Tuesday, June 26, 2007

More Bad News for The Business

Fresh on the heels of today's blistering Rolling Stone article forecasting the (well deserved) demise of the major record labels, DiscoverFinancial brings the cheery news that consumers, in the face of higher energy prices, prefer to cut discretionary spending (read: entertainment = music) before they'll change their driving habits. From the article:

According to the new survey conducted as part of the Discover® Spending Confidence Monitorsm, 80 percent of Americans find their car very important in their everyday lives. This may explain why car owners are ready to sacrifice non-essential items in their lives rather than their cars if gas prices increase $1.

Cutbacks Would Most Likely Affect Vacations, Entertainment Spending, Major Purchases

According to the survey:

  • 70 percent of car owners said they will cut back on entertainment spending if gas prices were to increase a dollar,
  • 66 percent said they will change their vacation plans, and
  • 64 percent said they will postpone a major purchase
Seventy percent.

So here's today's takeaway meditation for commercial creatives: what do we do to attract people to our shows and products in spite of the rising cost for them to do so?

Photo by Matt Heap.


Brian said...

I understand your pessimism about the drop in entertainment spending, but can one make a direct correllation that a drop in ent. spending will actually negatively effect music sales? Let's look at the entertainment pie that America spends each month on average for Entertainment... First off Sports is No.1, thats right - must be all those $100 football tickets, baseball who knows. Second biggest slice is Video Games, then Hollywood, then Music. (biggest slice actually is internet porn - no kidding, but we'll keep this conversation mainstream). So music is the fourth slice in the pie and is quite ancillary to the much bigger dollar slices. So if the Average American gets a cut of say $50 from his budget per month due to a gas hike, how do you think he's going to psychologically react? Will he say "No way I can afford five $.99 downloads this week now that gas is so high" or will he simply skip the higher cost and psychologically larger expense of the $100 football ticket and buy a couple CD's to listen to around the house? I don't think that we'll see a dip in small dollar ent. spending like music and DVD's I think you'll see it more in fewer Video game systems sold (like Sony's $700 PS3) and less big ticket sporting events and concerts. My two cents...

Jeremiah said...

Confined to the entertainment services (sporting events, concerts, shiny-disc retail, etc), I think your assessment is spot-on. Zoom out a bit to include energy prices, it makes attending geographically distant events a more expensive proposition for consumers...which, in my view, changes the value propositions of various entertainment products.

The Discover report is predicated on a $1/gal increase in the retail price of gas. It's interesting you mention $0.99 downloads, because we can make raise an interesting question: Will people be offsetting their energy costs from lower-cost products first, or higher cost? The mind churns.....