What Drives People to the Movies?

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By MICHAEL SALAMA and NANCY WONG

Do fewer people go to see movies in the theater as gasoline prices rise?

A survey reported in a number of national newspapers recently prompted that question for us. That article, one of many, and likely many more to come, relied upon a survey to explain that escalating prices at the pump had caused folks across America to cancel vacations, carpool more and change other consumer spending. That got us to thinking about our beloved Los Angeles, and a resident darling, the film industry.

With less disposable income, consumers may expend less on discretionary items. But does that hold true for movies?

The counter to this line of thought is that, hey, movies are an inexpensive form of entertainment where else can one receive a high-quality entertainment experience outside of home for around $10 (popcorn and sundries not included). For example, consider the performance of the new Batman film, “The Dark Knight.” During the opening weekend of July 18-20, when the average domestic gas price reached almost $4.20 a gallon (following a month of record $4.20-plus-per-gallon prices) the Batman film had domestic gross ticket sales of more than $158 million. This is an all-time box office record. This might lead one to say that when good content is made, folks will want to see it in the movie theater, period.

We’ve sought to evaluate this issue using basic statistics to see whether one side is right or whether there is any relationship at all. The years 1987 through 2007 were examined. During this time period the average ticket price increased from $3.91 to $6.88, and the domestic box office increased from $4.25 billion to $9.63 billion. During this time, gas price per gallon increased by an average percentage of 6.4 percent and the number of moviegoers, or admissions, increased by an average of 1.4 percent, suggesting that there may be no, if any, relationship between the two.

Statistical analysis in large part depends on quality data. In this case, we used the following sources: the National Association of Theatre Owners, the Motion Picture Association of America and the Energy Information Administration. Another invaluable resource was data supplied by Rick Rosas, a tax partner with PricewaterhouseCoopers LLP (you may know him better as one of the briefcase-carrying accountants at the Academy Awards responsible for tallying the votes). Rosas graciously provided us with a copy of the firm’s Global Entertainment and Media Outlook: 2008-2012.

An examination of the data suggests there is no real relationship between the two variables. For example, in 1989, the average gas price per gallon increased by 11 percent and theater attendance increased by nearly 17 percent from the prior year, whereas in 1990 the average gas price increase was 15 percent and theater attendance dropped by 5.6 percent.

We plotted the data on a graph, which is to the left. It shows the average price per gallon of gasoline per year on the horizontal axis and the number of moviegoers per year on the vertical axis. From that point (pun not intended), we looked to see if there is any relationship. If moving from left to right, the data looks like a line sloping up, there is a positive relationship. A positive relationship means that as the gas price goes up the number of moviegoers also goes up. A negative relationship means as the gas price goes up the number of moviegoers (reading the graph from left to right) goes down. But if the data does not look like a line, and looks more like a Rorschach test gone bad, there is no linear relationship. As you can see, there is no upward or downward sloping line.

In our analysis, there’s a weak relationship between the increase in price of gas per gallon and movie theater attendance for the years evaluated. But it does confirm our suspicion that there is not a general decline in the number of moviegoers as gas price increases.

Box office attendance numbers to date through the summer, Batman included, suggest that many are still going to the movies. Whether they are buying the theater popcorn or going out to dinner after is another question.


Michael Salama is vice president, tax administration and senior tax counsel for the Walt Disney Co. Nancy Wong is manager, corporate tax, also for Disney.

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