Ups and Down as Recorded Through The Years by VideoAge

 

By Dom Serafini

The world over has witnessed an America that, in 2001 began the first of George W. Bush’s two presidential terms with the tragic destruction of parts of Wall Street, and ended in 2008 with a dramatic Wall Street crisis. In both cases the entire planet paid the consequences in human lives and suffering. And in both cases the television industry was catapulted into the driver’s seat by the public’s need to be informed of the unfolding events, as well as to have its worries relieved through entertainment.

Josh Elbaum

It is a truism that in times of crisis, the television sector around the world prospers. It’s not something new — the ancient Romans used to demand panem et circensens, or “just bread and entertainment,” from their leaders. 

In modern times, The New York Times stated it best. It recently wrote: “Historically, the movie factories haven’t been afraid of tough economic times. In fact, they have almost welcomed them. During the Great Depression, people continued to turn to the movies for escape. VHS rentals boomed during the recession of the early 1980s, while DVDs got a boost from the downturn earlier this decade.”

Plus, during economic crises the entertainment industry has always come up with new ways to stimulate business. In the crisis of the early ’80s cable TV came to the rescue. In the early ’90s, home video was the savior. In 2001, it was DVDs. Now, it’s digital media. Indeed, despite hard times, it seems that no one is cutting broadband service. Broadband is resilient, which is causing a surge of digital media revenues.

According to some analysts, in troubled economies, movie tickets and premium cable channels are the first to go among media options. But in the view of an HBO spokesperson quoted in The New York Times, “Pay-television has performed very well in previous downturns.” The Orlando Sentinel wrote that Florida cable provider “Bright House’s On-Demand movies are up significantly as people try to save money by not going out to the movies.”

Still, despite all that, don’t count movies out just yet. During various crises the movie business hasn’t stayed idle, either. At one time it responded with a widescreen format and now is facing an economic downturn square in the eye with 3D, or stereoscopic, technology. This year, a dozen or so 3D films are scheduled for release, with another 30 in various stages of gestation. By 2011, it is expected that 40 3D movies will be released in a single year. And, according to some reports, going stereoscopic adds only about 10 percent to a movie’s production costs. It is said, however, that it is important to view stereoscopic movies as a way to bring more people to cinemas, not as a way to charge more than the already exorbitant ticket costs. If a ticket price increase for 3D movies is unavoidable, perhaps distributors should plan to exhibit the movies both in 2D and 3D and let moviegoers decide which they would rather pay for.

It has been pointed out that, whatever movies do, television does it better, therefore several TV set manufacturers, such as Phillips and Samsung, are already planning to introduce 3D TV sets. In the U.K., BSkyB is testing 3D TV. In Japan, satellite TV network BS11 of Nippon BS Broadcasting (part of NTV network) already transmits in 3D, and, in Europe, Phillips is working on a 52-inch auto-stereoscopic (glass-free) TV set. For the television industry it’s a natural progression: First black-and-white TV, then color, then HD, and now 3D. And regardless of how new the concept might seem, 3D was actually invented in 1840.

Like with any crisis, the television industry has to adapt to audiences’ newfound moods and tastes. One of the U.S. casualties of the current economic downturn seems to be the television drama, first because of the production costs involved and second because viewers like to laugh during troubled times. As such, dramedies will fare better, while comedies are poised to rise from the ashes.

And yet each new crisis brings new opportunities, at least for the film and television industries. VideoAge, for example, was born in New York City in 1981 in the midst of a recession in which the U.S. federal government raised interest rates to 18.87 percent for prime rate (interests charged to banks). Inflation was 10.35 percent, unemployment was 10.8 percent and the Dow Jones average (stock index of 30 large companies) went down 24 percent.

In 1981, inflation in Argentina reached 600 percent. Notes of one million pesos could barely buy a soda bottle. That same year, Poland declared martial law and, in 1982 Argentina went to war with Britain over the Malvinas (Falkland) islands while the Iranian oil crisis crippled Mexico.

At the same time, in the U.S., 134 movies were released, grossing close to $2.35 billion, versus 133 movies the previous year, which maintained the prior year’s grosses. Total cable TV ad sales reached $121 million, compared to just $72 million the year before. For its part, NATPE 1982 stayed the course with small increases in both exhibitors (262) and attendees (5,551) from 1981.

