tough times."

Marshall said Cineplex isn't worried about losing too much business to rentals and predicted the moviegoing experience is something people won't give up.

"The reality is we're very social animals and so you need to get out from time to time and people will still visit the theatres, especially the younger demographic on the dating scene," she said.

"There's no way they're going to take a date to their rec room and watch a video, that's not going out."

But the video game industry is counting on more and more people forgetting their worries by parking themselves on the couch and becoming more engrossed in their virtual exploits.

"(People will) still want to be entertained and video games already offer some of the most hours of entertainment per dollar than any other form," said the chief financial officer of Microsoft's entertainment and devices division, Mindy Mount, at a conference in New York last month.

The video game industry grew by about 43 per cent in the United States during the last recession in 2001, she said. Meanwhile, Canadian video game sales this year are up 41 per cent through October.

"It seems like the video game market - so far at least - in Canada is unscathed by this recession," said Matthew Tattle, a spokesman for the research company NPD Group.

But he warned that past results are no guarantee of future success.

"You have to be worried anyway, it'd be naive for them to think they're completely recession-proof."

The movie industry also shouldn't be overconfident, Keil added. While it did benefit from good sales during the Great Depression, many companies were not able to recoup the construction costs of new theatres built in that era and went into receivership.

Players in today's movie industry also face huge costs, whether it's the studios that have to finance blockbuster pictures and astronomical salaries, or the theatres that are competing with each other to provide the best moviegoing experience.

"(Increased sales) are still not a guarantee that you will as an entertainment provider sail through this kind of economic uncertainty unscathed," Keil said.

"The balancing act is spending enough to make theatre-going seem enticing and not spending so much that you put yourself out of business."

British Columbia's largest professional ballet company recently announced poor ticket sales, and the slumping economy left it no choice but to lay off all its dancers and staff.

But other fine arts groups across the country say they're still doing OK, and Keil predicted the entertainment industry will thrive, although there will be losers.

"People are clearly still making decisions to spend, it's all depending on whether they see their money as being well spent."

For consumers like 23-year-old James, who would not give his last name, spending money on movies is done without a second thought, although that may not last for long.

He said he occasionally will download movies and TV shows when he doesn't feel like spending money on entertainment but finds the process is too much of a hassle, so sometimes he'll just pay for the rental.

"I don't even have a job right now but I don't consider my money (when spending on entertainment), I just consider fun," he said while returning two "Family Guy" DVDs at a Toronto video store.

"But I think it will be a factor in six months or a year to come. Right now money's not a factor, but it will be soon."