The Resilient Consumer?

 Those of you who are business news junkies such as I have seen and heard commentary that the American consumer is holding up very well these days.

Credit card balances exist but, on balance, are not out of control. Retail, always a tough game, is better than many expected going into 2025.

Dig a bit deeper and ignore the top line averages and a different picture comes in to focus. According to several sources in the consumer credit industry, it appears that approximately 60% of US households are living “paycheck to paycheck”. This means they do not have anywhere near the savings cushion of six months living expenses that most financial planners recommend for a family.

With that in mind, I went back to some Federal Reserve data. Each year, they publish a mini report that measures what percentage of American households could handle a cash emergency to cover a car or appliance need, an emergency health issue or other expense to the tune of $1,000.

Things have not improved over the last few years. Some 41% of households could not cover a $1,000 surprise expense with cash or check. Some 30% would put in on their credit card (already having a balance), 11% would go to family or friend, some would ask for a delayed payment or payment plan and a small group said that they would not pay. Interestingly, when I probed about the 11% going to friends or family (outside the Federal Reserve report), it appears some cannot go to friends or family anymore as they are tapped out as well or they have never been paid back from previous bailouts. Also, on a regional basis, 57% of people in the South could not come up with $1,000 readily and 54.6% of people in the Northeast were in the same boat.

Many Americans have no breathing room anymore. Most people need a car to get to work. Fortunately, cars are much more reliable than they used to be. Old timers (meaning me) remember the horrible cars that came out of Detroit in the early ‘70’s. After four years, they were largely ready for the junkyard. As I type, the average age of on road vehicles in the U.S. is at an all time high of 12.6 years. The average new car sold in the U.S. weighs in at $48,000. This is way out of reach for the bottom 40% of Americans.

There are some Nissan and Volkswagen models in the $20-24 range that are not loaded but can provide transportation but are not good for most families. About 9% of U.S. auto loan holders pay $1000+ a month in payments according to Lending Tree data. Credit analyst Experian pegs the average payment at $700 per month. Many of those are on 7 to the new 8-year loans! 

If someone is struggling, how about buying a clunker? Well, used car prices have been on the rise and remember, 40% cannot easily deal with a $1,000 repair bill and they are still borrowing to purchase the used car.

Another straw in the wind that I have observed is the growth of BNPL (Buy Now, Pay Later). They get the item they may desperately need but soon payments come due. Much the same has happened with student loans that are no longer deferred.

Most of you reading this may say that such sad statistics do not apply to me. Fair enough. Yet, if you are a marketer, you need to keep a very close eye on it. 

When the next downturn occurs (I have no idea when), the bottom half of America, already stretched, is going to be in a world of hurt. 

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

Disney, ESPN, and The NFL

 Earlier this month, many of us were a bit surprised to hear that ESPN announced a non-binding agreement to acquire the NFL Network including items such as the Red Zone Channel and NFL Fantasy. The NFL gets a 10% stake in ESPN (ESPN is currently owned 80% by ABC, a subsidiary of Disney and 20% by Hearst).

This announcement comes shortly before the launch of Disney’s Direct to Consumer service which has been long awaited.

Some of you may be surprised to learn that the NFL network has been around for 22 years. Recently, it has been considered by many media analysts as a failing property that never really lived up to its original potential. ESPN, once a powerhouse in cable and in advertising revenue, has been slipping the last few years as well. Young people embraced smaller sports outlets with edgier commentary, and the rights fees became so high for some sports properties that they laid off many long-term employees in a cost cutting measure. Also, ESPN is a legacy media property in a world that is largely digital these days. 

Some see positives in that NFL Fantasy Football will merge with ESPN Fantasy Football. ESPN platforms will license an additional three NFL games that will air on the NFL network. The NFL will hold on to NFL Films and other platforms as well as the official sites for the 32 league teams. 

Okay, a lot of issues come up with this deal. Many need to be clarified but there are some questions  and observations that have come up to me and some friends:

1) Is ESPN now locked into Monday Night Football forever? Will they stay in the Super Bowl Rotation (ABC/ESPN)?

2) A few years ago, some clever Wall Street analysts thought that Apple or Amazon or even Microsoft would be smart to buy all of Disney, not just ESPN. One colorful analyst said that Apple buying Disney was a no brainer. Will Disney ever go on the block?

3) In recent years, Apple and Amazon have invaded streaming video with some excellent programming. Netflix, a strong financial performer and to date the winner in the streaming race, also got their feet wet with a slight introduction to football. The opinion of some, including me, was that if they wanted to get into sports, particularly football, they could bid up the cost of rights to the NFL and could snatch some games from the legacy media players. 

4) Also, a contender might have been Google with their popular You Tube platform. Again, they had the resources to pay up for a football package that few companies other than those referred to in item #3 could match.

5) The NFL would have to thread the needle on deals so there would not be complaints if ESPN received sweet deals relative to others who wanted the rights to the games.

6) Finally, when groups merge, there are likely to be layoffs in certain areas. For example, with the two fantasy football products reduced to one, staff reductions seem a certainty. Also, commentators and announcers will be reduced. Both ESPN and the NFL need to proceed carefully as many on air people have a significant following.

For decades, people have always referred to the Big Four in sports broadcasting—the NFL, Major League Baseball, the NBA and the NHL. In recent years, there has been no contest. The NFL is the dominant force among them. 

How this will all shake out is not clear at this point. 

It will be interesting for sure.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.