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Entertainment and Media: Markets and Economics


Title: Economic Foundations for Entertainment, Media, and Technology Author: William Greene Last modified by: Bill Created Date: 9/28/2000 12:58:17 AM – PowerPoint PPT presentation

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Title: Entertainment and Media: Markets and Economics

Entertainment and Media Markets and Economics
  • Long Run Trends and Short Run Outcomes Who We

Why do we work?
How much do we work? A Very Long Run Trend US
hours worked is falling or steady
International Comparison Hours Worked (Per
Year) Americans generally work more hours than
others. Same long run trend
The trend in hours worked is different between
manufacturing and services The service sector is
growing and the manufacturing sector is
shrinking. This describes more finely the long
run trend in hours worked Change in the hours
worked in the service sector and expansion of the
service sector in the economy.
Recent trend in hours worked (weekly, average),
Spending on recreation is growing in absolute
  • Per capita, real spending on recreation
  • and recreation services.

The long run trend in recreation expenditure as
a proportion of real income is growing
Recreation as a of Disposable Income
The form of recreation spending is changing
  • Service Component of Recreation Expenditures
  • Service Movies, Sports, (passive) 1959-2009

Adding It Up
  • Household income is not rising very much
  • Time spent working is steady or falling slightly
  • Time spent on recreation is no longer rising
  • Budget allocated to
  • Entertainment is rising
  • Health care is rising, but more slowly now than
    in 2010
  • Food and clothing is falling
  • Growing entertainment market is driven by
  • budget reallocation
  • changes in preferences.
  • changing technologies and falling prices
  • Demand in the recreational segment of the economy
    is rising faster than overall output.

Cultural Differences in Hours Worked
Entertainment and Media Markets and Economics
  • Short Run Outcomes
  • Consumer Theory

Consumers allocate their resources to maximize
their well being
  • A standard model for consumer behavior
  • Utility maximization over choices subject to
  • Market environment Prices
  • Resources
  • Time
  • Money Income and savings

Time Is the Ultimate Constraint
  • Consumers Maximize Utility (Consumption,
  • Constraints that limit the amounts they can
  • Available Money Savings WageLabor
  • Prices
  • Pcons Goods Prices
  • Pleisure Wage Rate opportunity cost of
  • Available Time Labor Consumption
  • At least for the short term, the wage (ability to
    earn) is fixed
  • Tradeoff To consume more, we must work more,
    leaving less time for leisure.
  • The fixed amount of time is ultimately the
    binding constraint

Implications of the Theory for Changes Over Time
  • As Wage rises, leisure becomes more expensive.
  • As Income rises, leisure becomes more
    desirable. (Leisure is a normal good.)
  • Net effect over time if real wages and incomes
  • Higher incomes generally lead to greater demand
    for leisure leisure is a normal good
  • Higher wages make leisure more expensive
    consumers desire greater consumption rather than
    greater leisure. Hours worked are not falling
    very much any more.
  • Not clear which way the result will go. Look at
    our macro data.
  • Per capita income in the U.S. is not rising much
    at all.
  • Hours worked is falling, but not as fast as it
    once did.
  • Demand for entertainment seems to be rising
    reflecting cultural shifts.

Falling hours worked is a substitution of leisure
for consumption
Does falling hours worked mean lower
income? Aggregate GDP? No there are more
people and wages are higher (slightly) For
Individuals? No Higher real wages because of
productivity increases. Yes Conscious decision
to take higher income in the form of more
Short term fluctuations
Finer detail on the allocation of the consumers
  • Consumer Budgets
  • Housing
  • Transportation
  • Food
  • Clothing
  • Medical and Physical Upkeep
  • Recreation (and other stuff)
  • Allocation Based On
  • Relative prices including the price of time
  • Income and savings
  • Culturally influenced preferences.

Food 6373 Housing
16895 Clothing
1725 Transportation 7658 Health Care
3126 Entertainment 2693 Insurance
5471 Everything Else 5127
Consumer Spending by Income Class
Category Avg Top Income 51G
127G Food 6.1 7.1 Health care 4.2
2.8 Entertain. 4.0 3.6 Clothing
3.3 2.6 Education 1.5
1.7 Housing About 31 Transportation
16 Other 35
The figures suggest consumers reallocate spending
as incomes change. Careful! This shows a
difference between consumers, not necessarily the
change in behavior of a particular consumer as
income rises. It is only suggestive.
EM Is a Large Industry
  • Total Economy 15,000b
  • Entertainment and Media 6.4
  • Health Care 19.0 (has peaked)
  • Recreation of all kinds 725b
  • Games, sports, clubs,
  • Print Media 110b
  • (Books, magazines, newspapers,)
  • Movies in theaters 12b
  • (All figures approximate)

The U.S. economy grows by about 2 - 3 per year.
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