Friday, August 5, 2011

The Price Of Fame

Two tales of prices and consumers this evening, first for the top 10% of America here in the New Gilded Age, life is good...and the luxury item market has not only rebounded from the 2008 crash, it's growing faster than ever.

Tiffany’s first-quarter sales were up 20 percent to $761 million. Last week LVMH, which owns expensive brands like Louis Vuitton and Givenchy, reported sales growth in the first half of 2011 of 13 percent to 10.3 billion euros, or $14.9 billion. Also last week, PPR, home to Gucci, Yves Saint Laurent and other brands, said its luxury segment’s sales gained 23 percent in the first half. Profits are also up by double digits for many of these companies.

BMW this week said it more than doubled its quarterly profit from a year ago as sales rose 16.5 percent; Porsche said its first-half profit rose 59 percent; and Mercedes-Benz said July sales of its high-end S-Class sedans — some of which cost more than $200,000 — jumped nearly 14 percent in the United States. 

Meanwhile for the rest of us schlubs, it's sobering to know the economy has gotten so bad even cable giants like Time Warner are admitting the monthly price of cable and broadband internet service is now out of reach for many Americans.

Time Warner Cable Chief Executive Glenn Britt, however, was one of the executives focusing on the hazards of a bad economy.

"There clearly is a growing underclass of people who clearly can't afford it," he said. "It would serve us well to worry about that group."

Even with the economy on shaky footing, Viacom CEO Phillipe Dauman and Time Warner CEO Jeff Bewkes remained particularly bullish about cable's prospects.

Dauman said it was "remarkable" that cable was one of the last things that customers cut off during the recession and was a testament to the value that cable offered.

Bernstein Research analyst Craig Moffett, one of the analysts who has written extensively about the poverty issue, said the cable business was a "rigged game" that allowed programing fee hikes to be passed on by operators to consumers with impunity.

"That has been a wonderfully attractive model for a generation, but the danger, of course, is that eventually the video product will be priced into irrelevance for lower income consumers," said Moffett. "I don't know when it will happen, but I suspect we're already perilously close."


That's because if you're like me, you've trimmed your cable bill already and it's still going up, and home broadband internet is more or less required for my line of work.   If luxury good sellers are making money hand over fist and can raise prices while the vast majority of Americans are cutting back, if even cable companies are asking themselves if their prices are too high, there's a fundamental problem with the way the "free market" is working here in the US.

But hey, this is the economy the big corps bought Congress and paid for.

No comments:

Post a Comment