For months, we’ve been inundated with headlines celebrating the ‘Taylor Swift economy’. Wtf is that? Is this just about Swift or a long-term change in how we spend money? Also: Is it a good thing?
Researched by: Nirmal Bhansali & Anannya Parekh
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Explained: Wtf is a Taylor Swift economy?
At its simplest, the term refers to the massive spike in spending that occurs when Taylor Swift stages a concert. This surge in spending in turn boosts the economy—both local and the US. This effect has become highly visible ever since Swift launched her Eras Tour in the summer.
The numbers: Swift personally made an estimated sweet $4.1 billion in earnings from her concert tour—which is more than the “yearly economic output of 42 countries, including Liberia, which has more than 5 million people.” But her impact on the US economy has been even more outsized. Some forecasts suggest that her US tour will add $5.7 billion to the American economy. And every city that hosts her concert has reported an astonishing mini-boom. Some examples:
In Los Angeles, where Swift performed six shows, the California Center for Jobs and the Economy predicted a $320 million boost to the county. Kansas City tourism organization Visit KC said the region got an estimated $48 million impact from the tour’s July stop. The Common Sense Institute, which studies the state of Colorado’s economy, predicted the boom from Swift’s Denver performances would add up to $140 million statewide.
Or look at this way: Her two-day stop in San Jose boosted the Silicon Valley economy by $33 million. Not many tech startups can say that.
Why is this happening? Because Swifties really, really like to spend. On average, they dropped a total of $93 million per show. That includes all sorts of things—tickets, hotels, food, outfits, merch etc. Just hotels pulled in an estimated $208 million in revenue thanks to 53 Swift concerts.
The numbers for a Swift concert are way higher than any other artist:
Typically, every $100 spent on live performances generates an estimated $300 in ancillary local spending on things like hotels, food and transportation. But for the Eras Tour, Swifties are taking this to the next level, dropping an estimated $1,300-$1,500 on things like outfits and costumes, merchandise, dining, and travel—boosting local economies by hundreds of millions of dollars in one weekend.
The average merch sales per show is an estimated $864,000. Data point to note: a recent survey showed that Swifties spent an average of $720 more than their intended budget. And yet 71% said it was worth it, and 91% said they'd go again. Yeah, it’s that crazy.
Point to note: This doesn’t include all the money brands splurge on desperate efforts to monetise Taylor mania—including her relationship with NFL player Travis Kelce. In fact, their romance is its own economy now.
The bigger picture: Say hello to ‘funflation’
A pandemic hangover: One key reason why the Eras Tour has become such a phenomenon is timing. It is the biggest live spectacle of the post-pandemic era. The isolation and boredom imposed by the virus has given birth to the “experience economy”—“where people crave going out and participating in social events.”
This is why prices for any kind of live event—be it sport or entertainment—are going through the roof. It is part of a bigger phenomenon that also has its own name: Funflation—inflation caused by people spending oodles of money on fun—be it travel, movies, concerts, sporting events, dining out, takeaway and alcohol:
Pandemic stimulus helped fuel a spending binge that favoured high-quality experiences over possessions. After being locked up for months, it seemed people were willing, and able, to splurge on a good time. And even as the government cash splash exhausted, the cost of living soared and real wages plunged, the trend towards spending on shows, movies and restaurants continued almost unabated.
Funflation explains not just Swift’s mad success—but also the blockbuster performance of ‘Barbenheimer’. The average US shopper spent a total of $12 billion on just Halloween.
Is this ‘diverted’ spending? Some experts argue that Taylor Swift’s impact is vastly exaggerated. The reason: This isn’t new spending that actually helps an economy. Rather, people are taking money that would otherwise go to other businesses—and splurging on her concerts:
The money spent to attend one of Taylor Swift’s shows likely would have been spent on other things, possibly other entertainment options, whenever people were attending the show. The concerts are simply the results of a reallocation of spending in a local economy, rather than in real increases in economic activity. So, while Swift’s concerts have generated a lot of revenue (“the seen”), it’s essential to consider that these earnings could have been allocated elsewhere in the local economy (“the unseen”).
Certainly, the CEO of BestBuy thinks her company would be doing better if it weren’t for Swift: “‘Funflation,’ Taylor Swift… those experiences are really where people are willing to pay… [B]igger ticket items in electronics are not right now where people are interested.” In other words, BestBuy’s sales fell last quarter because people spent all their money on experiences—so didn’t have money to, say, upgrade their TV.
