Feeling the Pinch : The Show Goes On for Film and TV While the Performing and Visual Arts Hit Hard Times

Leon, the six-figure screenwriter, is trading in his Mercedes for a Ford. Gasoline is getting expensive, he says.

Tom, the Equity actor-dancer, is working dinner theater in Claremont now that last summer’s “Chorus Line” gig is just a lucrative memory. His current salary won’t pay his MasterCard bill, but it will pay the rent. And dinner, after all, is free.

Jeff, the morning drive-time producer, lost his job just after Thanksgiving after five years of service at a well-known Los Angeles radio station. There is little comfort in the fact that he was not the only one to get the ax. His wife is pregnant and unemployment benefits won’t begin to pay the mortgage.

Los Angeles seems to be at the brink of a recession this holiday season, even if the federal government is loath to admit it. And along with the well-documented souring of the Southern California real-estate market and massive defense-industry layoffs, the arts as well as broadcasting and entertainment are also beginning to feel the pinch.

Tom, Jeff and Leon may work in very different niches of the vast and varied arts and entertainment industries, but each is having to retrench in the wake of an economic downturn that put the state’s overall joblessness at 6.7% this month. More people are out of work in Southern California than at any time in the last three years. The national unemployment average of 5.9%, which is also a new high for the same time period, is actually brighter than Los Angeles’.

Following the government’s lead, David Letterman’s home office in Lebanon, Pa., came up with such euphemisms as “lifestyle downsizing opportunity” and “the ugly, stupid cousin of robust growth” for the current dip in the economy.

The fact is, the United States has not had an official recession--defined as two consecutive quarters of gross national product shrinkage--since 1982. But the revelation earlier this month of worsening national unemployment figures prompted Michael J. Boskin, chairman of the President’s Council of Economic Advisors, to admit to a “worsening slowdown” that will probably finish off the year with at least one quarter of GNP decline. If it persists through March, the nation will be in recession.

Much has been made recently of the “recession-proof” nature of the entertainment industry: motion pictures, TV and pop music. But the arts--particularly visual art and government-subsidized performing arts--tend to be among the first and worst affected. Thus far in the current belt-tightening atmosphere, those two propositions seem to be holding true to form.

On the one hand, Hollywood is expecting to take in a near-record $4.6 billion in 1990, overall ad revenue sales for the three major TV networks is running about 5% above last year and pop-record sales were one of the few bright spots reported in retail sales this Christmas.

On the other hand, grant money is draining from nonprofit arts. According to the National Assembly of State Arts Agencies, state agencies such as the California Arts Council have cut tax support for the arts for the first time in 13 years.

In addition, the National Endowment for the Arts expects to cut theater grants by 16% next year. Joe Papp’s famous New York Shakespeare Festival was among dozens of arts organizations in New York that have had a total of $3.6 million in state arts grants suspended this fall as a result of that state’s financial crisis. As of Jan. 1, 30 festival workers will be laid off. Overall, cuts are expected to be even more severe next year in New York.

Similar austerity will affect California arts groups in 1991, but not so much from taxpayer support as from cuts in foundation and corporate aid. AT&T; and Philip Morris, both major corporate donors to the arts, have already announced a scaling back of funding and other Fortune 500 companies are expected to follow suit, said Los Angeles Theatre Center managing director Robert Lear.

Three weeks ago, a spokesman for the James Irvine Foundation--one of the major contributors to Southern California nonprofit stage and museum groups--announced that its $2 million in annual arts subsidies would be cut to $1.5 million next year.

Consider that:

* The Orange County Performing Arts Center--which made national headlines four years ago when it was built entirely with private donations--reported $1 million in losses at the box office, and executive director Thomas R. Kendrick said that troubles in the economy were having a similarly “negative effect on fund raising.” The center has reduced programming, a hiring freeze was instituted in April, five of the center’s 65 staff positions have not been filled and Kendrick said he does not rule out layoffs. Long-held plans for a second theater have been moved to the back burner.

* The Los Angeles Theatre Center’s landlord, the Los Angeles Community Redevelopment Agency, allowed $4.6 million in LATC bonds to go into default 12 days ago when it did not pay a $380,000 interest payment on them. The five-year-old theater operation is awaiting a takeover--and bailout--by the city.

