The show indeed goes on

RJ Hamster

2 years ago

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Thursday, August 24, 2023

“I’ll face it with a grin/I’m never giving in/On with the show!”
– “The Show Must Go On” by Queen

It’s been a big summer for the entertainment industry. Between the Barbenheimer craze and the ongoing actors’ and writers’ strike, there’s plenty to keep an audience glued to their seats. Following the height of the COVID-19 pandemic, the question remains of whether people prefer watching from their couches at home or in real theaters.

Don’t let this summer’s cinematic sensations fool you – we’ve certainly witnessed a change of current in terms of movie spending vs. streaming spending. But does this mean our beloved movie theaters will eventually go the way of the dodo? Not quite, as we’re still in the wake of post-pandemic demand shifts, the effects of which have changed the overall entertainment climate in a big way. All that’s to say folks still want their entertainment, they’re just consuming it differently now.

No cliffhangers here – read on to learn more about the behind-the-scenes of this shift in entertainment.

It’s been a while since there was serious buzz about a movie. In fact, Barbie and Oppenheimer’s release marked the first time since the pandemic that the box office got this much attention. It’s been a tough period for the entertainment industry overall as shifting demand and the actors’ and writers’ strike weigh on the sector. Plus, artificial intelligence (AI) poses questions looking ahead. But even with this in mind, it’s not all bad for the entertainment space.

Let’s dig in.

The good news is there’s a big piece of the puzzle that’s growing considerably: streaming. Since the pandemic started, spending on movies and cable TV has declined by 52% and 15%, respectively, giving way to a surge in streaming, which is up 58%. Put another way, digital movies accounted for 72% of the combined home, mobile and theatrical market in 2021, as discovered in a study conducted by the Motion Picture Association (MPA) – a jaw-dropping leap from 46% in 2019.

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Unsurprisingly, massive shifts in demand haven’t given the industry time to adjust to changing consumer preferences, although many big-name companies have jumped on the bandwagon and created their own streaming platforms in recent years. It’s probably just a matter of adjusting to mix shifts happening under the surface. Generally speaking, such massive changes tend to happen more slowly, allowing experts in the space to reorient over time. But the global pandemic essentially upended the entertainment world overnight, leading to a pressing need to shift quickly.

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The Hollywood strike is a byproduct of this – the weakening of the traditional entertainment industry, without it fully capitalizing on the streaming side of the equation. While AI hasn’t left much of a footprint yet, there are questions about how it will impact the entertainment industry (along with everything else). As with any new technology, we believe it will likely boost productivity overall, and new jobs will be created as some jobs are displaced.

But the fact that the consumer is still spending on entertainment is encouraging, with some pockets seeing considerable growth. We like companies that are not only capitalizing on the structural shift from cable TV to streaming, but those that are focusing on maximizing revenue per paying user as well.

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If you’re feeling annoyed by your razor costing more, or the woman in your life’s razor costing more, you are feeling the result of the “pink tax” – the extra amount of money that women pay for ordinary products such as the aforementioned razors, haircuts and even dry cleaning.

“By some estimates, the pink tax costs women an average of $1,300 annually,” said Jeanne Sun, Head of Investments and Advice for Digital Wealth and former General Manager of Inclusive Investing for J.P. Morgan Wealth Management. “If the same amount were invested into a retirement fund each year, that would amount to about $16K over 10 years (assuming an annual return of 5%) and nearly $160k over a 40-year work life. But not all of this is in our individual control, and we all have personal preferences. What’s in our control, however, is knowing the tradeoffs we make in these purchases and making these decisions intentionally. It’s not about saving for saving’s sake (unless that is your current focus) but thinking about if there’s a better use for that money elsewhere.”

States have steadily worked to make changes. At the start of 2023, both Virginia and Iowa joined the ranks of states exempting personal hygiene products from tax. Companies like CVS are also making an effort to eliminate the pink tax. CVS Health announced they would enact a 25% reduction in the price of CVS-brand menstrual products and cover the existing sales tax in 12 states. While strides are certainly being made, there is still more work to be done to eradicate gendered pricing.

To learn more about the pink tax and how it affects women consumers, read the full article here».

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Chart 1

This chart shows the trends in consumer spending on movies, cable TV service and streaming/video rental since 2020 (adjusted for inflation). Movie sales are down 52%, cable sales are down 15% and streaming sales are up 58%.

Source: J.P. Morgan Private Bank, BEA. Data as of June 30, 2023.

Chart 2

This chart shows Google search interest over time for “Box Office.” There was little interest since the pandemic, with the exception of the Barbie/Oppenheimer release in July 2023 and a bit of a spike for Spider-Man: No Way Home (2021). Otherwise, historical peaks were around Avengers: Endgame (2019), Star Wars: The Force Awakens (2015), The Hunger Games (2012), Avatar (2010), Spiderman (2007) and Shrek (2004).

Source: Google Trends. Data as of July 31, 2023.

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