11/17/2011 09:22 am ET Updated Nov 17, 2011

Movies And The Economy: Courting Adults In A Time Of Declining Film Attendance

This is the second in an occasional series examining the recession's impact on culture: The Recessionary Arts. Find out more about it here.

If you see a movie at one of the handful of AMC theaters with Cinema Suites service, you won't have to worry about crying babies, texting teens, or stale nachos; In fact, you'll be treated to reserved seats in plush recliners, an audience with no one under 21, and seat-side waiters summoned at the press of a button, bringing you cocktails and restaurant-quality meals. You might indulge in Crab Rangoon appetizers, followed by chicken and papardelle pasta in Alfredo sauce, topped off with angel food cake with creme anglaise and raspberry Grand Marnier sauce. Ah, but in this economy, what couple is going to spend $100 or so for all of those trappings, just to see "A Very Harold & Kumar 3D Christmas"?

This is the dilemma facing movie theaters in this recessionary era of shrinking paychecks and uninspired Hollywood fare, when technology makes it easier than ever to watch movies on the couch and studios are releasing movies to cable customers earlier than ever, sometimes on the day films open in theaters.

Members of the demographic that's most tricky to court during a recession -- adults over 21 who spend their own money -- aren't budging from the house. To lure them out, cinemas are adding all kinds of amenities -- not just reserved seats and gourmet food and liquor, as in the AMC initiative, but also digital projection, 3D, giant IMAX screens, and alternative programming such as simulcasts of live musicals and operas. The question is whether these extravagant measures will actually work, or whether they'll only alienate budget-conscious adults in this economy.

It's premature, of course, to mourn an industry that sold $10.5 billion worth of tickets in the U.S. and Canada last year and is predicted to gross a similar amount in 2011. However rising average ticket prices, inflated even further by the increasing number of 3D movies in release, cloud that statistic. Admissions actually slipped at an annual rate of about 5 percent in 2010 and have continued to fall at a rate of about 3 percent so far in 2011. According to the National Organization of Theater Owners, the number of tickets sold has declined about 15 percent over the last decade, from a 2002 peak of 1.57 billion admissions.

Even a slight rise in ticket prices can slow sales, said Edward Jay Epstein, author of "The Hollywood Economist," and that can be disastrous for theater owners. "In 2000 and 2001, half the theaters in the country went out of business because of a 7 percent decline," he said. Even in an era of $10 billion at the box office, he said, "a small decline will push theaters into bankruptcy."

This decline is part of a downward trend that began when TV first arose as a competitor for America's eyeballs. According to Epstein, in 1948, 67 percent of Americans went to the movies at least once a week. In our current economic slump, it's less than 10 percent.

That core 10 percent hasn't changed much over the past decade, Epstein said. It's made up largely of people under 21 and hasn't been affected much by the economy because "most of these young people aren't employed anyway." What's more, he said, expanding technology and portable video options aren't necessarily going to keep them out of theaters. "The iPad won't stop moviegoing," he said. The multiplex will always appeal to teens because "it's the experience of getting out of the house."

As far as getting out of the house is concerned, the national theater group argues that movies are still one of the cheapest forms of entertainment, much cheaper than concerts or sporting events. In 2010, the average movie ticket cost $7.89; adjusting for inflation, that's cheaper than the average price 40 years ago, NATO said in its 2011 report on the effect of the economic downturn on the box office.

But to many paying adults in this economy, that relative decrease is effectively null when movie tickets are more than $10 in many parts of the country, and home video options like VOD are priced as low as $2.99. "I know a lot of people my age who simply look at the things they can afford and realize a night out is now either dinner or a movie, but not both," said Stephanie Sigafoos, an online producer at a newspaper website who lives in Bethlehem, Pa. with three other twenty-somethings. "Especially when the movie suddenly costs more than dinner."

If theaters are to stay in the black, they need to convince adults like Sigafoos to budget for both dinner and a movie. Food is a vital component of a theater's profit-making, as ticket sales are split roughly in half with the studios that release the movies and end up being marginal. Most exhibitors' profits come from the high markups on popcorn and soda. Epstein notes that theaters are really in the snack business, with the movies themselves bringing people to the concessions counter. "If they were allowed to let people in free, they would do better," Epstein said of the theaters, "but the studios won't let them."

But Epstein is dismissive of efforts to boost attendance among older viewers with attractions like AMC's premium food or highbrow alternative programming, which can raise ticket prices prohibitively in a down economy. (Indeed, before you order so much as a celery stick, a dine-in cinema ticket at AMC will cost you an additional "experience fee.")

As if theaters didn't have enough trouble attracting adults, there's also pressure from the studios to shorten the window during which movies play exclusively at the cineplex. In some cases, distributors are releasing art-house movies -- which appeal more to adults than teens -- via video-on-demand (VOD) on the same day the movies premiere on the big screen.

Theater owners haven't objected too loudly when this practice is used for independent movies because the stakes are still fairly low. But they have balked at any further shrinking of the theatrical window for blockbuster-hopefuls from major studios. Universal recently proposed a test in which it would make 'Tower Heist' available on demand just three weeks after its Nov. 4 opening; though the test was to take place in just two cities, at a price of $60 per rental, theater owners screamed bloody murder and the studio backed off.

"Make no mistake: this will happen in the near future," said Jeff Bock, a box-office analyst at Exhibitor Relations. "Theatre chains have a right to be worried, as VOD does represent a threat to their livelihood. There is a real possibility that film lovers that routinely stay at home, regardless of how appealing a movie in the theatres is, may be tempted to spend a few more bucks if a film is readily available on VOD simultaneously. Instead of waiting 3 to 4 months and then renting it for $1 to $4, maybe they will spend up to $10 to $40 to see a film sooner in the confines of their own home."

Of course, even with a top-of-the-line home-theater system and a library of new movies available cheaply at any time, you're ultimately still just watching TV in your living room, subject to a thousand possible interruptions amid your routine, everyday household existence. Not just theater owners but some film purists, like New Yorker film critic Anthony Lane, argue that the special experience of movie-watching -- being part of a captive audience of hundreds of people all submitting themselves to a totally immersive experience -- is vanishing.

If anything can draw people back to theaters, it's that special experience, but the movies themselves will have to be good enough to make home viewers want to invest the extra money and time. This March, when the 2011 box office slump was at its worst, industry observers recognized that the movies in release at the time just weren't very compelling.

With so many remakes and sequels in 2011 -- more than in any previous year -- there's been so little originality and inspiration on the big screen that even audiences who crave the comforting familiarity of franchise fare avoided such retreads as "Conan the Barbarian," "Fright Night" and "Footloose." Theater group NATO acknowledged that the "difficult" winter was "primarily a function of the movies that are in the market." At the Savannah Film Festival earlier this month, longtime Universal studio chief Ron Meyer explained such recent Universal flops as "Cowboys & Aliens," "The Wolfman," and "Land of the Lost" by admitting, "We make a lot of shitty movies."

"I think the one thing that can get me back to the theaters is a stronger product overall," Sigafoos said. "The end product doesn't have to be a mishmash of expensive stunts and large explosions. If there's something a little more interesting happening underneath the surface with that script and with the main characters, I'm going to walk away from the theater much more satisfied and likely to return."

CORRECTION: An earlier version of this article stated a charge of $10 to $15 is tacked onto AMC's Cinema Suites ticket price, then credited toward the final food bill. According to an AMC representative, this was changed in early 2011. Currently, there is a small additional "experience fee" -- from $2 to $5, depending on auditorium and showtime -- which does not affect the final food bill.