Slate's Hollywood Economist: Box Office Slump

Edward J. Epstein of Slate talks about this year's box office slump and what it really means for the Hollywood movie studios.

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Movie business now, which is not as good as movie people would like despite the big box office numbers for "War of the Worlds" last weekend. But for 19 weeks in a row, movie theaters overall have sold fewer tickets this year than they did last year. This is looking like a loser year. Still, as is often the case in Hollywood, perhaps all is not as it seems. Edward J. Epstein writes about the economics of Hollywood for our partners at the online magazine Slate.

Edward, welcome back to the show. And I was surprised to see you say in Slate that this slump is not really affecting the big studios. Why not?

EDWARD J. EPSTEIN (Slate): Well, I'm not saying it's not affecting the big studios; what I'm saying is it's not a slump. It's been going on for 55 years, not 19 weeks. The audience has been declining. And it's declining 'cause there's a new technology--at least there was a new technology in 1948 called television. And what that did is transfer people from the movie theater to the home.

CHADWICK: The numbers that you site are pretty persuasive. People used to go to the movies every week in much bigger numbers than they do now. I mean, hugely bigger.

EPSTEIN: Yeah, 90 million people and 95 million people used to go weekly,. And now 30 million people go, and the population has doubled. Now what I pointed out is that the studios themselves, which account for less than half the movies shown, actually don't have a box office slump this year. It's more or less the same or actually better than last year, for them.

But that's not the issue. The issue is as you get high-definition television, as you get TiVo-type devices for personal recording, more and more people are going to watch their entertainment at home than in theaters. The focus on theater and box office is an anachronism coming out of the 1930s and '40s. Studios still make 15 percent internal return on investment.

CHADWICK: So the people who are getting hurt are the smaller groups, the independent people. It's those films people are not going out to see.

EPSTEIN: Exactly. It's the independent and what's called the studioless studios, the smaller studios.

CHADWICK: Here's another part of the business equation for them: advertising. You write that they used to spend nothing on advertising; people would just go to the movies. And now the average film costs $30 million to market. That's just crazy.

EPSTEIN: No, it's not crazy. It's how you create an audience. Before, they had an audience; it was a habitual audience. Now they have to create one like an election campaign for a candidate, but they have to do it every week with a movie. And what justified that $30 million in the past was not the theater but the back end--the video, the television, the DVD, all that stuff. But even that isn't being justified now.

CHADWICK: Let me ask a very naive question, if I may: Does anyone think that people aren't going to see movies this year because the movies are not very good?

EPSTEIN: It's not a naive question at all. It goes to the heart of the problem. Hollywood makes its money from breakout movies, movies like "Titanic" or "Spider-Man." They make a huge amount of money, a 50-percent return on investment as opposed to 15 percent. These are the movies that are no longer happening. So you're right. It's that they're not making movies which create audiences themselves from word of mouth. That's the real problem with Hollywood.

CHADWICK: Opinion and analysis from Edward J. Epstein. He's the author of the book "The Big Picture" about the business of Hollywood, and he writes the Hollywood Economist column for our partners at the online magazine Slate.

Edward, thank you again.

EPSTEIN: Thank you very much, Alex.

(Soundbite of music)

CHADWICK: DAY TO DAY is a production of NPR News and I'm Alex Chadwick.

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