Media spending & relative constancy

That recent study conducted by Veronis Suhler Stevenson I mentioned earlier estimates that, on current trends, total spending on the media in the U.S. will reach $1 trillion by 2008--assuming a continued annual growth rate of 6.7% per annum. That's a lot of money and a lot of growth--twice the rate of inflation.

The figures for growth in media spending suggests (though I'm not so sure about this) that we're still some way off from reestablishing the principle of relative constancy in terms of media spending. For years--in fact, for most of the twentieth century, roughly from the birth of the film industry through to the late 1970s, economic and media scholars argued that relative constancy was operating in society. Quite simply, this means that, when adjusted for inflation, "individuals spend a constant portion of their disposable income (income left over after taxes and essential--food, clothing, shelter, and taxes) on the media" (Grossberg, Wartella & Whitney, MediaMaking, 1998). So if a typical consumer spends more on one type of media--say, by buying a television--he or she will spend less on another type of media--like the movies.

The term overessentializes the economic aspects of the public's media uses--focusing what major shifts are taking place in public consumption of media, without suggesting why--and it can't fully interpret these shifts. But it does give a basis for describing media use patterns over the long term.

And one thing that is indisputable is that people are spending more and more time and money on the media (in all its forms), and have been for some time. For decades, the proportion of income spent on entertainment and information media stayed stuck at about 3% of income; so any/all spending on new types of media had to come out of that 3%, i.e., out of the amount previously budgeted for old media. In other words, the media pie stayed the same size. From the perspective of media providers, the only overall growth in the media indistry came through natural increases in population as well as inflationary pressures in the economy.

After about 1979, though, the proportion of consumers' total incomes spent on media started to rise significantly--in fact, it has by some estimates almost doubled, to some 5% or 6% of total income. This has meant that new media have been added to older media without necessarily displacing them (e.g., the Internet has not displaced television, just as the television did not displace movie theaters). And the media pie has got much much bigger, and Wall Street, recognizing this, has rushed in to invest on the big media industries. This simple fact helps to explain much of the massive investments and corporate mergers and acquisitions that have taken place in the media since the 1980s.

Now some scholars have been arguing for a while that the principle of relative constancy simply has to reassert itself in the near future. In other words, people can't go on spending an ever larger proportion of their limited incomes on media products--especially if costs of other essentials, like health care and gasoline, keep going up much faster than inflation.

We'll see how this turns out.