Is the Motion-Pictures Industry Recession Proof?
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Is the Motion-Pictures Industry Recession Proof? Tylor Orme 1 & Harold L. Vogel 2
# International Atlantic Economic Society 2020
Abstract There is a longstanding belief among motion-pictures industry observers that box-office revenues are largely unaffected by poor macroeconomic conditions. This belief, which primarily grew out of the success of the film industry in the early years of the Great Depression, has been pervasive in the industry, and, to a lesser degree, among academics, despite a lack of empirical evidence to support it. This paper seeks to empirically evaluate the effect of recessions on box-office revenues of the U.S. motionpictures industry using data from Box Office Mojo and the St. Louis Federal Reserve Economic Database from 1990 to 2019. This period, which includes three periods of recession, is analyzed using a number of time-series econometric methods. Results show that macroeconomic fluctuations do have a significant effect on film-industry revenues and a declining economy curtails growth, as measured in terms of the mean of revenue and persistence over time. The depth of a recession appears to be an especially important determinant. These results inform future models of the film industry by highlighting the importance of macroeconomic effects on the industry as a whole. Keywords Motion-pictures industry studies . Recessions . Film industry . Time series econometrics JEL Z10 . Z11 . E32 . C32
Introduction In the immediate wake of the Great Depression, the motion-pictures industry flourished. Consumers continued their theater-going behaviors despite the struggling * Tylor Orme [email protected]
1
Cultural Economics, Emerson College, Boston, MA, USA
2
Vogel Capital Management, New York, NY, USA
Orme T., Vogel H.L.
economy and surging unemployment rate. This unique situation of an industry thriving while the economy as a whole suffered led to the belief that the film industry is recession proof. That is, the film industry can sustain or even exceed its usual levels of performance during periods of widespread economic hardships. The ability of the film industry to survive business cycle downturns without experiencing any major decline in revenues is taken as axiomatic among industry observers. Scholars have even attempted to provide theoretical justifications for this phenomenon, arguing that filmgoers use theater-going as a form of distraction and escapism. The belief that the film industry can maintain or perhaps even grow revenues and profitability in cyclical downturns persists despite the fact that there has been little empirical evidence supporting the claim. Many still assert the recession-proof nature of the film industry, both in the industry and in academia, while the only empirical support for the idea is nearly a century old (e.g. Surowiecki 2009; Lang and Rubin, 2019). There were some arguments advanced in opposition to the idea that the film industry is able to withstand recessions. The most common is that historical evidence of the success of the film industry in the
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