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Did the Box Office Peak?

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Hollywood had a huge year in 2009: the box office hit an unprecedented peak and ticket sales reached highs they haven't seen since 2004.

While many industry-watchers predict ongoing growth thanks to higher priced 3-D ticket sales, one Wall Street analyst is taking a far more negative note. Morgan Stanley's Ben Swinburne released a report with a pretty negative outlook for the theatrical box office, predicting a 3 percent decline in attendance, compared to last year's 5 to 6 percent gains. While Swinburne acknowledged that higher 3-D prices will help revenues, he warned that there revenue mix would shift away from high-margin concessions towards lower-margin ticket sales.

This means bad news for the theater chains, according to Swinburne, who expects earnings per share to decline at Regal Entertainment and Cinemark this year. He figures people traditionally go to the movies when the economy is weak, and the better the economy gets, the less they'll be lining up for some escapism.

What about the movie studios? Swinburne sees the shift from DVD purchases to rentals dragging on results — projecting an 8 percent increase in rental revenues while DVD sales drop 11 percent. The problem is that DVD sales are a bigger piece of the pie, so all-in; home video revenue will decline by some 2 percent next year. Digital revenues are still small, but they're in the spotlight this year as a key indicator of where the business will go next.

While Swinburne's point on the studios' struggle with declining DVD sales seems undisputable, I disagree with his negative outlook on movie going. While box office attendance has declined after peaks in unemployment three out of the last five recessions, I think movie going is an embedded part of the American experience.

There are so many options for home entertainment; during this recession there was huge potential for attendance to decline. Movie going has increasingly shifted to *event* films, like "Avatar" and "Star Trek," which I firmly believe people will pay to see at theaters even if they're traveling and eating out more as the economy recovers. I don't think the appeal of escapism will diminish as the economy recovers. Plus, it's sure to be a long recovery.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.