On Sept. 23, as he signed autographs outside Manhattan's Cort Theater, veteran actor Joe Bologna found himself in a new role: a victim of an economy plunged into turmoil by the terrorist attacks 12 days earlier. Bologna had just taken his final bow in the Broadway comedy If You Ever Leave Me, I'm Going With You! Sparse audiences brought down the curtain for the last time just seven weeks after its debut. Three other Broadway shows also have closed in the aftermath of the attack.
"There is no paradigm here for this. We had to close," says Bologna, who co-starred with his wife, Renee Taylor, in a play that cost $800,000 to produce. But, Bologna adds: "However bad this is, I feel we are going to get back to normal."
"Normal" could be a long, long way away for the media and entertainment industry, which was already among the country's weakest in the months prior to the attack. Americans are "cocooning," a term coined around the time of the Gulf War to describe a public that prefers hunkering down in front of the TV rather than buying tickets to movies (especially ones featuring explosions), plays, and sporting events.
Major advertisers also are retrenching, hurting TV outlets and publishers that rely on ad dollars. In addition, movie and TV studios are shelving costly projects with story lines that are too close to recent events. "There's so much uncertainty right now on the revenue side for these companies," says Merrill Lynch & Co. media analyst Jessica Reif Cohen. "And everyone's got to be worrying about what happens if there is another event."
PROBLEMS EXACERBATED. Before Osama bin Laden became a household name, the media industry was having anything but a banner year. Faced with the worst advertising recession since 1991, media and entertainment companies in the past 12 months have announced layoffs of nearly 100,000 workers. Prior to the attack, overall ad spending this year was expected to decline by 6.6%, vs. an 8% gain in 2000.
Plenty of businesses, from fledgling dot-coms to established brands, have been shuttered. So far this year, 63 magazines have failed, vs. 37 for all of last year. "The attacks only exacerbate the problems we've been dealing with all along," says Daniel B. Brewster, CEO of Bertelsmann's Gruner + Jahr USA Publishing, which publishes Fast Company, Rosie, and seven other magazines. He adds: "I've never seen such a hard time."
If all that isn't dismal enough, advertising is expected to continue to plummet. Ad spending was projected to stabilize in 2002, declining just 1.7%. But following the attack, forecasts sank. Now, advertising is estimated to drop by 7.4% next year, according to revised forecasts by media newsletter The Myers Report. That means $16 billion less in the market.
THE ULTIMATE CONCESSION. "You will see advertisers go more deeply into the trenches," says Jack Myers, the newsletter's chief economist. At companies such as Viacom, which depends on advertising for nearly 50% of its revenue, the terrorist attacks prompted even President Mel Karmazin -- usually a font of unqualified optimism -- to reevaluate. "Many advertisers have expressed uncertainty about their plans and are currently assessing various creative strategies," says Karmazin. "There also are concerns about additional disruptions that could occur following a U.S. response to the attacks."
On Sept. 19, Karmazin made the ultimate concession, announcing to Wall Street that Viacom, which owns CBS as well as cable-TV, movie, radio, and billboard properties, would no longer be able to meet its double-digit cash-flow goals for 2001. AOL Time Warner also recently lowered its sights for revenue and cash flow.
Perhaps no media company has been flogged as hard as Walt Disney, which has seen its stock fall 24% since Sept. 10. On Sept. 20, one of its largest shareholders, the Bass family of Fort Worth, sold off more than half its stake for $2 billion. Disney rushed to buy back 50 million shares, using money borrowed from Goldman Sachs. That prompted Standard & Poor's to put Disney's debt on watch status, and has since prompted rumors that Disney, despite a potential price tag of $60 billion or more, could be a takeover target. Disney declines comment.
SCHWARZENEGGER'S BAD TIMING. Disney and its Hollywood rivals will all face huge write-offs this year for projects canceled or put on hold because the content was deemed inappropriate for the times. Warner Bros., a division of AOL Time Warner, has delayed indefinitely the release of Arnold Schwarzenegger's $100 million flick Collateral Damage. The plot centers around a fireman whose family is killed by terrorists in a bomb explosion. The studio already had spent an estimated $22 million to market the movie, originally due out on Oct. 5.
Suddenly, Hollywood's fabled green light for movies has turned yellow, if not red. Sony Corp.'s Columbia Pictures has delayed production on Jennifer Lopez' new movie Tick-Tock, about an FBI agent trying to defuse bombs planted around Los Angeles. And a $42 million remake of War of the Worlds was postponed by Seattle-based studio Pendragon.
Even those movies already out are taking a hit as people stay home -- at least for now. The top-grossing film during the weekend of Sept. 22 was Paramount Pictures' drama Hardball, starring Keanu Reeves. It sold an anemic $8.2 million in tickets -- part of a $47 million total weekend draw that was Hollywood's worst in a year.
Theater isn't faring much better. Aside from the shuttered shows, the big musicals that survive in New York are each losing around $250,000 a week. That has prompted the unions working on at least five shows to agree to pay cuts of 25%. "Theaters aren't charging rent, media is lowering ad rates, and equipment firms are renegotiating leases, so everybody is trying to help," says Jed Bernstein, president of the League of American Theaters & Producers.
SOME BLOCKBUSTERS. Having more people perched on their sofas over the next several months may not help Broadway, but it does offer one upside for media. Videotape, DVD, and video game sales are likely to rise, say analysts. Blockbuster Entertainment, a division of Viacom, has seen same-store sales pick up 17% since Sept. 11, says Merrill Lynch. (Blockbuster declined to release numbers.)
Meanwhile, new subscriptions to cable and satellite services are on the rise as more people look to get the broadest swath of news coverage. Time Warner Cable, the country's No. 2 cable operator, with 13 million subscribers, has seen "spikes" in new subscriptions in some areas, says spokesman Mike Luftman. Sales have also risen at Time Warner for self-installation kits for its Roadrunner high-speed Internet service.
Those more adversely affected, such as the newly unemployed Bologna, are trying to hold on to some hope. The Cort Theater is keeping the sets intact for his show, just in case insurance money or city aid kicks in and allows it to reopen. But hope for that sort of second act isn't likely for the actors, writers, producers, and investors across the rest of the media world. By Tom Lowry in New York, with Ronald Grover in Los Angeles