One of the questions I have been getting lately is: Why the weekly focus on music, film, consumer electronics and all things digital ?
The simple answer: Consumer spending.
Consider the following macro consumer expenditures from select sectors in the United States:
(Autos and Bar/Restaurants are included for comparison purposes)
| Industry Sector, Consumer Spending | $ Billions* |
| Publishing industries (includes software) | 244.4 |
| Motion picture and sound recording industries | 85.6 |
| Broadcasting and telecommunications | 609.1 |
| Performing arts, spectator sports, museums | 78.5 |
| Amusements, gambling, and recreation | 92.0 |
| Computer and electronic products | 408.7 |
| Motor vehicles | 423.7 |
| Food services and drinking places | 414.0 |
* Data is for 2003; Amounts are in current dollars
Source: BEA
How do these numbers break down for individual families? Most people are unaware of this: The average American spends more on entertainment than on gasoline,
household furnishings and clothing and nearly the same amount as spent
on dining out, according to the Bureau of Labor Statistics.
And the wealthy spend more on entertainment than on health care:
graphic courtesy of NYT
That’s rather significant. While everyone (present company included)
has been cautiously watching fuel prices rise and fall, the American
entertainment dollar is a major driver of the U.S. economy.
And that’s before we get to the hardware: PCs, Plasmas, iPods, X-boxes, digital cameras. The hardware expenditures we make to keep ourselves entertained are substantial.
That’s the reason why Microsoft took a $4billion hit developing the X-Box. Its a jumbo loser on a short term basis for them; But if they can convert it to the center of the living room digital hub, it may payoff over the long term.
And yes, Mister Softie knows that the digital hub ain’t gonna be a P.C.
So the X-box is a giant hedge, an attempt to at least fight for the living room against Apple, Sony, TiVo, General Instrument, and even Intel.
Yes, these are glamor industries; But more importantly, they have significant on the overall economy . . .
Source:
How to Tame an Inflated Entertainment Budget
DAMON DARLIN
NYT, November 19, 2005
http://www.nytimes.com/2005/11/19/business/19money.html
Microsoft’s Xbox Reflects New Focus on Hardware
Software Giant Broadens Business Model as It Seeks Ways to Take On Apple, Sony
ROBERT A. GUTH
THE WALL STREET JOURNAL, November 22, 2005; Page A1
http://online.wsj.com/article/SB113262336104603730.html
Gross Output by Industry in Current Dollars
[Billions of dollars]
Bureau of Economic Analysis, Release date: November 9, 2005
http://www.bea.doc.gov/bea/industry/gpotables/gpo_action.cfm?anon=
578&table_id=12198&format_type=0
the rate of growth in the MP3 market was somewhat hard-to-believe
Thanks for the article. Very interesting. Just to clarify, what are you including in “Entertainement”? The first table includes “Motor Vehicles”. Are you including Motor Vehicles in Entertainement? That would be a large number and more a necessity than a luxury.
very interesting, and like jeff, i too have a question: what is “food at home?” is that groceries, takeout, or both? and where does restaurant eating (which surely occupies a bigger chunk of the top quintile’s spending) go? entertainment?
er, forget that restaurant eating question – i didn’t look carefully enough at the bottom line, “food services.” always preview!
but my question remains about takeout.
what do you think is driving stocks in the transportation sector? (is retail driving it? housing? entertainment? other?)
I believe its Bars & Restaurants
Barry:
You get an A+ on service and responsiveness.
How do you know it is bars and restaurants?
a lot of the trucks in my neighborhood are home delivery of a variety of items, or moving trucks. it is also cement and construction trucks.
Any idea if the $2060 and $$3606 numbers include motor vehicles?
A significant portion of food services is institutional
dining facilities like schools, dorms, hospitals, etc.
http://money.cnn.com/2005/11/22/news/economy/fed_outlook/index.htm
Barry is quoted in CNN. congratulations Barry-
how about this scenario:
Greenspan retired with rates at 4.25%. Bernanke takes over and raises to 4.5%.
Food at Home: The Whole Foods effect. Remarkably this distribution of food costs matches mine and my girlfriend’s. I’ll have to use this as one more piece of evidence that we are now affluent. [She won’t buy it until the diamonds flow like water, I’m afraid]
Also note the increased education expense for the wealthy. If only more Americans could be convinced that the short-term pain of little to no income (aka more school) is worth it in the long run. With all the loans and grants available, it really is available to anyone. [though having a family young will make it harder]
Consumer Tech Spending
Consumer tech spending is the hot topic of the week. Yesterday we talked about the moves that Cisco, Intel, and Microsoft have made to get in on this, and we pondered whether this consumer demand was based on a secular