ovies and movie stars come and go, but one thing seems eternal in the film business: The price of theater admission will forever increase.

Ticket prices at the local cinema have been on an upward spiral for the past decade, and never faster than in the past two years. In 1990, the average price of a movie ticket in the United States was $4.75, 8 percent more than in 1989 and 16 percent more than in 1988, according to the Motion Picture Association of America (MPAA). In the Washington area, the top ticket price was $6.50 last year.

Of course, everything got more expensive during the 1980s, but movie prices rose at a 70 percent rate while all consumer prices were up only 44 percent between 1981 and 1990.

By the normal logic of the marketplace, it shouldn't have happened this way. Theater attendance has been virtually unchanged since 1974, running just over 1 billion admissions a year. What's more, movie theaters faced a huge array of new entertainment competitors during the 1990s, from videocassette recorders to cable television to video games. And the supply, that is to say the number of movie screens, has grown by almost 30 percent thanks to aggressive development of multiscreen "multiplex" theaters in suburban areas across the nation.

In most other businesses, this combination -- hot competition, cool demand -- would spell a pricing meltdown. It certainly has for purveyors of office space, automobiles and even gasoline, where a glut of product has pushed prices down or kept them static relative to most goods and services.

So what's with movie tickets? And why do some people feel that local patrons will be paying $7 or even $8 for a movie in the not-too-distant future?

The short answer, according to economists and other industry observers, is Arnold Schwarzenegger and Tom Cruise.

"In the kinds of businesses where there is an irreducible labor component, and little productivity gain {each year}, prices will always rise 4 or 5 percent faster than the {general} rate of inflation," said William Baumol, a professor of industrial economics at Princeton University.

Translation: Because movies succeed or fail based on the talents of a few people whose services can't be duplicated by more efficient machines, the cost of producing a movie will constantly rise as producers bid up the price of the chosen few stars that can make a box office hit.

Ultimately, Baumol said, these ever-higher costs -- Schwarzenegger, for example, is getting about $10 million and a new Gulfstream jet for starring in "Terminator II" -- must be passed on to the consumer. The same economic rationale is behind skyrocketing operating costs in other talent-intensive fields, such as higher education or medical care or professional sports, he said.

Production Costs Soar In fact, the cost of making and marketing a movie has been rising faster than ticket prices during the past 10 years. According to the MPAA, the average big-studio movie cost $38.4 million to make last year ($26.8 million for production and $11.6 million for promotion and distribution), a leap of 14 percent over 1989 and 145 percent over 1981.

These figures included such big-budget summer blockbusters as "Die Hard 2," "Total Recall" and "Days of Thunder," each of which cost in excess of $60 million. Another summer movie, Walt Disney Co.'s "Dick Tracy," reportedly cost in excess of $100 million to make and sell, which would make it the most expensive movie ever.

Some of Hollywood's overhead covers the cost of hiring Bruce Willis or Eddie Murphy, but most of any movie's budget goes into behind-the-camera expenses. One area of dramatic inflation: script prices.

Carolco Pictures, maker of the "Rambo" series, recently paid $4 million to writer Joe Eszterhas and producer Irwin Winkler for the screenplay of a film called "Basic Instinct." Only a few years ago, a script that sold for $300,000 was considered astronomical.

In addition, with many more theaters screening a picture, the studios must spend more on film prints and advertising. "It costs a lot of money to advertise in The Washington Post, and it isn't getting cheaper," said William F. Kartozian, president of the National Association of Theater Owners.

Hollywood can afford to spend more making movies, in part, because of the growing competition among theater owners for its products. Even though attendance is flat, theater chains face intense competition from one another, which means they must bid increasingly larger sums to secure the right to play the studios' most promising films. This competition has been intensified by a declining number of releases; only 410 films were released last year, by far the lowest number since 1981.

Movie-rental costs are so high for theaters, in fact, that most merely break even at the box office and rely instead on popcorn and candy sales for their profits. When these rising movie-rental costs are added into the other costs of operating a theater -- labor, utilities, insurance, etc. -- it is all but inevitable that filmgoers will pay the price.

"When Sylvester Stallone gets $10 million a picture ... it is almost implicit that you have to charge these figures," said Ron Goldman, president of K-B Theaters, an independent chain based in Washington.

At the same time, however, Goldman acknowledges that the growth in the number of screens has diluted the ability of theater owners like himself to negotiate with the studios. "No question, exhibitors have done this to themselves," he acknowledged. Not surprisingly, there is widespread talk of a shakeout in the theater business.

Although the movie-theater building boom appears to be over, the upward pressure on ticket prices is likely to continue, observers say. "If history is any guide, I think we'll see $10 movie tickets before the year 2000," said Douglas Gomery, a University of Maryland professor who specializes in the economics of the entertainment business.

This is because Hollywood still has plenty of incentive to keep upping the budget ante, Gomery said. For one thing, higher ticket prices haven't scared off many moviegoers. After all, though it is true that attendence has been flat over the past two decades, it's also true that it hasn't declined even as ticket prices continued to climb.

More importantly, a hit film can reap a fortune in a long chain of lucrative "after markets." Last year, the revenue from these secondary distribution channels -- foreign theatrical exhibition, home video, cable and broadcast TV airings, even product licensing spin-offs -- was about twice the $5 billion that U.S. movie theaters took in at the box office.

"Hollywood is willing to invest a lot more money in movies now than 10 years ago because of all the markets it has to recoup the investment," Gomery said. The risks if a movie bombs are higher, he said, "but so are the payoffs."

In recent weeks, there has been talk of an economic revolution of sorts in Hollywood -- a counterrevolution against soaring budgets. Sobered by the dismal results of such expensive productions as "Days of Thunder," "Bonfire of the Vanities" and "Rocky V," the heads of Warner Bros., Walt Disney Co., Paramount Pictures Corp. and Columbia Pictures have publicly said they will attempt to restrain star salaries and marketing budgets.

The new conventional wisdom that small can be better has been reinforced by the success of three relatively low-budget films, "Ghost," "Pretty Woman" and "Home Alone," which have become the top-grossing movies released in 1990.

More Big-Budget Flicks

But a number of people aren't so sure Hollywood is putting budgets on a diet, not as long as the market for movies keeps growing. Indeed, even as the moguls vowed to restrain production costs last month, their studios were hard at work preparing to release a flood of movies that will cost well over $30 million each. Coming next summer to a theater near you: Schwarzenegger's "Terminator II," at an estimated cost of $82 million.

"No matter how much lip service the studios pay to {cutting} actors' and directors' salaries," said Ira Mayer, the publisher of Entertainment Marketing Letter, "they'll always have to pay those dollars to the people who can deliver a hit."