The nation's 23,000 movie theaters, often considered one of the most recession-proof businesses, may face a severe test if the economy becomes much more sickly.
"We've always said the movie theaters could survive any downturn, but this recession will put that theory to a test," said Thomas Sherak, executive vice president at Twentieth Century Fox studios. "During previous recessions, there really wasn't a home video market competing with the theaters."Experts agree the clearest threat to theaters comes from home video, just because it's cheaper to rent a movie for about $2 than to pay $5.50 or more for a movie ticket.
William Kartozian, president of the National Association of Theater Owners, whose members control 13,000 screens, admits the industry is concerned.
"Movies are still the least expensive out-of-home entertainment alternative," he said. "But my feeling is that it could be a little different than before, because now people have more in-the-home alternatives available."
But home video is not the only problem for the chains, which saw 1990 revenue from tickets drop slightly from 1989's record $5.03 billion level, despite an increase in ticket prices. Total admissions were down by about 10 percent to about 1 billion.
The chains have been suffering from a spate of movies that opened strongly but then did not perform particularly well, although there has been an upturn over the past month and a half.
Movie chains pay studios for the films based on a sliding scale that gives the theaters just a small profit when the film opens. Sometimes, a chain will virtually give up the first week of ticket sales in its bidding for a particularly desirable film.
The hope is that the film will have "legs" and stay popular long after it opens. The booking agreements call for studios to collect a much smaller share of ticket sales as the length of the film's play period increases.
"From the exhibition side, things are not as healthy as the overall movie business would indicate," said Sherak, who worked for the General Cinema Corp. chain for six years before joining Fox. "There has been a lot of very successful product, but it has not had long legs."
The summer season was replete with films that opened strongly but never achieved blockbuster status - "Dick Tracy," "Days of Thunder," "Back to the Future Part III," "Total Recall," "Another 48 HRS," "Die Hard 2." Not only does that trend affect ticket sales, it also hurts concessions, which are the lifeblood of the movie houses.
"It's difficult to handle a lot of people when you open, because you can only handle so many, especially when you're operating a 10-plex," Sherak said. "It's not as if they can sell as much as they can sell."
Additionally, two of the major players - General Cinema and Cineplex Odeon Corp. - have been hit hard in recent years because of problems with expanding too quickly. Both have been scaling back operations.
Cineplex, which borrowed heavily to build flashy new complexes before that strategy collapsed in 1989, has been forced to seek cash infusions from its two largest investors - MCA Inc. and the Montreal's Bronfman family - to keep from defaulting on bank loans.
"I think Cineplex Odeon has dragged down everything else," said entertainment analyst Paul Marsh of brokerage Bateman Eichler, Hill Richards Inc. in Los Angeles. He noted that such chains as the Southeast's Carmike Cinemas Inc. continue to do well.
Until 1989, the chains followed a frenzy of expansion, opening new complexes with as many as a dozen screens. The attraction was not just in having one big snack bar; it also enabled operators to show the films in their larger viewing rooms early in the run, then move them into smaller rooms as their popularity waned.
"Part of the problem now is that the chains have done about as much as they can with efficiency and economies of opreation," Marsh said. "Now they have to wait for a better batch of films."