ENTERTAINMENT QUARTERLY Industry in Review
Film: Sequels Dragging Down Box Office
It’s the story of the summer so far, with second-quarter box office grosses down 4 percent from the like period a year ago, according to Exhibitor Relations Co. a quarter, by the way, that included openings of the much-anticipated “Matrix Reloaded” and the Charlie’s Angels sequel, “Full Throttle.” “The movie business has become a manufacturing business. But the audience is now telling the majors that the model won’t work anymore,” said Exhibitor Relations President Paul Dergarabedian. More are on the way 15 sequels, including the third installment of the “American Pie” series, will be released this summer; a record 24 will reach theaters by the end of the year.
Local feature film production is also lagging behind last year. Second-quarter production days totaled 1,659, a 22 percent drop from the year-earlier period, according to the L.A. Entertainment Industry Development Corp. First-half production days totaled 3,499, a slight drop from the first half of 2002.
Home video continues to be the growth sector of the movie business. Home video sales reached $5.8 billion for the first six months of 2003, a 27 percent increase over the like year-earlier period according to Video Business magazine. For the first half, home video rentals reached $4.3 billion, a 3.5 percent increase from the like year-ago period DVDs have replaced videocassettes as the format of choice. DVD sales, which now account for more than 80 percent of video sales, rose 57 percent in the first half from over the like year-ago period. DVD rentals, now comprising more than half of total rental revenue, rose 42 percent to $2.2 billion.
RiShawn Biddle
TV: Sluggish Economy Belies Outlook
The major networks saw upfront advertising sales this spring surge to $9 billion, up 15 percent over 2002 and leading to optimism for a long-awaited rebound. Some slowing has been noted in recent weeks and several forecasters, including Robert Coen of media services firm Universal McCann, lowered their projections for growth in 2003. Coen remained relatively hopeful, projecting a 4.3 percent gain in ad spending this year…
During the May sweeps period, Fox’s KTTV (Channel 11) had the highest overall prime time rating among adults 18-49, while Univision Communications Inc.’s KMEX (Channel 34) made substantial gains to finish second overall and further establish itself as the dominant Spanish-language station.
The news continued to be dismal for local commercial filming. The 1,041 location production days between April and June was the lowest quarterly total since the damaging strike by commercial actors against advertisers more than two years ago Against that backdrop, the parties are preparing to negotiate a new deal this fall The new Federal Communications Commission ownership rules will preserve the status quo in Los Angeles, where Viacom Inc. and Fox Broadcasting both have duopolies and NBC, with its two Telemundo stations, has a triopoly.
Darrell Satzman
Music: Still Sounding Hollow
Album sales, already declining the past few years, fell further in the second quarter to 147 million units, a 2.3 percent decline from the like period a year earlier, according to Soundscan. The industry moved just 292 million albums during the first half of the year, a 6 percent drop from year-earlier levels.
Vivendi Universal SA’s Universal Music Group saved from the auction block in July remains the largest record company. Amid a dry spell, its first-half market share fell to 27.7 percent from 28.3 percent in the year-earlier period Rival Warner Music Group has had a revival, thanks to hits from new acts such as the rock group Staind and veteran rockers Metallica. The AOL Time Warner unit’s market share rose to 17.6 percent in the first half from 16.4 percent in the year-earlier period Another local record group that has done well: The music division of Univision Communications. Thanks to such top Latin artists as Los Tigres del Norte and its ties to the parent television network, Univision overtook Sony Corp.’s Discos label to become number one in the Latin category. In the first half it controlled 19 percent of the Latin segment, compared with 13 percent for the like period a year earlier.
L.A. may be a must stop on any worldwide concert tour, but it’s not reflected in the statistics. Not one of the county’s venues was listed among Billboard magazine’s top grossing venues for the first half. Nor did any local concerts reach the list of 25 highest-grossing performance dates during the year. Staples Center has the best chance of making the list later this year, but it holds too many sporting events to have a realistic shot at making the Top 10.
RiShawn Biddle
Radio: Second Straight Banner Year
The local market surpassed $100 million in total revenues in May, the first time any market has reached that mark in a single month (May and November are typically the most lucrative months on local radio because of an influx of ads by television stations during the sweeps periods) So far, local radio station revenues are pacing 10 percent ahead of last year’s record-breaking $929.6 million haul, according to the Southern California Broadcasters Association. “The last time we came close to $100 million in a single month was in May 2000, and that was because of the dot-com phenomenon,” says Mary Beth Garber, president of the local radio trade group.
One mild surprise was the Federal Communications Commission’s decision to hold the line on radio ownership limits, even as it introduced looser television ownership rules. The most immediate impact of the new rules is that they permit Viacom Inc., which owns two television stations in Los Angeles, to keep all eight of its Infinity Broadcasting Corp.’s local radio stations.
Meanwhile, Univision Communications Inc.’s proposed $3 billion acquisition of Hispanic Broadcasting Corp., which owns 63 radio stations nationwide, remains in regulatory limbo. A number of rivals have been lobbying to stop the merger, arguing that it would allow Univision and shareholder Clear Channel Communications Inc. to dominate Spanish media.
On the spring ratings front, Emmis Communications Corp.’s hip-hop station KPWR-FM (105.9) was the No. 1 station for the fifth straight period. Infinity-owned KROQ-FM (106.7) was second, and Clear Channel’s KFI-AM (640) moved up a couple of spots to third Ratings losers included ABC Radio Network’s KLOS-FM (95.5), which lost half a ratings point, and Infinity’s KFWB, which despite starting Dodgers coverage this spring also dropped half a rating point.
Darrell Satzman
Video Games: Hollywood is Everything
The extent to which computer game makers depend on the movie industry was in evidence during the second quarter Sales of Activision Inc.’s games in the quarter, including “Wolfenstein: Tides War” and “X2: Wolverines Revenge,” paled in comparison to last summer’s “Spider-Man” release. The company derived 30 percent of its revenues for the year ended March 31 from “Spider-Man” and its Tony Hawk Skater series It released a slew of Hollywood-themed video games at the 2003 Electronic Entertainment Expo in May, including “Shrek 2,” “Spider-Man 2” and “True Crime: Streets of L.A.,” featuring the voices of actors Christopher Walken and Gary Oldman.
The reliance on film-related material was also highlighted by Activision’s breach of contract suit filed against Viacom Inc. on June 30. The game maker alleged that Viacom had not delivered enough new “Star Trek” movies or TV shows under a 1998 agreement
Though the second quarter is a traditionally slow time in the industry, overall sales in the U.S. were up by 12 percent from the year earlier. Sales at Activision were lower in the April-June period, while THQ saw an increase. Still, sales of the latest installment in its “Grand Theft Auto” series, “Vice City,” were down 3 percent year over year.
One imponderable for the industry: A Securities and Exchange Commission investigation into how video game makers book sales. Local companies saw their stock prices fall upon word of the SEC inquiry.
Michael Thuresson
