To borrow a phrase from the poet Carl Sandburg, the recession seems to be growing in the US on tiny cat paws.
Everyone from Jeff Bezos to Gwyneth Paltrow is talking about the recession, while the Amazon founder advised Twitter followers on Oct. 19 to cut back on the bullets and the Goop chief admitted to complaining late at night about the state of the economy a few days earlier. . Technically, the US economy entered mid-year recession, following a second consecutive quarter of gross domestic product contraction. But the economy has recovered in the past following such downturns, leading some to argue that we have not yet recovered; The half-full population is pointing to low unemployment even as rising inflation is a sign that we are not in such an economic crisis.
The keynote will arrive on Oct. 27 when the Department of Commerce releases its first report of the third GDP activity.
The recession comes at a critical time for Hollywood, which is already struggling with high production costs and a gaming market that has yet to recover from the pandemic. Many people ask the question: How bad will the recession be for the entertainment industry?
Since consumers have less money to spend on smart products, Hollywood will have to adapt, especially given the recent growth in consumerism. There are indications that cord-cutting can speed up and consumers will unsubscribe from certain advertising when they feel their wallets are getting smaller.
“Due to rising interest rates, media companies will need to make tough choices about their priorities, where to invest – and where to cut costs,” said CJ Bangah, head of technology, media and telecom clients at PwC US.
In most cases, the work has already begun. Warner Bros. Discovery has promised to earn 3 billion dollars while working under a lot of debt, this week telegraphing that it will write between $ 3.2 billion and $ 4.3 billion in tax reform cases related to the merger of the mega-company, while Netflix cut. in software implementation and job cuts after its shares fell following a weak earnings report last April.
Tom Nunan, the Oscar-winning creator of “Crash” and a professor at the UCLA School of Theater, Film and Television, said: “Big, big companies can use this as an excuse to downsize, but this has been happening before.”
Marketing, as always, is an important part of business. But the yo-yo market of the past few years has disrupted traditional models. The Standard Media Index, which tracks ad spending, has reported a year-over-year decline in U.S. ad spending since June. Interpublic CEO Philippe Krakowsky told Wall Street analysts last week that advertisers have been nervous about the upcoming quarter and are urging consumers to be cautious with their campaigns.
“Many of our customers are now asking us to get involved in emergency planning, prioritizing work, and focusing on what will help get the job done,” said Krakowsky. Even so, recent forecasts call for population growth. GroupM, the media-buying giant owned by WPP, in June forecast that US ad spending will grow by 9.3% in 2022, and it’s not going away, according to Kate Scott-Dawkins, the company’s global head of business intelligence. .
“Our case in the US is not yet clear whether we are in recession or deep recession,” Scott-Dawkins said.
GroupM has already seen pockets of delays, including among major car dealers. The sector is “not sustainable” after the pandemic, said Scott-Dawkins.
In the front-end sales market earlier this year, many media companies tried to collect as much advertising money as possible, choosing to offer discounts on advertising prices in the hope of attracting buyers. There is a question of how much advertising money Madison Avenue has left after the guidelines to support ad-driven advertising.
Kevin Westcott, Deloitte’s US technology director, media and telecommunications. “Consumers can spend less money going out of the house – going out to eat, going to the movies. The number of minutes watched on streaming will probably increase, and this will increase the value of advertising on those services.”
The movie industry has historically been remarkably resilient in the face of recession. In fact, over the past eight years, the box office has increased six-fold and admissions have increased five-fold.
“Even in tough times, people don’t stop,” says Patrick Corcoran, vice president and director of communications for the National Association of Theater Owners. They only look for cheaper options. And they usually go to the movies instead of concerts or other things.”
But theaters are facing other challenges. The pandemic has depressed ticket sales and prevented studios from making the same movies as before COVID, leaving exhibitors without enough movies to watch. Ticket sales have fallen by around 35% since 2019 – the last year of the pandemic – and the main focus of the entertainment industry has shifted from producing international blockbusters to producing what these companies believe represent their future.
Eric Johnson, director of the UCLA Anderson School of Management’s Center for Media, Entertainment and Sports, believes that the ongoing battles will be more competitive.
“If you’re not one of the top three or higher you should be, the cost of acquiring new customers or trying to drive churn can be extraordinary,” he says.
Todd Spangler and Diane Garrett contributed to this story.