This doesn’t mean recurring media and entertainment expenses like internet, mobile plans and video streaming weren’t hit: About 1 in 4 U.S. adults said they either spent less on or stopped paying entirely for each of those categories.
It’s just that consumers are less willing to walk away completely from these subscription expenses than from one-off purchases like movie tickets and sports betting, as evidenced by the shares of consumers who said they didn’t cut spending for each category above.
This implies that categories with lower net difference values are seen as more essential. It also suggests that consumers are more likely to cut costs by switching to cheaper alternatives, rather than eliminating spending entirely, on essential entertainment categories, which MCEI data also confirms.
Our Substitutability index showed a sharp uptick in early 2023 in the telecom category, suggesting that more consumers who are purchasing telecom services are opting for cheaper alternatives. MC’s Substitutability index is based on our survey data on consumers who have selected cheaper alternatives within a purchase category amid decreasing spending power.
Notably, our Price Sensitivity index for the same category has been more stable. That index is based on our survey data on consumers who have forgone purchases due to higher-than-expected prices. Together, these findings suggest that while price concerns may be encouraging consumers to reduce telecom spending, they are less willing to abandon these purchases altogether, given the essential day-to-day functions enabled by mobile phone and internet services.
How the macroeconomic picture could impact entertainment expenses in the second half of 2023
It should be noted that dips in reported consumer spending are not proportional to changes in media giants’ revenues. Peacock, a U.S.-only streaming service, more than doubled its subscriber count in 2022, while Disney+ gained 3.7 million subscribers last year. Meanwhile, 2022 domestic box office revenue was up 65% year over year.
But more favorable economic conditions over the past year would have led to higher discretionary spending by consumers. And this would have meant even bigger year-over-year gains for certain companies, which are badly needed in an industry that now seems perpetually in cost-cutting mode.
Macroeconomic industry pressures won’t abate soon: Despite already having cut entertainment spending, consumers are indicating they’ll continue to minimize those expenses in the months ahead.
In March, around 3 in 5 U.S. adults said it was important to them to spend less on their internet and mobile phone plans in the year ahead. This suggests that even staples within the category are in cost-cutting jeopardy in U.S. households, though the net difference values above suggest most consumers will likely cut costs on music and streaming subscriptions prior to mobile and internet.
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