Hollywood's death spiral.

The numbers behind the industry.
July 25 2005 2:48 PM

Hollywood's Death Spiral

The secret numbers tell the story.

(Continued from Page 1)

Other studios followed suit with a vengeance, shortening the window to four months—or, in a few cases, three months—in order to sell Thanksgiving-released children's movies at Christmas. Even worse, the home entertainment divisions began to announce an upcoming DVD while the movie was still playing in theaters. For example, this July, only four weeks after opening The Adventures of Sharkboy and Lavagirl in 3-D, Buena Vista trumpeted the coming release of the extras-loaded DVD. Even if only a small percentage of moviegoers decide to wait for the announced DVD, it leads multiplex chains, which need to maximize their popcorn sales to stay in business, to cut the run of the movie in their premium theaters. The shorter the run, the less money the title takes in at the box office. As this spiral accelerates and studios earn a larger and larger share of their money from home entertainment, it adds to the pressure on studios to further reduce the video window. How far can this cycle go? After Hong Kong collapsed its video window in 2002, there was a 70 percent reduction in theater attendance. And, as a top studio executive pointed out after studying the problem, "A 6% reduction in attendance in 2000-2001 led to half the movie theaters in the world going bankrupt." How will Hollywood get out of the death spiral? "That is the $64 billion dollar question," he replied. (Stay tuned for the answer next week.)

Edward Jay Epstein is the author of The Big Picture: The New Logic of Money and Power in Hollywood. (To read the first chapter, click here.)

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