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S&P Sees Trouble Ahead for Movie Studios

Hollywood Reporter -- In its biannual Movie and Entertainment Industry Survey, Standard & Poor's Equity Research Services cautioned investors about the "numerous issues facing movie studios" and their business challenges this year.

However, the report also points out some easier growth comparisons that Hollywood faces in 2006 and "a strong slate" of film releases that could boost the summer boxoffice. Otherwise, S&P's report offered mainly bleak views on current movie business trends, referencing various data points that industry observers have described as 'red flags' and signs that growth will be harder to come by in the future.

After a 6 percent decline in the 2005 boxoffice, there is a possibility for further attendance erosion coupled with only moderate average ticket price increases, analyst Tuna Amobi said. In addition, the saturation of the U.S. home video market seems set to result in declining DVD sales for 2006 and lower contribution margins, something that has caused increasing concern, he said.

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