* The Music Center Opera has postponed indefinitely its new production of “Der Rosenkavalier,” chiefly because of its high staging costs.

Economic hard times don’t stop at the stage, though. There are tough times ahead in the priciest of the nation’s art galleries too. The luxury of speculating in art, characterized by one critic as the “canary in the mine shaft when the oxygen goes out of the economy,” is already history.

When Elizabeth Taylor put up a Van Gogh for auction earlier this month, the actress expected to get between $16 million and $22 million. When the highest bid topped out at $11.4 million, the actress took her painting and went home until times get better and she can get her asking price.

Taylor is not the only patron of the arts who can’t unload one of the Dutchman’s oils. At a Christie’s Impressionist and modern auction last month, a Van Gogh still life that auctioneers had predicted would go for at least $12 million sold for $9.5 million and a De Kooning that might have gone for as much as $15 million as little as a year ago went to a high bid of $8.8 million.

A record $82.5 million that a Japanese businessman paid last spring for Van Gogh’s “Portrait of Dr. Gachet” could be deflated by as much as 25% or more in today’s market, according to experts.

Christie’s 1990 art sales plummetted 8.5% from a 1989 record of $2.14 billion to $1.96 billion this year, prompting the auction house to announce a 10% cut in its staff last week.

At arch-rival Sotheby’s, sales dropped 17.5% in 1990. In 1989, the auction house grossed $2.94 billion while sales this year were down to $2.43 billion, said Michael Ainslie, president of Sotheby’s Holdings.

Richard Feigen, a New York art broker, maintains that the market in art is merely leveling out, much as the October, 1987, stock-market dive weeded out the worst of the ‘80s speculators.

“The recession has impacted on the art market most severely in the area where there has been lots of speculation,” he said. “Other areas have gone unaffected. Basically, art is mobile. It doesn’t suffer from regionalism. So, if it doesn’t sell in one place, it flows to another.”

Japanese industrialists and Wall Street arbitragers may not be in the market for Old Masters, first-rate contemporary art and top-level Impressionists, but somebody--perhaps from Europe or the Middle East--will be buying, said Feigen. Such art holds its value, much the way blue chip stocks did in the crash of October, 1987.

Among those very blue-chip stocks that survived the 1987 tumble were several “old masters” of recessionary times: companies that are likely to ride out the current downturn with a minimum of fuss and a maximum of profit. They include the major motion picture studios (Universal, Columbia, Tri-Star, Paramount, Disney, Warner Bros., Fox, Orion, MGM/Pathe), the Big Three TV networks (NBC, ABC, CBS) and the six major record labels (PolyGram, MCA, CBS, Warner Bros., RCA and Capitol).

That entertainment conglomerates retain their value in a recession is no accident, say market analysts and economists. Recession is no reason to stop investing in entertainment--especially if it has worldwide appeal.

“Basically, the entertainment industry has been very countercyclical,” said Glenn Aveni, a low-budget film producer who has turned to selling limited partnership shares in a foreign film distribution firm since the onset of hard times. “The moviegoing public out there would rather pay $4 or $5 and escape into the fantasy of a comedy or love story rather than face the reality of their woes.”

Historically, when times get tough, the tough go to the movies. Some critics attribute the success of romantic fantasies such as Disney’s “Pretty Woman” and Paramount’s $200-million box-office coup “Ghost” to the idea that people want to escape the hard times. With the notable exception of Fox’s “Die Hard 2” and Arnold Schwarzenegger’s sci-fi film “Total Recall,” the blood-and-guts action films so popular with audiences just 18 months ago fared poorly at the box office last summer.

From a cost standpoint, the recessionary swing to romance may be good news at the major studios. Ever-escalating star salaries, special effects expenses and overall negative costs for major motion pictures will probably have to be downsized in 1991. Publicly, the philosophy of pay-more-get-more championed by the independent production house Carolco has not changed. The small company that shot into the national headlines by paying screenwriter Joe Eszterhas $3 million for a script and Sylvester Stallone $12 million for a star turn plans four or five more high-budget films in 1991. Carolco justifies the big expenditures on grounds that foreign markets will make up the difference and that it must pay big fees to remain competitive with the major studios.