We also tend to forget the 1973-75 U.S. oil crisis, when OPEC raised oil prices, causing oil and gasoline shortages and the price of a gallon of gas went up 233 percent in just one year.

But going back to the various crises as seen through the pages of VideoAge, the 1990-1991 recession caused 653 U.S. banks to fail, the Dow Jones was down 21 percent and prime interest rates reached eight percent. The world was in the midst of the Gulf War and Japan’s Nikkei (stock market) Index went from 40,000 points to 13,000.

Psychologically, the biggest impact to the TV sector in 1991 was the Gulf War, which affected NATPE and the Monte Carlo TV Market the most. The eerie empty aisles are still impressed on the memories of the few NATPE participants who remained on the New Orleans convention floor. Similarly, few Americans ventured to the subsequent Monte Carlo TV Market, but everything bounced back as if nothing had happened in time for MIP-TV in Cannes in the spring.

Nonetheless, in the U.S. in 1990, 197 movies were released, up from 193 the previous year, while the box office increased by $251 million to close to $4.38 billion. In 1990, worldwide home video rentals and sales of U.S. programs increased to $3.48 billion from the $3.13 billion of 1989.

During the 2001-2003 recession, exacerbated by the collapse of the tech stock bubble, the NASDAQ (electronic stock exchange) lost 3,935 points, or 78 percent, and the Dow Jones went down 38 percent. Then, nearly half of European bank lending in 1999 went to telecom companies. Moody’s, a credit agency, estimated that about 80 percent of all the high-yield, or “junk” bonds issued in the U.S. at the height of the boom were to telecom operators. When the tech stock bubble exploded in 2001, the stock market value of all telecom operators and manufacturers had fallen by $3,800 billion from its peak of $6,300 billion in March 2000. To put this into context, the combined loss in value on all of Asia’s stock exchanges during the Asian financial crisis of the late 1990s was just $813 billion.

Japan’s recession continued into the 2000s. Deflation began plaguing Japan starting in 1999, and by 2005 the yen had 103 percent of its 2000 buying power.
The European Union introduced a new currency on January 1, 1999. The euro, which saw its value plummet when launched as physical coins and bank notes in 2002, continued to be a weak currency,  reducing its program buying power.

The 2001-2003 period also marked financial crises in Argentina, Brazil and Turkey. Meanwhile, in 2001, even though 477 movies were released in the U.S. — 25 fewer than during the previous year — box office grosses increased by $612 million to $8 billion.

The year 2002 witnessed the biggest fall in NATPE history, when participation dropped almost 50 percent, to 10,125 attendees and exhibitors by more than 36 percent to 553 companies, from the previous year.

In the current crisis, due to risky subprime loans (loans to non-credit-worthy borrowers), the Dow Jones is down 42 percent, inflation is at 3.6 percent, unemployment 6.7 percent, the prime interest rate is one percent and the Consumer Electronics Association reported a 0.1 percent increase of wholesale shipment revenues of consumer electronics in the fourth quarter of 2008, compared to the same period of 2007. According to U.K. research company IABM, profitability for the broadcast manufacturing and media technology sector worldwide “has still improved, but now it is only 9.3 percent.” Analysis by London-based media buyer ZenithOptimedia showed that worldwide ad spending is expected to fall by 0.2 percent to $490.5 billion in 2009.

In regions such as Latin America, Russia, China and India, Zenith expects advertising growth in 2009. Internet advertising is also expected to grow this year. In addition, the video game sector in the U.S. reported 2008 sales up 25 percent from the previous year.

Despite the worldwide economic downturn, attendance at last November’s AFM in Santa Monica registered just a 5.3 percent decrease from the 2007 market’s figures.

After a dramatic fourth quarter of 2008, the international television industry is now starting the new year with NATPE, full of the expectations that only new budgets can bring. At each subsequent market, companies will be able to better gauge the impact of their clients’ cuts and the effects of their own cuts on sales. As with every financial crisis, strong companies will be strengthened and weak ones will get weaker, generating another round of mergers and acquisitions. To find out which are the strongest companies, one needs only to flip through the pages of any TV trade publication.