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Investing in the New Leisure & Entertainment Sector

September 30, 2018

 

Technology is changing the nature of entertainment and leisure activities, creating new opportunities for investors. The leisure and entertainment sector represents a large chunk of the economy and has continued to grow. The Dow Jones Travel and Leisure Index has grown at twice the pace of the S&P 500 index in the past two decades. Total leisure spending is at more than $1 trillion globally if you keep in mind film, gaming, restaurants, fitness and social media. This space is set to grow even further for these reasons below:

 

  • Automation is allowing people to work less and spend more time to “play more”. Americans may feel busier than ever, but the time spent working has actually declined in aggregate. Automation, which makes work more efficient is the big reason why people have more spare time than they did in the 1970’s.

  • There is new technology leading to innovation in the leisure and entertainment space that fascinates consumers. Segments like virtual reality and e-sports have become increasingly popular as with gaming, streaming videos and social networking. These segments have further supported the fast-growing sector.

  • Multitasking has been increasing over the past years and has also expanded the number of hours per day spent on leisure activities and entertainment. People have evolved into a new trend of doing two kinds of leisure activities at once. For example – watching TV and posting on social media about their day-to-day life or exercising while steaming music. One study from Harvard shows how only 5% of active TV viewers watch television without performing any other activities. Existing statistical models on leisure have ignored multitasking which supports the claim that the leisure and entertainment space might be undervalued.

 

Multitasking, innovative changes and automation are three primary drivers for our interest in the sector. A downside of this growth in leisure activities is that competition for our leisure time and dollar is increasing. However, the fastest growing industries might not have much pricing power. Fully immersive experiences like virtual reality could have more pricing power than activities that require less attention, like posting on social media. Speculators argue that activities that can be multitasked may grow much faster. Some activities like social media are hybrids can be active or passive depending on person-to-person and the context. Investors should look into investing across active and passive leisure, also known as “multiline leisure companies”.

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