s of people who have lost their jobs in the movie, TV and music sectors during the past few months.
Still, there are some showbiz companies that haven't been weakened by the lousy worldwide economy. In fact, some in Hollywood are thriving in these tough times, and a slim few might actually be benefiting from recession-related shifts in consumer spending.
Netflix is arguably the most obvious winner. The DVD-by-mail company should add more than 1 million subscribers this year, bringing its total to 11.3 million, as U.S. consumers look for cheaper ways to watch movies than visiting the multiplex or renting titles for $4 a pop at Blockbuster.
When Netflix recently reported quarterly financial results, it showed improvement not only in the top and bottom lines but also in its gross margins and subscriber-acquisition costs. Shares of the company are up 59 percent during the past 12 months, while the S&P 500 is off 38 percent.
Netflix CEO Reed Hastings says that "streaming is energizing our growth," and as more of its customers opt for digitally delivered VOD, Netflix saves on postal costs.
"It is possible that the recession could also be accelerating the shift to digital," Barclays Capital analyst Anthony DiClemente says.
GAME IS ON
If the downturn is aiding Netflix, then the same might be said for GameStop, a top retailer of video games.
Consumers who want to save money increasingly are shaving about 50 percent off their video game budgets by opting for used games rather than new ones.
While video game sales rose 9 percent in December to a record $5.3 billion, according to research firm NPD Group, GameStop reported its sales grew 22 percent during the holiday season ended January 3, in large measure because of the used-game business it dominates.
Shares of GameStop are up 163 percent since Barnes & Noble spun off the company in 2004. Since then, B&N shares have sunk 15 percent.
Online retailer Amazon reported Thursday (January 29) its "best-ever" holiday season, with sales of CDs and DVDs climbing 9 percent year-over-year.
Imax stock also has been soaring, and co-CEO Richard Gelfond predicts a profit this year, as opposed to losses in 2008.
The key to Imax's weathering the economic storm has been its transition from a film-based platform to digital and to a business that relies on joint ventures as opposed to sales.
Imax will go from 150 commercial theaters showing Hollywood blockbusters on giant screens to 350 in the next three years. Each projector costs Imax about $500,000, while theater owners contribute $150,000.
But Imax gets a 12.5 percent cut of box-office grosses, so cash flow from earlier screens are paying for the installation of future ones. Plus, a $50 million financing package already in place is especially helpful during the current credit crunch.
"KNIGHT'S" HEROIC PERFORMANCE
Having "The Dark Knight" in its corner has helped as well. The second most commercially successful title in global film history has racked up $63 million in ticket sales at 130 Imax screens, not counting the current re-release of the Batman feature. That's an Imax record for a Hollywood blockbuster.
Barring a drop-off in theater attendance, this year ought to be a stellar one for Imax, with potential giant-screen hits "Watchmen," "Star Trek," "Transformers: Revenge of the Fallen," "Harry Potter and the Half-Blood Prince" and "Avatar," among others.
Coming to Imax in March is "Monsters vs. Aliens" from DreamWorks Animation, another business doing well despite the economy.
Unlike many of the major studio conglomerates, which are invested heavily in the television station business, "DWA has zero advertising exposure," says Steve Birenberg of Northlake Capital Management.
"Earnings should be flat to higher in 2009," Birenberg says of DWA. "Very few other media companies can come anywhere near to flat in 2009."
Plus, DWA and Imax hold key stakes in one of the more bullish areas in the entertainment industry: 3-D movies.
A 60-page report issued in January by Piper Jaffray says 3-D upgrades could help the exhibition business buck a recession into 2010 and 2011. Such theater chains as Regal, Cinemark and Carmike stand to benefit significantly from transitioning as many as 20 percent of their theaters to the format.
Analysts at Merriman Curhan Ford cite BoxOfficeMojo data that has domestic box-office revenue trending 15 percent higher year-to-date compared with last year, and National Association of Theater Owners figures indicate that admissions are up almost 5 percent year-over-year.
If theaters pack 'em in this year, the in-theater advertising business should hold up quite nicely.
National CineMedia, in fact, quietly increased its employee ranks last year by 10 percent to about 600. And in the last week of January, the company forecast revenue growth of as much as 17 percent in the fourth quarter and 13 percent in the current quarter. Its cost-per-thousand (or CPM) rates grew 10 percent in 2008 as TiVo-averse advertisers embraced the idea of captive multiplex audiences unable to fast-forward commercials.
"There's a shifting from nondigital media -- print and even broadcast TV -- to digital media like us," CEO Kurt Hall says. In this economy, "advertisers want to spend their money on ads that will actually be seen."
TOYS WEATHER THE STORM
Another entertainment entity riding out the recession with aplomb is, somewhat surprisingly, Hasbro.
Although many analysts presumed toymakers had a dismal Christmas, Hasbro has yet to lay off staff, and this year it should profit from three movies: "G.I. Joe," "Transformers: Revenge of the Fallen" and "Wolverine."
"Historically, toy sales have demonstrated remarkable resilience to the vagaries of the economy," Needham analyst Sean McGowan says. "Some of the best years for industry growth have come during recessions, and some of the worst years for industry growth have come during strong economic climates."
At least so far, Apple also has proved somewhat immune to the economic malaise.
The company reported record revenue in the most recent quarter, consumers have responded favorably to the iPod Touch, and even the company's little-marketed Apple TV sold well during the holidays.
With Apple and Netflix -- as well as TiVo, Amazon and even stodgy old Blockbuster -- making the streaming of shows and movies to TV screens easier by the day, Hollywood is finding it difficult to keep up, and the economy isn't helping.
"Anecdotal evidence suggests that the value proposition of digital may prove even more powerful in a recessionary environment," DiClemente says.
He adds that the companies most likely to be pressured are large-capitalization entertainment names including CBS, Viacom, Disney, News Corp. and Time Warner, all of which have announced layoffs or cost-cutting measures.
Reuters/Hollywood Reporter
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