But the majors, which depend heavily on domestic box office, are talking as though the days of $10-million Schwarzenegger or Eddie Murphy salaries are an anachronism. Despite industry analysts’ projections that 1990 will be second only to 1988 as the biggest box-office year in history, producers and development executives both are lambasting the runaway production trend of the last half of the 1980s. A “Days of Thunder” or “Dick Tracy” would not stand much chance of getting made at the same $40-million to $50-million range in 1991.

Universal’s Tom Pollock and Paramount Chairman Frank Mancuso have both gone on record calling for more moderately sized film budgets. Ironically, Mancuso may have presided over the last bloated-budget blockbuster of the pre-recession era: Francis Ford Coppola’s “The Godfather Part III” which, at a reported $55 million, will have to earn a minimum of $165 million in order to be profitable under the standard motion picture break-even ratio of $3 at the box office for every $1 spent to make the movie.

One bright spot for Hollywood is the unending appetite for American films in markets like Scandinavia, Japan and Europe. Even grade-Z productions, such as Nicolas Cage in “Time to Kill” and C. Thomas Howell in “Kid,” are playing to respectable foreign audiences, said Aveni, whose Box Office Partners II peddles such films overseas. Films that never open in the United States earn respectable profits abroad and, with a planned “opening” of heretofore closed or limited-quota European markets in 1992, sales of any American movie--no matter how wretched--are expected to increase in places like Italy, Poland and Germany.

“In the last several years, we have witnessed mergers, acquisitions and reconfigurations in joint ventures between American, Japanese, French and Italian companies and that is still continuing despite the recession,” said Steve Unger, who, along with Bill Simon, runs the entertainment division of Korn/Ferry International.

The company, which bills itself as the world’s largest executive search firm, has 41 offices in 20 countries and did more than $100 million in business last year, said Unger. Next year, at the highest levels of the world’s fast-merging entertainment and communications conglomerates, the head-hunting business will be even better, he predicts. While middle management shrinks within the United States, the need for chief executives who can operate beyond the borders will expand, said Unger.

“Two years ago, approximately 10% of our division’s work--that’s everything from satellite and cable to amusement parks, television and motion pictures--involved some foreign component,” Unger said. “Today, 60% of our demand is from the Japanese, European or other foreign company. That doesn’t mean these new multinational concerns aren’t taking the recession seriously. They are. But they are also looking beyond the current troubles to the mid-’90s and they want to be ready.”

The good news in the United States, where cable and home video is booming and the quality of even B movies is far higher than Europe or the Orient, is that recession-bound families who are unemployed or underemployed don’t have to spend a lot of money for top-flight entertainment.

“When money’s tight, my wife and I rent a couple of videos and pop popcorn at home,” Aveni said. “You just pay your HBO bill and you have a very cost-effective way of entertaining yourself.”

Indeed, the cable, pay-per-view and videocassette rental industries are gearing up for a banquet as the economy develops indigestion.

“Even in a recession, with a soft rental market, this will be a growth industry,” said Tower Video’s product manager, John Thrasher. “People look for inexpensive entertainment in a recession. Renting movies, even with a slight price rise, is still a cheap form of entertainment.”

The sales market for movies shouldn’t take a dive in a recession either--particularly those in the $15 range, which, Thrasher said, are becoming more common.

But the fast-growing laser-disc market is vulnerable, said Paul Culberg, executive vice president and chief operating officer of RCA/Columbia Home Video.

“The growth of this market is dependent on hardware sales,” he said. “A laser-disc player is a big-ticket item ($400 to $600). In a recession, people don’t buy a lot of big-ticket items.”

Presently, there are more than 400,000 laser-disc players in U.S. homes.

Pay-per-view, the cable service that offers boxing matches, concerts and special televised events for a fee, was virtually unheard of five years ago. In 1990, 35 such events grossed $135 million. The already broad offering of specialized cable channels (Nickelodeon for kids, Lifetime for women, Discovery for science buffs and CNN for news junkies) promises to expand even further in 1991. Despite tight capital, a Sci-Fi channel and a courtroom drama network in the Judge Wapner/Divorce Court mold are scheduled to go into U.S. living rooms by next summer.