Quote to note: As one economist explains it:
It doesn’t mean the economy is booming, it just means people are being more discerning with their spending. People see themselves getting a lot of satisfaction out of concerts and holidays, so they’re more willing to stump up and pay more for that. But in other areas where it’s more marginal, like getting a new car or a new suit, they think that’s too expensive right now, so they delay that spending.
Is it overspending? The big spends on “experiences” have made a big dent on personal finances. People are blowing money they really can’t spare:
Over half of Americans (57%) have admitted to making sacrifices in other areas to afford tickets to a live entertainment event. Such sacrifices include cutting back on dining out, taking on additional work, borrowing from savings, or selling personal belongings or clothes. Additionally, 20% of those surveyed said they had incurred credit card debt to fund their entertainment expenses, as reported by Qualtrics for Intuit Credit Karma.
The experience economy: Generational change or temporary madness?
That’s the biggest question for economists. Will people come to their senses once they get into increasing debt? There are already signs that the price of “experiences” is becoming increasingly unaffordable:
Nearly 60% of Americans say they have had to cut back on spending on live entertainment this year because of rising costs… Some 37% of respondents said they can’t keep up with the rising price of events they want to attend, while more than 20% of Americans say they are willing to take on debt to continue to be able to afford their favourite entertainment activities.
A fleeting madness? Although there is no sign of dimming enthusiasm, many experts like Bloomberg News say this Taylor Swift economy will inevitably go bust:
The Bloomberg team argues that the boost provided by the movies and tours is short-lived. They noted neither Beyoncé nor Swift are scheduled to hit the stage in the US in the last three months of the year, and described “Barbenheimer” as a “once-in-a-blue moon” event… “A large chunk of that strength comes from temporary factors,” they wrote. “These factors create a mirage of resilient consumption, when in fact it’s running out of steam.”
No one knows if this post-pandemic "pent-up demand for in-person, communal experiences” will last.
Or is it a Gen Z thing? Other experts say the Taylor Swift economy is a sign of generational change. A recent survey found that 60% of young Americans would prefer to spend money on “life experiences” now rather than save. Others suggest that the pandemic and climate change etc have changed how young people think about money:
Young people – Gen Z, millennials – are making a choice that says, 'We are going to enjoy life. We are upset with where the world's going.' We're burning this planet down. We've got corporate greed. We've got politicians that can't agree. So young folks are like, 'You know what? This is my escape.' And the numbers are really interesting, because people aren't buying TVs or blenders; retail stores are not selling furniture for apartments. The choice is being made for experiences over things.
A number of recent surveys show that this is true at least for a significant minority. According to them:
Gen Z consumers spend more on recreational diversions than other age groups, with 90% spending money each month on entertainment and 19% spending $300 or more each month. Gen Zers (35%) are purportedly the most willing to go into debt to afford entertainment, followed by Millennials (33%), Gen X (16%), and Boomers (6%).
What about India? All of the above holds true for India. More people than ever are running up debt not for houses or cars—but for fun: “People are taking short-term payday loans, and why? Just that they are also buying a shirt or a pizza using buy now pay later. This is the kind of consumerism we are seeing.”
Our experience economy is also driven by travel—and vacation debt is rising very fast:
The trend of borrowing for travel purposes gained momentum in the second quarter of 2023 compared to the first three months of the year, according to a survey conducted by Paisabazaar, an online loan platform. The data revealed that 16% of borrowers sought vacation loans between January and March 2023, while the number increased to nearly 24% in the subsequent quarter (April-June 2023).
Vacation is now the second most popular reason for taking a personal loan. Point to note: the trends in personal loans is making the RBI increasingly “uncomfortable”—due to fears of widespread defaults.
The bottomline: While we do love Taylor Swift, surely there is a better way to spend $1,000-plus?
Washington Post (splainer gift link) has the definitive piece on the Taylor Swift economy—for more, see TIME. For a solid critique, read Monday Morning Economist. Wall Street Journal (splainer gift link) , Dallas Express and Financial Times are best on the trends in funflation. CBC News and Australian Financial Review have good reports on why it's happening. Business Insider looks at whether this is a long term trend. Economic Times is best on trends in personal loans in India.