With doom-and-gloom surrounding the current state of the economy, what could this mean for the entertainment industry as a whole? While it’s hard to escape the naysayers, and impossible to avoid the sticky fact that inflation and tightening budgets are becoming a reality, are larger economic worries about a recession climate a threat to the entertainment industry? Our expert entertainment lawyer with Blake & Wang P.A, Brandon Blake, sifts through the opinions for some solid facts.
Does Entertainment Slow Down with the Economy?
Within the industry itself, you’ll see a lot of dismissal of fears around a recession climate. While some of it can seem a little too blissful, it’s rooted in fact. Arenas that suffer most in tough economic times are those where mass spending is needed- think vacations, costly experiences, household ‘luxuries’, and so on. The human need for something outside of work and food, however, does not cease to exist. People still want to get out and entertain themselves. And the film and TV industry, whether you look at theatrical releases or streaming, remains a low-cost, high-reward entertainment arena for the average person.
Let’s also not lose sight of the fact that a recession is far from guaranteed at this point. Tougher times are ahead, but let’s not put the cart before the horse, either. Where we’re most likely to see tougher economic conditions impact most is in advertising spend, which could be bad news for the streamers focusing on AVOD as the latest money driver. How long, and how slow-growing, any recession-leaning trends turn out to be will drive how badly that impact is felt. Likewise, it’s the only side of the industry particularly reliant on supply chains that could have issues.
One of the first trends we see in tighter economic times is hiring freezes. With Meta, Netflix, and other companies already slowing down in that arena, there’s some cause for concern- but only if the trend accelerates and we reach the point of actual layoffs. So, overall, the entertainment industry may not be ‘recession-proof’, but any negative economic turn is dampened considerably by the nature of the industry itself.
What We Could See Impacted
What we might see, however, is increased scrutiny and a more careful buying cycle. When times are abundant, it’s easy to throw money away on a gamble here or a pet project there. In a slower economic cycle, that scrutiny will intensify, and products will be expected to meet desired parameters or face the ax.
This means smart media companies are likely already turning their minds to the constraints the economy could bring to bear on media product performances, and how to offer appealing options in the face of tightened purse strings. Discretionary costs are vulnerable, so making sure you’re providing the best ‘bang’ for the customer’s buck becomes critical. We’re likely not at the end of the appeal for AVOD/FAST products, either. While advertisers may feel more constrained, FAST entertainment services offer a ‘soft’ landing pad for customers churning through subscriptions and trimming the fat. Free looks very appealing when your pockets are shallow, after all.
We might also see an acceleration away from pricey cable packages to low-cost streaming options. Also, possibly, the death of some of the higher-cost ‘premium’ streaming packages unless they wake up and deliver value that offsets their higher price tag.
The entertainment industry as a whole is well placed to weather an economic downturn. But it’s who positions themselves the most effectively to stay buoyant in that space that will emerge the actual victor, especially on the distribution end. Expect some changes ahead, but there’s no need to buy into the doom-and-gloom just yet.