More Greenspan Today

Get set for some more of the same from the Fed Chair today.

Here’s some resources to use:

The complete text of testimony

Federal Reserve’s Monetary Policy Report to Congress

Response to JEC Chairman Saxton on 7/11

Consider also, some reactions from the Dismal set regarding the "Maestro’s" testimony:

* * *

The key upside risk to inflation is — no surprise here — the upturn in unit labor costs. Greenspan is not sure how much of this is real and will be sustained but he simply cannot afford to take chances. On the downside he is concerned about further rises in energy prices but points out that if they merely level off — they don’t need to fall — then "the prospects for aggregate demand appear favorable".
– Ian Shepherdson, High Frequency Economics

While investment rates in the US and Japan have picked up, investment rates in Europe remain relatively low. The shortfall of worldwide investment intentions relative to the availability of savings has pushed long-term interest rates down. However, long-term interest rates can be expected to move up gradually as global investment rates pick up.
– Brian Bethune, Global Insight

The Fed sees growth on a sustainable footing, and the risk that the softer data in March were signaling a slowdown has been significantly reduced in the minds of the FOMC members. Greenspan also signaled the need for continued removal of monetary accommodation and there is no hint in this testimony that the Fed sees that process as drawing to a close any time soon.
– John Ryding, Conrad DeQuadros, Elena Volovelsky, of Bear Stearns

Greenspan sees the pick-up in hourly compensation as a result of temporary factors and also believes that the current statistics overstate the degree of slowing in productivity. We concur with this latter observation and look for the GDP revisions due out at the end of the month to reveal somewhat stronger output growth implying an upward adjustment to the productivity data.
– David Greenlaw and Ted Wieseman, Morgan Stanley

His discussion of inflation completely ignored the apparent deceleration in inflation over the past three months, presumably because he puts much less weight on high-frequency and commodity-related inflation swings than most market participants.
– Bill Dudley, Jan Hatzius, Ed McKelvey, Andrew Tilton, of Goldman Sachs

The uncertainty which the Chairman spent most of his time talking about relates to the behavior of long-term interest rates and the housing market. He continues to describe low-long term interest rates as unusual. In contrast to recent comments in which he was open minded about the cause of this "conundrum" the Chairman focused on two global causes of low yields — a fall in risk premium resulting from less inflation and growth volatility; and the excess of intended savings over investment.
– Bruce Kasman, J.P. Morgan

* * *


Economists React

WSJ, July 20, 2005 1:03 p.m.,,SB112187432542290928,00.html

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Why is Movie Theatre Revenue Attendance Declining?

There’s been plenty of chatter about declining movie theatrical revenue attendance. You just know the MPAA is itching to tie this onto piracy somehow and thus get some favorable legislation.

Let’s nip this one in the bud, shall we? 5 6 7 factors are hurting theater attendance:

1) Social factors eroding theater environment (talking, cell phones, babies crying, etc.); 
2) Sacrificing long term relationships with theater-goers for the increase in short term profitability (commercials, no ushers, etc.);
3) Higher quality experience elsewhere (Home theater);
4) Declining quality of mainstream movies;
5) Easily available Long Tail content alternatives (Netflix, Amazon);
6) Price;
7) Demographics: Aging babyboomers simply go out to movies less.

While content quality has indeed worsened over the years, it shouldn’t be the main concern this Summer:  As of late, there have been a spate of movies which have been either well-reviewed (Batman Begins) or had good word-of-mouth (Wedding Crashers) or incredible special effects perfectly suited to the big screen (Revenge of the Sith or War of the Worlds).

So what else might be the source of declining theatrical fortunes?

Well, how about the movie theater-going experience itself? The adventure of heading to a cineplex is becoming a less and less pleasant form of entertainment. Many of the headaches involved have been painfully detailed by Bob Lefsetz’ readers (see their ordeals below).

Note that we are not even discussing content quality at this point.

Then there are the adverts. A recent L.A.Times article – Now playing: A glut of ads — points out that even studio executives were stunned by 15 minutes of commercials theatre goers had to endure after paying their 10 bucks:

"As head of production at New Line Cinema, Toby Emmerich is not your typical moviegoer. So when he wanted to see "War of the Worlds" the other night, his choice was between seeing the film in a theater with a tub of popcorn or watching it in a screening room at Jim Carrey’s house, with a private chef handling the culinary options. Despite this seemingly loaded deck, Emmerich opted for a real theater.

"I love seeing a movie with a big crowd," he says. "But I had no idea how many obnoxious ads I’d have to endure — it really drove me crazy. After sitting through about 15 minutes of ads, I turned to my wife and said, ‘Maybe we should’ve gone to Jim Carrey’s house after all.’ "

When DreamWorks marketing chief Terry Press took her young twins to see "Robots" this year, she said, "My own children turned to me and said, ‘Mommy, there are too many commercials!’ Now, when the lights go halfway down, I’m filled with dread. The whole uniqueness of the moviegoing experience is being eroded by all the endless ads."  (emphasis added)

So while the industry laments piracy, consider if you will why going to the theatre has become so much less enjoyable than watching DVD films on your own big screen in the comfort of your home theatre.   

The theatres have adapted Radio’s disasterous Hamburger Helper approach: Short term increases in profitability in exchange for alienating your core audience, who eventually seek out a more enjoyable substitute. Quite frankly, I’m astonished the film industry has (contractually)
allowed theatre owners to degrade their copyright protected product by
diminishing the experience so dramatically.

As Radio has so painfully learned, the end result is a big fat Buh-bye!

To a large degree, this is  a zero sum game: The theatre chains losses are Best Buys’ gain; Is it any surprise that high quality home sound systems and large screen TV sales have gone through a ginormous growth spurt over the past 5 years? Even as the lowest common denominator productions falter, Netflix (and its rivals) allow home theater owners to enjoy a Long Tail orgy of DVD content. 

Yo, theatre owners, when a segment of retail electronics called HOME THEATRE explodes in sales, that is your wake up call. You seem to have been oblivous, and missed the bell ringing.

Good luck getting the toothepaste back in the tube!


UPDATE: July 25, 2005 7:37pm
At Slate, Edward Jay Epstein explains the numbers behind decreased attendance on increased revenue. Fascinating stuff . . .


UPDATE II: August 30, 2005 12:07pm
A weekend NYT article, titled Summer Fading, Hollywood Sees Fizzle quotes an exec as blaming the quality of flicks:

"Part of this is the fact that the movies may not have lived up to the
expectations of the audience, not just in this year, but in years prior," said
Michael Lynton, chairman of Sony Pictures Entertainment, which had some flops
this summer, including the science fiction action movie "Stealth"
and the romantic comedy "Bewitched."
"Audiences have gotten smart to the marketing, and they can smell the good ones
from the bad ones at a distance."



Now Playing: A Glut Of Ads
The Big Picture
Patrick Goldstein
L. A. Times, July 12, 2005,1,35978.story

Lefstz Letter
June 5, 2005
(complete sourcing below)

Summer Fading, Hollywood Sees Fizzle
NYTimes, August 24, 2005


Continue to see Lefsetz’ readers critique of the theater experience . . .


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