Welcome to one of the most serious problems facing the economy, of which the music industry is completely dependent. Because no matter how fast upper class grows, rich people simply can’t buy enough stuff to power a robust economy. They can’t buy enough homes, clothing, cars, food, or vacations to prop an entire economy or industry. And they can’t buy enough of the things the music industry is selling: concerts, downloads, merchandise, premium subscriptions, instruments, vinyl.
Real spending has to come from the middle class masses. Which makes this latest report from the Federal Reserve an alarming one. It’s called the Survey of Consumer Finances, a report issued every three years and widely regarded as one of the most authoritarian on US-based family income. The latest stats, released this week, showed:
(a) The median American family’s net worth dropped 38.9 percent between 2007 and 2010, from $126,400 to $77,300. This pushes median net worth back to early 90s levels.
(b) Median household income also dropped 7.7 percent to $45,800 in the same period.
(c) 74.9 percent of all families reported some form of debt, and the amount owed remained unchanged over the three-year span.
(d) Fewer families are saving: the number putting money aside dropped to 52 percent, from 56.4 percent in 2007. More importantly, large percentages have shifted their savings to shorter-term, emergency funds (instead of things like retirement and longer-term investments).
Overall, the report found that the middle class has sustained a far greater blow from the Great Recession than poorer or wealthier groups. And a major reason for that is housing. In fact, roughly three-fourths of the net worth plunge came from housing declines, though a two-decade reversion shows that damage is coming from other areas as well.
So how resilient will this group be? The data leaves out the last two years, and on the ground, places like Coachella, EDC and Bonnaroo are stuffed with people. Elsewhere, things like iTunes downloads and Spotify subscriptions are growing (though in fairness, CDs are plunging). The question is whether the middle class will have the firepower to create a seriously robust music industry – one that depends on buying lots of stuff, over and over again.