The global entertainment industry has always praised itself for proving to be “recession-proof. Case in point: The age of depression. As America struggled with its worst economic crises in history, the public flocked in droves to the movies, cheering for Warner Bros’ crime flicks, watching a less-ambiguous reality presented in the social dramas, and laughing at the Marx Brothers’ derisive political satires.
The current global recession is no different, or so it seems. Book sales have remained steady throughout the world, ranging from a variety of non-fiction tomes investigating the roots of the crises, self-help books, the usual bestselling fiction and various books written by, about or against Barack Obama.
The American film box office this year was dead even with last year’s. Similarly, several European countries struck heavily by the recession have had a record-year, including France, Italy and Britain.
Despite the massive flow of cash mega hits “The Dark Knight, “Mama Mia! “Bienvenue chez les Ch’tis, “Gomorra and “Red Cliff have generated, the actual numbers are quite disconcerting.
In the book biz, major American publishing houses Simon & Schuster, Houghton Mifflin Harcourt and Random House have seen considerable layoffs. Two of America’s biggest retail bookstores Borders and Barnes & Noble have noticeably cut back their Christmas orders. According to trade magazine Variety, Michael S. Hyatt, CEO of publishing house Thomas Nelson, says that the retail book market is “bracing for a difficult holiday season. On the other hand, book company Houghton Mifflin Harcourt, announced it would temporarily stop acquiring manuscripts.
In global music, CD sales dropped 11 percent from last year despite the release of a swarm of new records by some of the industry’s biggest players, including Coldplay, Madonna, Lil Wayne, AC/DC and Mariah Carey. Digital album sales rose by 34 percent while digital track sales rose by 30 percent. Apple, home of the largest digital music store online, reported a 34 percent increase.
The situation in Egypt was starkly different from the rest of the world. Despite the absence of any sales figures, most major bookstores in Egypt have reported an increase in sales, especially for Egyptian and Arabic books.
The picture was less bright for the local music industry. Despite the substantial reduction in album prices by Rotana, the Saudi-based label that is currently monopolizing the music scene in Egypt, illegal music piracy continued to soar as the music industry attempts to search haphazardly for revenues from alternative sources.
The film industry was much more problematic internationally and locally. While overall revenues are impressive, actual attendance is down from previous years.
Three of America’s biggest specialty film divisions – Warner Independent Pictures and Picturehouse and New Line Cinema – shut down their operations this spring. Shortly after, ThinkFilm slimmed down its activities. Yet perhaps the biggest causality of the year was Tartan Film, one of the UK’s oldest, most prestigious arthouse film distributers, which shut down entirely.
Most American production companies saw significant layoffs as well, including Disney, Paramount, which announced its decision to shrink its film slate from 25 films a year to 20, and Sony which cut down $1.1 billion from costs. According to Reuters, NBC Universal, home to Universal Pictures, said it would cut 500, or 3 percent, of its staff, while Viacom Inc, owner of Paramount, cut 850, or seven percent, of its workforce. Warner Bros, producer of the year’s highest grossing film “The Dark Knight, is also expected to announce layoffs next month.
In South Korea, whose local film market share is larger than that of Hollywood’s, most of the nation’s bona-fide stars such as Choi Ji Woo, Song Seung Hun, Kim Rae Won, were forced to lower their paychecks in 2008.
In India, home to the second largest film industry in the world, most of the large production houses – Adlabs, Balaji, Ashtavinayak, K Sera Sera, Mukta Arts, NDTV, TV18, UTV – have lost between 50 to 80 percent of their market cap this year. A reduction in film funding is expected next year, meaning that fewer films will be produced.
In Egypt, some producers, such as Arabeya production company head Isaad Younis, believe that the price increase for movie-theater tickets was one of the reasons behind the current slump in revenues. Yet perhaps the most alarming calamity for Egyptian cinema this year is that apart from a handful of pictures, theatrical grosses of most movies released this year, including the recent Eid Al-Adha releases, have failed to cover their production costs. The independent daily Al-Badeel reported earlier this week that the eight Eid releases, which cost a combined LE 68 million, have only managed to snag LE 25 million so far.
So will the current wave of layoffs, bad economies and weak dollar reflect on the entertainment industry next year? Observers believe so, at least to some extent.
The global book industry will sure take a significant, if not lethal, hit. Sales of luxurious items such as book-sets, the bulk of which constitute a sizeable chunk of retail revenues, are expected to fall sharply. New authors will find it difficult publishing their works with the reduction of marketing budgets and the reliance of book publishers on household names. Focus on non-fiction books will also increase since they don’t require the effort and money needed to sell serious fiction. The hunger for fresh blood and new ideas will continue to boost sales of books in Egypt, especially with the relative modest price tags.
Sales of physical records will continue to decline as listeners become more selective in their music purchases. Digital music sales are expected to tumble for the first time since the beginning of the digital music age while music piracy, especially in Asia and East Europe, will soar. Sales of music concerts in particular are expected to dip, while major labels will continue to downsize. Music sales will remain stagnant in Egypt, unaffected much by the bad economy as much as the lack of interest from the audience.
The global film industry could suffer the most. Smaller pictures will find it more difficult to find funding and the quality of films could possibly drop. The current awards season is a clear example. The crop of films released in the US this winter notably pale in comparison to last year. Foreign and art-film acquisitions, which dropped significantly this year, will dwindle further. Trade in Sundance, Cannes, Venice and Toronto expected to witness one of the bleakest years in some time, meaning that fewer foreign films will make it to film theaters across the world.
World viewers will primarily flock to event movies, while escapist fares such as comedies, sci-fi and actioners, will continue to do good business for major production companies.
On the other hand, the home entertainment market might be the greatest beneficiary of the crises. According to Reuters, US DVD sales have dropped 2 percent in 2008, slightly better than the 4.8 percent drop in 2007. Sales of high definition TVs and Blue Ray DVD players are growing while the gaming industry remains healthy.
In Egypt, the situation is somehow baffling. Unlike all leading film industries in the world, Egyptian cinema is entirely financed by private equities. It doesn’t possess any market stocks and banks play no role in film financing. The foundation for the Egyptian film industry is shaky, and most critics are still perplexed as to how the industry managed to survive that long.
The current backbone of the film industry is not the shrinking local market but the Arabic satellite TV channels whose acquisitions of all Egyptian film productions guarantee producers profit regardless of their performance at the box office.
If these channels are hit by the economic crisis and begin to reduce their acquisition rates, the Egyptian film industry could face nothing short of catastrophe, especially with the rise in wages, film s
tock prices and marketing costs. The powerhouse new players entering the industry – Naguib Sawiris’ Misr Cinema, Melody Pictures, Baraka, El Sherouk – aren’t expected to cause a drastic change in the way the industry operates, as they all essentially work under the umbrella of the country’s two largest film conglomerates: El Arabeya and Oscar/El Nasr/ Massa.
Despite these serious challenges, the global and local entertainment industry is not likely to be hit as hard as other industries, simply because people aren’t going to stop watching films, reading books or listening to music. Choices will be more limited though and numerous novelists and filmmakers might temporarily pull back their works until the crisis ends.
The people responsible for all sectors in the industry will survive the storm if they make the right decisions. Yet, and like the companies that have closed shop this year, the recession could signal the end of an era for some.