According to Bank of America, the concept of “fanflation” is currently widespread. Despite the ongoing Hollywood strike, there are still positive aspects in the entertainment industry, such as the success of Taylor Swift, Beyoncé, and the box office hit “Babenheimer,” which have contributed to domestic growth in the third quarter. Morgan Stanley estimates that summer concerts and blockbuster movies will add $8.5 billion to the current U.S. growth. Bank of America analyst Jessica Reif Ehrlich believes that live entertainment is currently the most promising sector in the broader media and entertainment world. She highlights five catalysts that will lead to sustained profits in the long-term.
The first catalyst is industry growth, as spending shifts towards services and experiences. The second catalyst is the pricing power in the face of rising demand. The third catalyst is the positive trends in supply and demand driven by social media apps like TikTok, which promote global awareness and fan growth. The fourth catalyst is the relatively “non-disruptive” nature of live events, as virtual formats cannot compete with the experience of attending a live event. Lastly, Ehrlich believes that talented artists who have a large fan base will be able to extract more value from the ecosystem, primarily through increased ticket prices. She mentions several companies that can benefit from the growth of live events, including Live Nation, Endeavor-owned talent agencies, Madison Square Garden Entertainment, Warner Music Group, and Spotify.
However, Ehrlich also cautions that there are certain risks involved, such as the macro environment, consumer confidence in a potential downturn, and regulation. The lack of one-off events like Taylor Swift and Beyoncé’s tours could have a negative impact on the economy in the second half of the year. Despite these risks, Ehrlich believes that the live event economy remains strong and will continue to grow.
In conclusion, the live entertainment industry has been a powerful growth engine for the music industry, and consumer demand for live entertainment is booming again after being initially impacted by COVID-19. Bank of America’s Ehrlich believes that the future looks sustainable for the live entertainment sector in the next few years.