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America's Changing Entertainment Landscape

Economic concerns continue to weigh on entertainment consumers, though optimism about spending has rebounded slightly this year

Summer’s here, and manufacturers and retailers are wondering whether consumers will jump right into the deep end and resume their pre-recession spending behavior – or if they’ll just test the water with their toes. NPD examined the entertainment industry’s health to see if it indicates consumers are ready to end their vacation from spending.
 
According to the latest update of The NPD Group’s Entertainment Trends in America report, the list of entertainment activities enjoyed by U.S. consumers has remained reasonably stable year-over-year. Average monthly spending on entertainment products and content increased from $156 in 2008 to $162 in 2009, a hopeful harbinger for continued economic and retail recovery. When it comes to specific entertainment activities, however, the entertainment-market story brings with it, as always, a mix of positive and negative forces.

For video games, music, home video, and other entertainment content, monthly spending declined by 10 percent in 2009. Consumer sales of console video games, DVDs, CDs, and other key packaged media stalwarts experienced sales volume declines that were not entirely offset by increased consumer spending on digital media. “Although digital entertainment content spending is certainly on the rise, it continues to be one of the smaller revenue components for many entertainment sectors; thus, it’s not fully replacing lost revenue,” said Russ Crupnick, vice president and senior industry analyst for The NPD Group.

In addition to the more conventional forms of entertainment, consumers are showing increasing interest in new entertainment options, including social networking, messaging, and sharing. Usage patterns for these newer formats already reveal changes in how consumers discover, consume, and acquire entertainment content -- and how entertainment should be promoted to consumers in the future.

There are also major consumer-revenue shifts afoot in the entertainment market – especially when it comes to subscription spending. As readership for traditional newspapers and magazines continued to decline in the first quarter, overall spending on subscriptions actually rose 10 percent, due in large part to increased consumer excitement surrounding Netflix and other subscription offerings. NPD also noted increasing penetration of smartphones, which bring with them the need for ongoing data-plan subscriptions.

“Consumers who report buying or renting more entertainment content are seeing the overall value proposition for entertainment in the form of content that is compelling, attractive pricing, or in the ability to meet their lifestyle needs,” Crupnick said. “Consumers who reported spending less on entertainment this year point to economic concerns, which also may hint at a weakened value proposition for entertainment overall. Some of this may be real economic stress and some may be that they’re not finding interesting content at a pricepoint that makes the experience valuable.”

The NPD Group's entertainment consumer research also revealed that economic concerns continue to weigh on entertainment consumers, with nine out of 10 consumers telling NPD they plan to spend the same or less on entertainment this year than they did last year.

To learn more about Entertainment Trends in America, go here.

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