Network TV has not fared nearly so well.

Despite heading for what appears to be another record year of advertising grosses, topping out at an estimated $9.6 billion, the networks are facing tough times in this last quarter of 1990 and even tougher times in 1991, according to the small army of pundits who track ad dollars and their relationship to commercial television.

With the general softening of the economy, particularly in the auto industry, advertising budgets also tightened this holiday season. In what TV executives call the “upfront” ad sales period last June, in which advertisers shell out the bulk of their prime-time advertising money for a stake in the fall network lineup, ABC, CBS and NBC shared in a record $4.3 billion outlay for commercial air time.

By September, however, the layoffs and lethargy had set in. Those same major advertisers were not committing more ad dollars. In some cases (notably the fledgling fourth network, Fox Broadcasting), advertisers were complaining that the viewing audiences that TV ad salesmen promised them in the spring were not watching in the fall. They demanded “make-good” time: free or discounted commercials to make up for the viewers that they paid for but did not get.

Fox alone lost several million dollars of its presold $550 million in advertising revenues in this way. The three older networks have not fared much better overall.

Networks are making fewer scheduling changes this year than in the past. In a Los Angeles press conference in late October, ABC’s entertainment president Robert Iger said the soft advertising market kept the network from testing low-rated series such as “Cop Rock” in various time slots in the fall.

Some reports have said that the networks are trying to save money by developing more “infotainment” programming--including the recently unveiled NBC series “Sunday Best”: a program highlighting NBC shows that aired during the week, including Carson and Letterman and hosted by Jane Pauley and Tom Brokaw. An NBC spokeswoman told The Times last week, however, that “Sunday Best” would feature mostly new material, not just recycled clips from the week’s shows, and the budget should be only slightly less than that of an entertainment series. “This is not a cheap alternative,” she said.

Another effect of a weak economy has been more reruns. As of Dec. 10, Broadcasting magazine reported that the three networks and Fox have aired 37 series rerun episodes this fall, up 48% from the 25 programs that were repeated up to that point in the regular TV season just one year ago.

All three major networks have continued a decade-long decline in their overall ratings with their worst-ever regular season weekly showing in the Nielsens: a combined share of 60% of the total viewing audience at any given time.

Just within the last month, ratings-battered CBS revealed a staggering loss of $55 million on its broadcast of major league baseball games last summer. Fifty people have already been laid off in the third-place network’s once-celebrated news division and two bureaus have been shut down.

Second-place ABC has also laid off a dozen people in its news division over the last three weeks and closed bureaus in Dallas, Chicago, Boston, Budapest, Prague and Frankfurt.

(The network has asked permission of the Securities and Exchange Commission to float a $500 million bond issue, however, in order to upgrade its facilities and staffing. In Hollywood, however, speculation is running high that what the network really means is that it plans to buy Paramount Studios and set up a West Coast headquarters on Melrose Avenue.)

NBC, which remains in first-place by a hair in the Nielsens derby, plans to lay off as many as 18 people in the news division, but is shutting down only one bureau: Budapest.

Traditionally, radio has been able to withstand the belt-tightening strictures of recession far more easily than television, chiefly because the medium is a tenth as costly as TV to produce and far less-labor intensive. Radio--particularly publicly supported stations that have grown in popularity and influence during the past decade--operate on a shoestring anyway, so economic hard times are not all that different from the norm.

“The irony is we have become the great entrepreneurs,” said KCRW-FM (89.9) general manager Ruth Hirschman. “Those of us who depend on the public to support us have become the great entrepreneurs. We live or die based upon how resourceful we can be all the time, so we can function very well through a recession.”

Hirschman’s counterpart at KUSC-FM (91.5), general manager Wally Smith, says his station’s $5-million annual operating budget hasn’t been adversely affected yet, though at least two major corporate givers have cut back on their giving, leaving the station with $20,000 less in expected grants for 1991. Corporate grants to the arts and nonprofit groups are among the first to go in economic hard times, particularly if the corporation is, itself, experiencing major reversals.

