On June 14th, the United States Department of Agriculture (USDA) released its 2011 cost estimates for raising children in the U.S. (see “A Child Born in 2011 Will Cost $234,900 to Raise According to USDA Report“). According to this report, the average cost of raising a child in the U.S. rose 3.5% from 2010 and rose 22.5% from 1960 (in 2011 dollars), the first year these data were collected. (Note the USDA cautions that its methodology has changed over the years so comparisons between now and 1960 are not “precisely comparable). The share of expenditures has changed dramatically in certain categories like child care and education, food, and health care. The following chart is from the end of the publication (click image for a larger view), and it demonstrates the big differences in how children are raised now versus 50 years ago:
The amount families spend on children varies greatly based on household income, so these averages hide even more interesting stories. For example:
“A family earning less than $59,410 per year can expect to spend a total of $169,080 (in 2011 dollars) on a child from birth through high school. Similarly, middle-income parents with an income between $59,410 and $102,870 can expect to spend $234,900; and a family earning more than $102,870 can expect to spend $389,670.”
It is clear from the report that the costs increase according to income because of choices families make. Thus, it is not quite accurate to say child-rearing gets more expensive with income. Instead, families tend to choose to spend more on their children the more income at their disposal.
Read/download the full report here.
The price of attending the Illinois State Fair is skyrocketing again. This summer, it will cost $7 for adults to attend for a day, a 40% increase from last year’s $5 admission price. In 2009, prices increased from $3 to $5 in 2009 and broke a 19-year run at the $3 admission rate. It looks like Illinois is playing some bigtime catch-up. Children and senior citizens will pay an extra 50% at $3 per person.
For more details see “State Fair releases concert lineup; admission price increasing.”
Last week, Redbox, the company owned by Coinstar (CSTR) that rents movies through big red kiosks, raised the price of DVD rentals from $1.00 to $1.20, a 20% increase. The company needs to offset higher costs for DVDs and process debit card transactions. Redbox tested out higher prices for a year in select cities and concluded that it was OK to roll out the increases nationwide. Given this testing, the company should not suffer the same backlash and outcry that Netflix (NFLX) suffered when it dramatically increases its movie rental prices.
For more details see “Redbox rental prices to rise.”
The venerable cartoon series “The Simpsons” has a strong following that has kept the show alive for a record 23 seasons. However, NPR reports hat rising production costs threaten to deliver the last laugh on The Simpsons. 20th Century Fox Television wants the show’s actors to take a 45% pay cut on the $8M a year they currently earn. A $4.4M salary sure sounds fantastic to 99% of us, but in wages and income, relativity counts. These actors have certainly built lifestyles to match their salaries and a sudden and drastic cut could actually cause at least a few of them some hardships (hopefully just in the short-term).
If negotiation go poorly, the actors will be left with zero pay. Hopefully, they will still get a cut of the treasure trove that awaits in syndication. NPR states that “…one analyst noted that ending the show would make it worth even more in syndication — perhaps $1.5 million for each of the show’s 506 episodes, which would bring in something like $750 million.” This means the studio actually has a large incentive to end the series rather than continue to pay high production costs to keep the show going.
For more, see or listen to “Do Rising Costs Have ‘The Simpsons’ On The Ropes?“
In “Philips Warns On TV Business As Price Pressures Remain“, the Wall Street Journal reports that Philips (PHG) observed a 15% decline in television prices form the fourth quarter of last year to the first quarter of this year. PHG is under pressure to turn a profit in televisions as the company has lost money in this division for several years.
The troubles at PHG confirm the poor performance retailers like Best Buy (BBY) saw in televisions. From BBY’s last earnings report (March 24, 2011):
“The Domestic segment experienced a low double-digit decline in entertainment hardware and software, as well as TVs, as current consumer demand in new television technologies had not yet emerged as a significant revenue driver…”
Netflix (NFLX) is increasing the price it charges for its 1-DVD and 2-DVDs out at a time plans by $1. Its 3 DVDs-plan will increase by $3 to $19.99.
As if the Post Office did not have enough problems, Netflix (NFLX) is bragging about the $600M it will transfer from its postal bills to Hollywood. Netflix announced today that it will stream films from Paramount Pictures, Lions Gate and MGM as a part of its online subscription service:
“Ted Sarandos, the chief content officer for Netflix, said he is essentially taking the “huge pile of money” that Netflix pays in postage for DVDs by mail — about $600 million this year — “and starting to pay it to the studios and networks.”” (“Netflix to Stream Films From Paramount, Lions Gate, MGM“)
Expect more upward pressure on the price of stamps to recover the ever-bleeding revenue streams at the Post Office.