Funflation: A Taylor-made show?

The willingness to splurge on live entertainment is reshaping consumer behaviour

The term “funflation”, which has become much more than just a catchphrase, describes a recent phenomenon wherein people are willing to pay staggeringly increasing costs for live entertainment, such as four-figure tickets for a Taylor Swift show or higher prices for Disney theme parks, despite economic uncertainty and dwindling household budgets.

Typically, consumers tend to spend less overall and primarily on necessities during periods of high inflation. According to data from the Bank of America, however, consumers in North America have actually spent more through summer 2023 compared to their income on “fun” experiences rather than goods. The trend also held true in other locations.

The New York Times and the Bank of America are among those that have coined the term “funflation,” which is essentially a portmanteau of the words “fun” and “inflation.” According to a Bank of America report dated September 13 titled “Funflation in Full Force”, funflation was brought on by pent-up demand and increased savings following the Covid-19 pandemic, with a major contribution from celebrities like Taylor Swift and Beyoncé, as well as the movie anomaly known as “Barbenheimer” (Barbie+Oppenheimer). Crucially, it might not be a passing fad. It’s projected that Swift’s career-spanning Eras Tour will bring in over $5 billion in consumer spending, including travel, products, food, and other expenses.

For every $100 spent on live performances, an estimated $300 in ancillary local spending is usually created. In contrast, Swifties — fans of Taylor Swift —are shelling out $1,300-$1,500 for the Eras Tour. Over the same period last year, hotel rates in the cities where the Eras Tour is being held increased by an average of 7.2 per cent. Over 300 employment are supported by the approximately $36 million in direct and indirect spending that each Eras show brings to the local economy. Therefore, one might wonder whether “funflation” is primarily a Taylor-made phenomenon. However, other significant players exist. For instance, Beyoncé’s Renaissance world tour is predicted to bring in $4.5 billion. Additionally, “funflation” was also fuelled by tours by Lizzo, the Red Hot Chili Peppers, Billy Joel and Stevie Nicks, Harry Styles, and many other artists.

Fun now costs more than ever, perhaps. The cost of everything has increased, including travel, movie tickets, concert tickets, sports tickets, eating out, takeout, and alcohol. For instance, prices for sports tickets in the US increased by an astounding 25.1 per cent between October 2022 and October 2023, based on data from the Bureau of Labour Statistics. Of course, in addition to regular major-league seasons and NFL games, fan spending has increased due to the announcement of Lionel Messi’s summer transfer to Inter Miami and the Formula One race in Las Vegas. The US Bureau of Economic Analysis projects that Americans will spend around $95 billion on tickets to sporting events, movies, concerts, and other such events in 2023, a 23 per cent increase over the previous year.

Interestingly, while grocery prices are finally flattening, entertainment expenses are still rising. There’re a lot of reasons why “funflation” might occur, such as concerts being seen as a long-term investment in one’s soul, a priceless sacred experience, a natural reaction to existential dread for young people, and so on. Overall, “funflation” provides a framework for events that are beyond a CEO’s control. “And they’re prioritising fun. Funflation... those experiences are really where people are willing to pay,” Best Buy CEO Corie Barry said at Fortune’s Most Powerful Women summit. “Bigger ticket items in electronics are not right now where people are interested.”

In addition, live entertainment was dubbed the “biggest star” in the media and entertainment industry by Bank of America analysts, who also listed five “sustainable and longer-term key drivers that will fuel solid growth for a number of years.” Funflation may be a double-edged sword, though. In a way, it’s similar to a funfair that gives the economy new opportunities. However, its immediate repercussions, akin to the collapse of the dot-com bubble or a recession brought on by Covid, remains uncertain.

One could argue that in this digital age funflation is a reflection of our shifting priorities and values. Some analysts, however, disagree with the Bank of America analysts and state that the entertainment boost was short-lived and a “once-in-a-blue moon” phenomenon. They argue that it’s mostly driven by exceptional performers like Taylor Swift and Beyoncé.

Some experts even suggest that it could be seasonal, with a potential summer explosion. If other smaller-scale events can produce enough heat, it might not be essential to replicate the economic impact of Swifties and Bey Hive members for funflation to continue or recur. Taylor Swift or Beyoncé might be among the best catalysts and genuine beneficiaries of this unavoidable economic fad known as funflation, which is mostly being choreographed by an exceptional time at a unique turning point in human history.

The writer is professor of statistics, Indian Statistical Institute, Kolkata