Do high gas prices really send people running to movie theaters?

By Steven Zeitchik

When the Hollywood gods shut a door, they open a window. Or, these days, more like a crack in the floorboards.

With all the talk about how a recession will or won't affect the entertainment biz, we decided to put the longstanding truism about box office and gas prices -- the one that says that when there's pain at the pump, leisure-seeking consumers opt for shorter trips to the multiplex over longer trips to other destinations --  to the test.

And after looking through a few of the numbers and talking to some of the economists who know about these things, we found that it's slightly true -- but only really slightly.

Admissions in the last decade are flat despite some pretty significant swings in oil prices over the period. That's the bad, no-correlation news.

The good news is that box-office swings in some pivotal years does seem to track roughly along the lines of oil prices, suggesting that even if the boost from high oil prices in those years is not enough to actually send admissions up, it's at least enough to prevent them from going down.

"It's a low-cost option, so it's conceivable that in the aggregate, the movies don't feel as much pain (as other areas)," said the University of Michigan's Paul Edelstein, who co-authored a recent paper called Retail Energy Prices and Consumer Expenditures.

The study found a jump -- but a small and statistically insignificant one -- in movie attendance when gas prices rose. That isn't great news, until you consider that the pricier category of live entertainment was flat to down when gas prices rose. In a time of pricey gas, people evidently don't want to spend as much on costlier things like ball games and live theater. With movies, some shift do their spending while others cut it out entirely, so the effect is a wash.

Our own look at the b.o. numbers and gas prices over the last few decades shows similarly mixed results.

There are years when it's correlated (never causal; at best gas prices and box office stem from a third factor; paying $60 to fill up doesn't directly make people crave a summer blockbuster). Consider the period between 1979 and 1982, when oil prices rose more than 40% -- and box office spiked an impressive 24%. Or 1989, when oil prices increased for the first time in seven years and box office jumped 13%, its largest increase in..seven years.

But it doesn't always hold. Gas prices rising almost 30% in 2005 did nothing to stop that year's notorious box-office drop of 6%. And a slide in gas prices doesn't exactly cause a falloff in tickets, which is what should happen if this theory was true. Gas prices dropped nearly 40% in 1998, but box office actually rose 9% that year, its biggest gain in a decade.

In other words, high gas prices are associated with healthy box office, except when they're not.

We should we note we conducted this little study in the context of a larger story about some unlikely entertainment beneficiaries of the oil spikes -- financiers who rely on oil money, to name one. These investors need to shelter their money, and there's no better place than a film, the financing-as-safehouse model. Even if they lose 30% or 40%, they still come out on top because of all the tax savings, ensuring these independently financed productions get made clear through a recession. Time to pull those bad scripts out of the drawer. And maybe a few myths about gas prices and box office out with it.

Comments

[Mickey Slevin, ModernMoviegoer]

I agree that correlation sounds week, but I think it has more to do with inflation. In the times when a dollar doesn't buy much, $10 for 2 hours or so of entertainment where your kids don't scream and cry, and the whole family can sit together and enjoy, is a pretty good deal. Even when watching movies as bad as Hancock.

[Liz]

Interesting thoughts. Movies are still fairly cheap entertainment, and they're usually close to home, which is where fuel costs factor in. Despite some, I don't think theaters are likely to die out anytime soon. Not as long as it's summer and they have air conditioning.

[John Darko]

I'm going to have to agree with Mickey and Liz. Interesting topic though. Cinema is a past time of ours that I do not see flickering out anytime soon, regardless of our failing economic system. For about two & a half gallons of gas, the theater offers an escape from our everyday routine. Which for some, is worth more the ticket price alone.

[pm]

Hm. The relationship between fuel prices & box office mightn't be that strong, but what if we were to include other indicators, like the cost of health care, food prices, consumer debt, etc.? My sense is that the amount of money Americans have for leisure activities has decreased a good deal -- fuel prices are a small but visible component of that larger trend.
This summer has been interesting. I think the 17% increase in the box office shows us that TV or other home viewing options were never a substitute for going to the movies but vacations, amusement parks, and other postwar leisure activities were. As those latter activities become less affordable, we got back to cheap entertainments like movies.

[Dan Zee]

I just think there happens to be more movies this summer that passes the "I'd like to see that movie" test.

For example, I'd like to see Robert Downey Jr. as Iron Man. I'd like to see Edward Norton as the Hulk. I'd like to see sequels to Indiana Jones, Hellboy and Batman Returns. I'd like to see a Pixar film (almost any Pixar film).

On the other side, I don't want to see Meet Dave, Get Smart, Don't Mess with the Zohan, or The Happening, but apparently a lot of other people do.

I can't remember when there's been a summer filled with so many "I'd like to see" movies.

So I think it's too early to see it as a response to high gas prices, especially when it costs $60 or more for a family of four to go to the movies. Not exactly cheap.

I would guess that you would more likely see an upturn in NextFlix rentals and DVD sales, since these options are a lot cheaper, and they take advantage of those big-screen TVs people are buying with their economic stimulus checks.

[Joe]

The cost of gas for us to go to a movie is just over $8. Then there's the tickets and food at $20 per person. We're now Netflixing and missing opening weekends waiting for the rental.