Analysts predict worst holiday sales in decades
It’s beginning to look a lot like Christmas — unfortunately for showbiz.The holiday shopping season that kicks off on Black Friday is likely to provide a fitting cap to a tumultuous year, with retail analysts predicting the worst showing in several decades. Accounting and consulting firm BDO Seidman last week released a poll of execs taken after the economic meltdown began. It projects a 3% drop in overall holiday sales and anemic 1% growth on Black Friday compared with 8% growth a year ago. Bright spots through New Year’s should include movie box office, Broadway grosses and cable TV ratings. The biz has coped with recessions before, but the longer ancillary tentacles of the entertainment sector have amplified its vulnerability to the traditional retail cash register. Best Buy, one of the big-box chains that have come to define retail sales for showbiz, sounded the alarm earlier this month by radically lowering its financial forecasts. Chief exec Brad Anderson cited “seismic” changes in consumer behavior that had created “the most difficult climate” the company had ever seen. That means tough sledding for electronics (including Blu-ray players, vidgame consoles and home theater components) at Best Buy, which is striking given that its nearest competitor, Circuit City, just declared bankruptcy. Borders Group and Barnes & Noble have also noted single-digit percentage drops in monthly sales this fall as book browsing slows. Broadway theaters are trying to forestall any audience erosion by touting more discounts earlier in the season, though most don’t take effect until after the new year. Black Friday always is a nail-biter for homevideo and vidgames, which rely on the holiday shopping season for a hefty portion of their annual coin. This year, however, stakes are even higher given the uncertainty surrounding Blu-ray: Execs are hoping that low player prices will drive purchases and help the high-def format take off at last. The big question is whether these prices will entice converts in a roiling retail climate. Blu-ray player prices will certainly reach new lows on Black Friday: Wal-Mart will be selling a Magnavox Blu-ray player below $130, while rival mass merchant K-Mart is selling a Sony Blu-ray machine for $179. Mass merchants have also steeply discounted Blu-ray discs to entice shoppers during the official kickoff to the holiday gift-buying frenzy. The importance of Blu-ray cannot be overstated. Studios need the format to offset sales declines in the aging DVD format. Homevid declines are pinching studios that have come to rely on the coin to cover production and marketing costs of their theatrical releases. Digital sales, while also growing, are even smaller than Blu-ray sales at this point, and considered unlikely to substantially eat into disc sales for a few years. Because standard DVD sales dwarf those for Blu-ray, strong sales in that format are even more crucial on a title-by-title basis during the holiday period. To boost DVD sales, studios have ramped up their promotions. Paramount, for example, took the unusual step of placing a $5 coupon for “Kung Fu Panda” purchases in full-page ads in the New York Times and Los Angeles Times late last week. The promotion is all the more notable because the studio had already bundled “Kung Fu Panda” with the separate “Secrets of the Furious Five” disc to boost sales. Massive retail pushes also are expected for “The Dark Knight” when it arrives on disc Dec. 9, and studios have churned out lavish gift sets by the scores, even for recent movies such as “300” and “I Am Legend.” However, despite all these promotional efforts, home entertainment execs do not expect holiday sales to make up for soft sales earlier in the year. The Digital Entertainment Group recently projected a 3%-4% decline in overall homevid sales worldwide this year and a 6% drop in DVD sales. The homevid biz, which posted its first substantial spending decline last year, had hoped for a turnaround by the end of this year but now projects that a return to growth is at least a year away (Daily Variety, Nov. 17). The videogame biz is counting on a big Friday to kick off the crucial holiday season during which the industry makes most of its revenue. Though growth has been well into the double digits throughout the year, it has been slowing recently, with franchises like “Guitar Hero” showing significant dropoff from 2008. Recent releases such as “World of Warcraft: Wrath of the Lich King,” “Gears of War 2″ and “Fallout 3″ have been solid hits, but there haven’t been any blockbusters since last spring’s “Grand Theft Auto IV.” Sales of consoles will be particularly key, as industryites worry whether consumers are ready to spend the hundreds of dollars necessary to purchase a Wii, Xbox 360 or PlayStation 3. If console sales don’t hit targets, it won’t only hurt the biz this holiday season but reduce potential game sales throughout 2009. It’s a similar fourth-quarter story for the music biz, which gets about 40% of sales in the period. But with a lot of major releases by artists such as U2 and 50 Cent getting shelved until 2009, an already gloomy sales picture got even darker. Forecasts of SoundScan numbers in the coming weeks call for unit sales of about 600,000, down from 700,000-1 million last year. At retail, there are a couple of issues — the Best Buys and Targets are clearing out more shelf space for Blu-ray DVDs and bigger-selling vidgames, and then there’s the year-over-year loss of hundreds of music outlets. On Broadway, the fall has seen an unusually large number of productions post closing notices — “Hairspray,” “Monty Python’s Spamalot,” “Spring Awakening,” “Young Frankenstein” — but box office impact has been largely anecdotal. Receipts have been down in the past few weeks, but that’s often true in the run-up to Thanksgiving. The Turkey Day frame is traditionally one of the most profitable of the year, usually second only to the week between Christmas and New Year’s Day. Many legiters believe this year’s grosses and attendance will serve as one of the first true indicators of the effects of the economy on Rialto box office. Exact numbers won’t be known until early next week, but so far, most in the industry are trying remain upbeat. “We do expect a strong season,” said Charlotte St. Martin, exec director of the Broadway League, the trade association of legit producers and presenters. In the meantime, producers are rustling up discounts to encourage ticket sales during the winter months, when many legiters expect the usual post-holiday sales slump to be worse than usual. Disney Theatrical Prods. is trumpeting free tickets for kids to Disney offerings during perfs skedded between Jan. 6 and March 13, while “August: Osage County” is touting a promotion for senior citizens. (Ben Fritz, Gordon Cox and Phil Gallo contributed to this report.)
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