I’ve been in the media & entertainment industry for some time now (to prove it without aging myself too much – I produced a Tony! Toni! Toné! show). The industry has taught me that when the economy gets rough, the one true escape people have is usually through entertainment. Countless times, I’ve been told that it’s practically a recession-proof / war-proof industry. And whenever sentiment has pointed towards doom & gloom, and we question what’s safe – I turn to the movies and everything adjacent to it (from IP to music rights, to sports, and all technology and production tied to it).
But is it true? (for this post, I'll focus on the film industry first)
I found a great VIP+ Variety Intelligence Report that’s come out that summarized the current sentiment out there. But wanted to do some digging myself.
To start, I'm usually pointed to the Box Office. And in this case, let's look at Canada & USA. Simply looking at Box Office numbers and comparing them to some economic turbulence, we see the following:
Volcker: July 1981–November 1982 Duration: 16 months | GDP decline: 2.9% | Peak Unemployment rate: 10.8% | Box Office: +227%
Gulf War: July 1990–March 1991 Duration: Eight months | GDP decline: 1.5% | Peak unemployment Rate: 6.8% | Box Office: +6.32%
The Dot-Com: March 2001–November 2001 Duration: Eight months | GDP decline: 0.3% | Peak unemployment rate: 5.5% | Box Office: +13%
The Great Recession: December 2007–June 2009 Duration: Eighteen months | GDP decline: 4.3% | Peak unemployment rate: 9.5% | Box Office: +10%
There’s a bit of truth to it, right? Ignoring COVID-19 in this scenario (I’ll get into it, in a separate post), economic uncertainty rarely has mattered to box office revenues. But if you’re a skeptic, you’re likely saying, I’m not accounting for inflation. True – movie tickets in the 80s surely aren’t the same today. So, let’s dig into actual movie tickets being sold.
Once again, ignoring COVID19 for this exercise, we do see ticketing numbers slowly taper but not necessarily due to the economy. Looking at Dot Com Bubble in 2001, numbers rise. And during the Great Recession from Dec 2007 to June 2009, ticket numbers slightly rise as well. The fluctuations may be more tied to general price sensitivity than actual economic sentiment. From 1995 to 2022, average prices across the board have more than doubled from $4.35 to $9.16. And specifically, from the peak in 2002 to 2022, prices jumped $5.81 to $9.16. We can also point to streaming hurting movie-going – which we can get into in another report.
So there is a hint of truth to turn to the movies when it gets grim. And historically speaking, it makes sense.
Another reason why investments in movies, are a good bet is the indirect benefits to the economy it can make during not-so-great times. A single movie project can employ hundreds of workers, it keeps localities, and industry (VFX, production, city, etc) economies going and is typically budgeted from Day Zero. With larger productions taking as long as a few years, it can weather a recession. So movie investments in this sense are a net positive for more than just returns.