The Wall Street Journal fails to do its homework

The Wall Street Journal ran an article today that sets a new standard of egregious ignorance in reporting on the movie theater industry.

Using as its jumping-off point a study by Interpret LLC, the article contends that people may be giving up movie-going in favor of staying home. The proof? Interpret asked 1,000 people, in addition to whether they are seeing more or fewr movies in theaters, ‘if they had decided not to buy one of seven specific items in the last six months because of “concern over the economy,” more respondents chose movie ticket than a range of options, including a car, DVD, videogame system and house.’

Comparing putting off seeing a movie because of money concerns to putting off buying a house or car? How many people were contemplating buying a house or car to begin with? People consider going to a movie weekly – if not more often.

The article retails some conventional wisdom that just doesn’t hold up. “Those consumer behaviors are reflected in part at the box office, where any increases in ticket revenue in recent years have been largely attributable to higher ticket prices. Actual attendance has usually declined.”

Some facts: Over 16 years, admissions declined five times and rose eleven times. Three of those years were recent. The past two years have been modest increases.

That’s the problem with treating recent slumps as trends. It takes time to put them in perspective. For instance, here are decade-by decade admissions averages:

Now that looks like a trend.

There’s more:

Hal Vogel, a longtime media analyst, says the availability of those alternative forms of entertainment means that today’s economic slowdown could have more of a negative impact on the film business than previous times of economic turbulence.

“You can’t compare how this slowdown might affect the movie industry to previous recessions,” says Mr. Vogel. “The industry still has a degree of recession resistance, but this time around there is all this new technology and all these new distractions for moviegoers — you didn’t have Web episodes and cable television and computer games coming out of your ears in the past.”

As for Hal Vogel’s analysis of the unique threat that home entertainment poses to the movie theater business, I will note two dates: 1977 – the introduction of VHS; and 1997, the introduction of DVD. Take a look at the following table:

Movie theater admissions and box office trend strongly upward following the introduction of both technologies, with movie admissions hitting a modern peak in 2002. Home video sales and rentals (both in terms of dollars and units) peaked shortly after and then declined for two straight years. They will be likely flat or slightly down this year. Does that look familiar? Perhaps, those declines are the result of those car and home purchases that people neglected to put off. Most likely, it’s because movie theaters and home entertainment are complementary and their fortunes are linked.

People, even when pinching pennies, still need to get out of the house once in a while, even when their house is filled with gadgets and screens. When they do, they usually choose the least expensive and most dependable form of out of home entertainment – movie theaters.