Both public stations, however, have experienced a surge in individual donations during their recent pledge campaigns and that increase could make up the difference, said Hirschman and Smith.

KCET-TV Channel 28 also finished its annual 11-day December pledge drive with a higher total than 1989. The $981,760 pledged to the station represented a 5.5% climb over its pre-recessionary pledges of last year.

Nevertheless, KCET vice president Don Youpa maintains that the station “is looking for places where we can trim, just like any other business. We don’t want to wait until it gets bad before making adjustments.”

Youpa recalled the last major recession of 1981-82 in which KCET ran into serious fiscal problems. That will not happen again, he vowed.

National Public Radio also teetered on the brink of bankruptcy in those years. According to KCRW’s Hirschman, NPR--the widely respected producer of “All Things Considered” and “Morning Edition”--has also learned its lesson. KCRW’s current fund-raising campaign features a special one-time 10% contribution to NPR to help the network keep information flowing from the Persian Gulf and tide it over the recession.

Commercial radio is having a slightly tougher time--especially at stations that have experienced recent ratings declines. Several longtime radio personalities, including Al Lohman and Gary Owens, have been off the air in Los Angeles for months.

They aren’t in the poorhouse, however. Lohman is working at a station in Palm Springs and Owens is earning as much, or more, as he did on radio by taping voice-over commercials and announcements for radio and television.

According to Owens, the worst toll the recession has taken thus far has been on his art collection.

“My Ernie Bushmiller crayon-on-flypaper original of Nancy and Sluggo will probably not be worth what it once was,” he said with a sigh.

Top Movies in Recessions During the most recent three recessions (1974,1980 and 1981-82,) the following movies were the top five box-office grossers: Amounts in thousands of dollars 1974 1. The Sting: $68,450 2. The Exocrist: $66,300 3. Papillon: $19,750 4. Magnum Force: $18,300 5. Herbie Rides Again: $17,500 1980 1. The Empire Strikes Back: $223,000 2. 9 to 5: $103,291 3. Stir Crazy: $101,300 4. Airplane!: $83,400 5. Coal Miner’s Daughter: $79,900 1981 1. Raiders of the Lost Ark: $242,374 2. On Golden Pond: $118,711 3. Superman II: $108,186 4. Arthur: $95,462 5. Stripes: $85,297 1982 1. E.T. the Extra-Terrestrial: $367,668 2. Tootsie: $177,200 3. An Officer and a Gentleman: $129,796 4. Rocky III: $122,823 5. Porky’s: $105,492 Source: Premiere magazine State Goverment Arts Expenditures The nation’s 10 most populous states are generally cutting taxpayer contributions to the arts. Listed below are state Arts Council’s government subsidies for fiscal years 1990 and 1991 California: ‘90: $16.795 ‘91: $16.886 +0.54% Pennsylvania ‘90: $12.814 ‘91: $12.704 -0.86% New York ‘90: $59.484 ‘91: $55.262 -7.10% Illinois ‘90: $10.705 ‘91: $10.699 -0.05% Florida ‘90: $23.635 ‘91: $24.008 +1.58% New Jersey ‘90: $19.722 ‘91: $11.671 -40.82% Texas ‘90: $3.437 ‘91: $3.413 -0.68% Ohio ‘90: $12.075 ‘91: $13.462 +11.49% Michigan ‘90: $12.233 ‘91: $13.001 +6.28% Massachusetts ‘90: $17.685 ‘91: $12.620 -28.64% Source: National Assembly of State Art Agencies The economics of TV reporting have changed. Just ask Doug Bruckner F34 L.A. Theatre Center’s struggle for existence. F35 San Diego theaters walk a financial tightrope.F36 “When the economy is bad, people escape into fantasy,” says Jamie Masada, owner of the Laugh Factory. F36 “People are continuing to buy animation art,” claims a Burbank cel seller. F37

Times staff writers Dennis Hunt, Diane Haithman, John Henken, Jane Hall, Mark Pinsky and Don Shirley contributed to this article.