How Inflation Negatively Affects the Entertainment Industry

Author: Shaun Stack

Inflation is a term that has been thrown around a lot lately, especially in modern politics. The term itself is an economic concept that is important for comparing the health of a given industry or economy.

Understanding inflation is important for people who are planning their financial futures. Also, it can give us insight into how different industries will progress in the future.

For example, one of the first industries that is usually affected by inflation is the entertainment industry. When consumers are making cuts to their budget, their extra money for entertainment is one of the first areas to go. Keep reading to see how inflation impacts the entertainment industry and its consumers.

Causes of Inflation

Inflation is a commonly used term, but not everyone knows exactly what the term means. Simply put, inflation is a measure of the increase in prices over a set period of time. Because it increases prices, inflation also correlates to a decrease in purchasing power for consumers.

With that in mind, it is understandable why inflation has become such a negative word in the American vernacular. However, it is actually a natural force in economics.

There are different types of inflation, and each has its own cause.

Built-in inflation: the prices of goods and services increase in response to rising costs of employing workers in that industry
Cost-push inflation: the cost of the final product increases because the cost of producing it increases
Demand-pull inflation: the increase in demand for goods and services outpaces the supply, creating an increase in prices.

As you can see, some types of inflation are going to always be present in the economy. For example, giving workers cost of living raises will eventually lead to an increase in prices in that industry.

Other types of inflation are more insidious. For instance, if there is an increase in investment in oil, then oil prices may go up. This, in turn, will cause inflation in other industries that rely on oil.

How to Measure Inflation

If you want to assess the effect of inflation, then you need to know how to reliably measure it. The main ways inflation is measured are the following:

Consumer Price Index (CPI)
Wholesale Price Index (WPI)
Producer Price Index (PPI)

CPI is the most commonly used tool for comparing different time periods. You will see the CPI used to discuss changes in the cost of living. The Bureau of Labor Statistics updates the CPI on a monthly basis.

You may also come across the WPI and the PPI. The WPI tracks the changes in the cost of goods before they reach the retail level and includes some taxes. Finally, there is the PPI which excludes direct taxes and measures changes in prices for the producer of a good or service.

What Is The Entertainment Industry?

As I mentioned above, the entertainment industry is often one of the first affected by rises in inflation. But what exactly is the entertainment industry?

Entertainment is a broad industry that includes films, gaming, sports, music, and more. Simply put, it is any industry that aims to make a profit by entertaining its consumers. Consumers use their spare income to participate in this industry.

Inflation has a direct impact on the amount of discretionary funds in your budget. The higher the inflation is, the less money you will have to spend on things like entertainment.

As a result, the rate of inflation is very closely tied to the success of business in the entertainment industry. For example, when inflation is high, you may have less discretionary funds to put into your gambling bankroll. As a result, you have less money to spend at real money gambling sites, which reduces their potential profits.

Effects of Inflation on the Entertainment Industry

Consumers having fewer dollars to spend on entertainment can affect the whole industry. However, there are other ways that inflation affects the entertainment industry as well.

Direct Effect of Inflation on the Entertainment Industry

Inflation can increase the cost of production in any industry. The entertainment industry is not immune to rising costs of production.

Creating film sets, employing staff, and advertising are all areas that inflations can severely impact. Creating the product is only half of the battle. After your film, show, or sport is ready to go, you still have to get people to come and see it.

The price of tickets, streaming services, and food and drinks can also be impacted by inflation. This is on top of the overhead costs of operating a stadium, casino, or movie theater.

As I mentioned above, built-in inflation is also a factor to consider. As the cost of living increases, whether due to inflation or otherwise, companies have to pay their workers more. Keeping up with the cost of paying actors, casino dealers, and other staff can be even harder to do when inflation is already high.

How Inflation Affects Consumers in the Entertainment Industry

Consumers are also heavily impacted by the same inflationary factors that affect the entertainment industry. As I mentioned above, inflation can severely limit the amount of money the average consumer can spend on entertainment.

Also, rising costs of accessing entertainment can price out some customers. For example, some people may not be as willing to pay for a streaming service after the monthly subscription price goes up.

Increases in the price of tickets, minimum betting limits, and the cost of travel can also shrink the consumer base. This also decreases the amount of money that certain sectors are able to bring in, which could lead to even more increases in prices in the future.

How the Entertainment Industry Combats Inflation

Inflation is, unfortunately, a natural part of any economy. On the bright side, this means that companies in the entertainment industry have found ways to try and combat inflation.

Technology and Other Innovations

One of the best ways the entertainment industry has found to combat inflation is to try and cut production costs. This could mean recasting actors who are asking for new, more expensive contracts. It could also mean finding ways to produce sets and special effects at a lower cost.

No one likes it when the production value of their favorite show to go down. However, sometimes that is necessary for the show to keep running.

Advances in technology can also help cut production costs dramatically. Finding cheaper ways to produce the same product is one of the keys to battling inflation. Online casinos, for example, offer the same games at a lower cost than brick-and-mortar casinos.

Downsizing Entertainment Companies

Another way that people in the entertainment industry can battle inflation is by downsizing. While this is less than ideal, it is often the only course of action to keep a company in business.

This often means canceling shows or other upcoming productions. It can also mean closing stores, casinos, and other businesses if they are too expensive to keep open. Alternatively, you will also see companies get bought out by larger companies.

A buyout can help save smaller companies and keep well-established brands afloat. It can also bring an influx of funds to help finish projects and help businesses stay open.

Push for Changes in Government Policies to Fight Inflation

A third way that members of the entertainment industry can fight inflation is to push for policy changes. The government already has policies in place to help the average American deal with inflation. But major companies pushing for new changes can help fight inflation in the short term, too.

People within the entertainment industry can also use strikes and other forms of protest to help battle inflation. Unionizing and protesting can help actors, screenwriters, and other members of the industry get better compensation. Having better pay and benefits will make it easier to battle inflation.

Inflation's Negative Affect on Entertainment

Inflation can increase prices across all industries, including entertainment. The rising prices can make it harder for companies to supply entertainment, like movies or casinos, to consumers. It can also make it more challenging for consumers to be able to afford entertainment products as they have less discretionary funding.

Disclaimer: The above is a sponsored post, the views expressed are those of the sponsor/author and do not represent the stand and views of Outlook Editorial.