Funflation

With major wars in Ukraine and Gaza, as oil prices recently spiked, as our GOP-dominated House of Representatives is handcuffed by an internal struggle between traditional Republicans and the ultra-rightwing Freedom Caucus and as Americans try to square all the positive economic data with their day-to-day experience with rising prices for virtually everything, it may seem out of place to discuss how many Americans are coping with it all: by cutting back on entertainment. Vacation travel. Dining out. Going to theme parks. Concerts. Movies. And increasingly streaming services. You can see that concern as the hidden beast – income inequality combined with very limited upward mobility – is increasingly dividing us into the “haves” and the “have-nots.” The body of “have-nots” is growing fast. The post-pandemic consumption surge seems mostly over.

Housing affordability, tuition and student loans for those seeking higher education, credit card interest rates (interest in general), cost of basics (food and fuel rising fast) and fewer Americans saving a dime for retirement as Social Security and Medicare are targets for rightwing congresspeople, creates a general concern that life will soon be unaffordable. Even the rising temperatures from climate change are running electric bills through the stratosphere. The escalation of labor disputes is a most obvious reflection of these concerns. Hotel and hospital workers. Automakers. Writers and Actors. Etc., etc. That CEOs are paid at the inflation-corrected highest levels in history (from the 1950s 50-to-1 differential between average workers and that CEO to a 2023 350-to-1 ration), make average Americans uncomfortable or just plain angry.

In-home entertainment is rising fast as well. Even without a flood of new series and made-for-streaming features, because of the strikes, major streamers are raising their prices and clamping down on password sharing. Across the board, entertainment providers are raising their prices, just as so many families are targeting coping with seemingly unstoppable rises in the cost of living by electing to cut back their spending on entertainment.

Writing for the October 16th Wall Street Journal, Robbie Whelan and Anne Steele note that “It’s getting too expensive to have fun… The rising cost of fun is becoming a drag… Ticket prices for live entertainment events, from Taylor Swift concerts to National Football League games and high-season theme-park visits, rose at a startling rate this year, triggering a phenomenon that analysts have dubbed ‘funflation.’ … Families coughed up large sums saved during the pandemic to attend live events and parks this year. Friends treated themselves to memorable performances. Mothers took their daughters to stadiums packed with friendship-bracelet-clad concertgoers to see Swift’s Eras Tour… Now, some Americans are feeling tapped out…

“Nearly 60% of Americans say they have had to cut back on spending on live entertainment this year because of rising costs, according to a Wall Street Journal/Credit Karma survey of about 1,000 U.S. consumers conducted at the start of September. Some 37% of respondents said they can’t keep up with the rising price of events they want to attend, while more than 20% of Americans say they are willing to take on debt to continue to be able to afford their favorite entertainment activities…

“Roughly 26% of respondents said they don’t spend any money at all on live entertainment, up from 16% before the pandemic, the survey found… The cost of admissions and fees rose faster than the prices of food, gasoline and other staples in 2022, according to the Bureau of Labor Statistics Consumer Expenditures Survey. Those rising costs have continued this year… ‘Anything live, anything experiential is just going through the roof,’ said Jessica Reif Ehrlich, a Bank of America analyst who labeled the dynamic as ‘funflation’ in a September research note.

“Americans were on track to spend about $95 billion this year on tickets to spectator amusements including movies, live entertainment and sporting events, according to August data from the U.S. Bureau of Economic Analysis. That is up 23% from all of last year, and 12.5% higher than the $84.4 billion spent on the same entertainments in 2019, the last year before the pandemic shut down most spectator events… Spending at theme parks, campgrounds and related services is on track to hit $79.9 billion this year, up 3.4% from 2022 and 6.2% from 2019.”

I don’t like to pick on Disney, since they are hardly alone in raising prices, but the above chart published by the Orange County Register tells you that there is mismatch between the rise in the general cost of living and what location-based entertainment providers (everywhere) are doing with ticket prices. Yet where the attraction is strong enough, particularly evident in concerts, superfan consumers may be cutting other forms of entertainment to go to expensive premiere events: “Live music in particular has undergone supercharged ticket-price increases because of strong demand from some consumers who are still willing to pay up. Music executives attribute this to the marketing power of social media and the globalization of pop music thanks to streaming, with acts such as Puerto Rican artist Bad Bunny and Korean girl group Blackpink filling stadiums across the globe during recent tours…. ‘We’re seeing record attendance everywhere,’ Ehrlich said. ‘Everything is sold out.’

“The average ticket price for North American tours hit $120.11 this summer, a 7.4% increase over last year and up 27% from 2019, according to Pollstar… Fans shelled out for big-ticket shows, especially as more acts tour in stadiums. For the first time, the top five touring acts globally—Taylor Swift, Bruce Springsteen, Harry Styles, Elton John and Ed Sheeran—each racked up more than $100 million in sold-ticket revenue during the first half of 2023. Over the past two decades, there were usually no more than one or two artists at that level, according to Pollstar… The percentage of cardholders who buy tickets to live events, however, has fallen more than 10%, suggesting that fewer people are spending on in-person events than in the prepandemic period.” WSJ.

As a lawyer in film, television and digital entertainment, I can tell you that there are fewer scripted productions, most at reduced budgets and decidedly lower pay above union or guild minimum, a reality that threatens to get worse once the actors settle their labor dispute. I am expecting more streaming disconnects (on when a hot program is rising, off when that fades), and until the economic reality stabilizes, expect lower attendance for ordinary venues, fewer customers for better but middle-level restaurants, lower spends on middle-plus clothing and a contraction in driving as fuel prices remain high.

Combined with this reality, the employment explosion is settling down as the big statistical reality is hitting more and more Americans. The United States consumer base is not a growth market. As we shut down immigration, our existing population base now generates birth rates well below replacement value. Major urban areas are experiencing massive increases in office vacancy rates, and big cities are witnessing population losses as remote work catches up with absurd residential housing costs. It’s going to be a rough ride.

I’m Peter Dekom, and unless government stimuli kick in to provide better and more plentiful jobs (e.g., our infrastructure needs), “less” is going to replace any semblance of future generations living better than did their parents.