Recession fears return to Hollywood amid economic uncertainty

Recession worries are creeping back into Hollywood as economic uncertainty grows. Since mid-2022, the entertainment industry has largely avoided these fears, but now they are resurfacing. Factors like a weak U.S. stock market, inflation, and tariffs are contributing to this anxiety. The upcoming earnings reports from media companies will be closely watched. Investors may want to hear reassurances from CEOs about weathering a potential recession. However, just the fear of a recession can cause anxiety and impact advertising budgets. Recent data from McKinsey & Company shows that many consumers plan to keep their spending on home entertainment steady over the next few months. This category was prioritized over travel, clothing, and alcohol. Yet, while most consumers won’t cut back on streaming and gaming, only a small number intend to spend more. Different age groups show varying spending habits. Gen Z is more willing to splurge on entertainment than older generations. Even if the entertainment sector has held up in past recessions, this time could be different, especially with changes in the streaming industry. Streaming services are facing challenges as their business models shift, and there are concerns about rising prices. The pay TV market is also struggling due to more people canceling their subscriptions. A recent survey indicated that consumers are spending more on streaming and pay TV than before, raising questions about their willingness to pay as prices increase. Overall, the entertainment industry could face significant challenges in a potential economic downturn, especially since it is still recovering from the impacts of COVID-19. The combination of these issues means that a recession could be particularly tough for Hollywood.