Hollywood also feels the pinch

Los Angeles: When Paul Hodges lost his job as a newspaper librarian this summer, he cut back on junk food, cancelled his Netflix subscription, went back to his old DVDs and tried to stop buying new ones.

"I had to scale back like everyone," said Hodges, a 35-year-old homeowner in Coral Springs, Florida. "It forced me to prioritise things." In past downturns, Hollywood earned a reputation for being "recession-proof" as US consumers' movie spending kept growing steadily. This time, the industry is coming off three years of nearly flat spending, and there are cracks in its armour: Home video sales slipped this month as consumer confidence fell again amid rising unemployment and a crashing stock market.

But studios - which profit more from distributing a movie on DVD than they do from its theatrical release - are faring better than other companies dependent on discretionary spending. And many Hollywood executives remain optimistic.

"The bottom hasn't fallen out of it," said Steve Feldstein, a vice president at Twentieth Century Fox Home Entertainment, owned by News Corp. "Historically, home entertainment has withstood economic downturns. Most folks would rather watch a movie than watch the stock market." In fact, Fox plans a massive marketing push before Horton Hears a Who! is released on DVD December 9, including a balloon in New York's Macy's Thanksgiving Day Parade.

Several of the six major studios' parent companies have been buffeted this year by a variety of factors, most notably lower ad spending. The drop has squeezed profits in television and publishing at such conglomerates as The Walt Disney Company which owns ABC and ESPN; at News Corporation which owns newspapers, two dozen TV stations and Twentieth Century Fox; and at Time Warner Inc., which owns AOL, Time Inc. magazines and Warner Bros. At Disney, for example, a consumer slowdown could hurt the merchandise business and crimp attendance at theme parks and resorts, and its stock fell last week when securities analysts noted this.

Even though the ad decline hasn't cut parent companies' profits so significantly that studios must give up the cash they're used to living on.