The Economics of Entertainment

Tuesday, August 8, 2006 4:07 PM
There've been a lot of posts lately about the economics of the amusement industry. Ticket prices are rising faster than inflation, and in at least some parks, guest demographics are changing. The counterpoint is, of course, the just-as-rapidly increasing prices of many forms of entertainment.

I've often wondered how long this can go on---after all, if prices keep rising faster than inflation, won't something have to give eventually?

Today I put together some interesting data that suggests that, no, nothing has to give anytime soon. Here's why: income also is growing faster than inflation, which puts price pressure on discretionary spending.

According to census.gov, the median income of a 4-person family in 1974 was a bit under $15K. The median income for that family in 2003 was just over $65K. However, according to NASA's Consumer Price Index calculator, the '74 median income is worth $55K in 2003.

In other words, median income is growing faster than living costs are. The additional income is free to be used for discretionary pursuits.

So, perhaps Disney and Six Flags aren't pricing out the middle class after all?

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Tuesday, August 8, 2006 4:13 PM
BN, I've posted this same thing for the past 5 years that parks are hanging themselves by OVERHEAD and stockholder needs.

If the only way you can pay dividends is to raise prices. Eventually you pass the point of what people are willing to pay.

Chuck, who says most parks haven't found that yet but I see the time where every item on the planet that people need price rising will soon overcome people expendable income for leisure. The movie industrys been struggling with it for some time now. It's just a matter of time for parks.

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Tuesday, August 8, 2006 4:16 PM
God bless you, Professor. :)

See, the scary part about talking money on forums like this is that it's a touchy situation. How do you go about differing opinions when we're all in different boats financially and expressing those opinions based on our world and the one we see around us.

The best I can do is use personal experience and information like Brian presented and figure that these forums have to be representative of some kind of cross-section of average american life.

All of that said, I stand by my previously (and frequently) stated opinions - it can go higher and it will over the next few years...across the board.

The only arguement I could make against your numbers is that you didn't run the costs of visiting these parks then and now. We'd need to dig up the 'then' price of a handful of parks and see how that translates to today's dollars to get a real grip on how the current pricing of parks compares.

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Tuesday, August 8, 2006 4:20 PM
The median income may be growing faster than living costs, but how does it compare to how fast a family's typical debt is growing? Income is up, but aren't more and more people living "paycheck to paycheck?"

*** Edited 8/8/2006 8:21:34 PM UTC by Gemini***

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Tuesday, August 8, 2006 4:22 PM

you didn't run the costs of visiting these parks then and now.

I did it elswhere. It's pretty similar.


If the only way you can pay dividends is to raise prices. Eventually you pass the point of what people are willing to pay.

But that's just it, Chuck. I used to agree with you. After I looked at this data, I'm not so sure I still do.

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Tuesday, August 8, 2006 4:27 PM

but how does it compare to how fast a family's typical debt is growing?

But, if I understand the various definitions, the debt must be incurred due to excess discretionary spending, not increasing living costs. The CPI measures living costs, and incomes have grown faster.

Now, I suppose that "college" is probably discretionary in this definition. (And, perhaps this also explains why tuition has also been able to rise faster than inflation, yet a record fraction of americans attend college.)

But I'm pretty sure that "housing," "heat," "food," and "clothing" are not.

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Tuesday, August 8, 2006 4:31 PM

aren't more and more people living "paycheck to paycheck?"

I don't know. Are they? That's certainly the story in the news. I've not pored over the census data to figure it whether or not it's really true though.

And, to Amplify LG's point: this is tricky, because each of our situations are different. And, there are plenty of people here on the boards who have lost jobs, taken pay cuts, or both. I don't mean to imply that anyone "must be able to afford" anything.

And, frankly, when I started collecting that data, I intended to use them as evidence for the "fact" that Disney was intentionally targetting a shrinking number of ever-more-wealthy people. Unfortunately, the numbers didn't prove my intended point!

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Tuesday, August 8, 2006 4:36 PM
Actually, I've always been surprised about lift tickets being so much more expensive than parks. You'd think parks would cost as much. I don't think a typical ski resort employs more people than a large regional park. And equipment? Lifts, coasters, grooming equipment, trams?

Anyway, seems lift tickets were at today's park prices about 20 years ago.

Oh, and it's one of the reasons I haven't being skiing in about 10 years. ;)

Consider me outpriced (my knees stink too).

^ Paycheck to paycheck? Try charge to charge. ;)

*** Edited 8/8/2006 8:38:40 PM UTC by janfrederick***

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Tuesday, August 8, 2006 4:39 PM
Ok, whatever. Im not going to get into this long drawn out situation of where nobodys right and nobodys wrong.

Im also a sprint car and racing fan and the cost of travel far outweighs the cost of the event anymore.

Five years ago I could fill the tank for 18 dollars. See the race for 10 dollars and still have a half tank left.

Today it cost me 12 dollars to watch the race and almost thirty just to get there and back.

It has affected how many I can go to and how often I can visit and the thing is, The price of the event hasn't gone up near as much as everything else.

Park prices are rising faster than inflation in many cases and it or inflation of everything else is gonna bite em in the arse.

Chuck, who drives by PKI everyday and sees the parking lot not even 1/3 full unless it's a bring a friend free day and then its what used to be a NORMAL WEEKEND in attendance. Point being that attendance is artificaly boosted by passholders and non paying visitors *** Edited 8/8/2006 8:42:34 PM UTC by Charles Nungester***

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Tuesday, August 8, 2006 4:52 PM

Brian Noble said:I did it elswhere. It's pretty similar.

Ha! Love that post.

Good to know there's someone out there who's posts don't sound like my grandma complaining about the price of her phone bill ;) ("I can remember when it was just $1 to have a phone, my monthly bill for basic service is a whole $20 now!")

I'd like to see more than Disney Prices, but that's a good start. Maybe I'll try to dig some numbers up later tonight if I'm feeling froggy.

The thing that strikes me the hardest on the whole topic is the way everyone seems to think everyone else is in a similar situation. In additional to income, debt and hard numbers like that there are variables like willingness to spend, perception of ability to spend, perceived value of said spending and so on.

-Maybe two people make the same but one feels savings or investments or their 401k is very important and chooses to put money there first while person #2 doesn't find this as important and is willing to drop the money on leisure activities before putting it away.

-Maybe person #1 loves parks and feels the price could never be too high for a day at the park while person #2 can live with or without it and reaches a certain point where even if they can spend the money, it just isn't worth it to them.

-Maybe person #1 has access to several regiona parks that vary in pricing and rather than paying $60 a day, they're happier knowing they can spend 1/2 that for an experience that is just as good while person #2 only know the same old local park he always visits and figures that all parks cost the same general prices.

There's limitless variables that go into the equation and no two people will come up with the same answer in all situations. That's why this often seems like and endless and answerless debate.

But I digress, back to the statement, "The thing that strikes me the hardest on the whole topic is the way everyone seems to think everyone else is in a similar situation."

All the individual examples in the world mean squat. I don't care if you used to go to 1000 parks a day and now you can only afford the county fair. I don't care if you claim to see more people at the parks than ever before.

The parks will know when they've priced themselves too high and they'll adjust accordingly. Given the recent and numerous price increases in the industry and the fact that the only company in financial hurt is SF (and that happened by "giving away the gate," not pricing people out) - I'd say things are just fine. It's the individual's perception of things that has changed.

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Tuesday, August 8, 2006 5:38 PM
Everyone has two choices: agree with me or be wrong.

*** Edited 8/8/2006 9:38:42 PM UTC by ApolloAndy***

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