WHAT YOU CAN DO DURING AN ECONOMIC DOWNTURN

This is a topic that’s been rolling around in my head for some time now; well, let’s just say it was right about the time home values, yes that value that had been rising for who-knows-how-many straight quarters, began a slow decent in a southerly direction. At first I wasn’t overly fazed by the news – after all, I live in the Bay Area, home to the most over-inflated home values in the World. In my mind, it appeared to be more of a “correction” after so many years of unsustainable growth. However, as you know, many of the other important indices were also beginning to change negatively. The stock market was heading down while gas prices, taxes, the costs for necessary goods and services and interest rates were all on the rise. I do have an MBA, but my business training wasn’t required to deduce that this was not healthy for our economic vitality and personal well-being. I know there will always be swings in our economy, and historically what goes down does come up, but something about this one just didn’t feel right. It was enough of a concern that it got me thinking about the long-term ramifications of this economic slowdown and how we, as non-governmental entities, can work to turn it around; and how we, as mere mortals, can work together to reverse this downward spiral? And more importantly, how in the heck does this relate to art licensing?

When I dug deeper in my research, it occurred to me that the economy isn’t really in the awful shape our media, financial gurus and governmental figureheads actually project. I realize this is a bold statement – especially in light of our personal, daily struggles, but it has merit … bear with me. I don’t want to waste time and energy spewing facts and filling your heads with numbers that only confuse, for I want these articles to be general topics of discussion; so-called musings (or ramblings if you will) from the mind of a fairly regular guy (or gal, depending on which one of us at Simply Licensed is doing the drafting). However, what my research did uncover (and you will see as you continue to read how this applies to all of us) was that, in reality, the U.S. economy has grown in comparison to last year, albeit at a slower pace than in the past. There it is, the cold hard facts. We are still growing, just not as rapidly as we have in the past. This fact may pale in comparison to the all-time high numbers of home foreclosures; rising inflation; decreasing home sales; etc, but I believe it impacts all areas and it is the easiest to curtail.

The problem is that we have all grown accustomed to a certain level of continued, systematic and sustainable growth (and why not, we have benefited nicely over the last 10 years). Even if that growth was artificially over-inflated, wholly unsustainable and fated to subside, it still became the “way it should be.” After all, such economic prosperity granted us seemingly unlimited spending power, it was padding our bank accounts, over-inflating our homes’ equity and allowing us to buy the kinds of houses, cars, clothing and jewelry that we shouldn’t have been able to buy, because we were all living on overextended credit. Interestingly, it was because of our wild spending that this growth persisted. Like kids in a candy store, we believed in our hearts (though probably not in our heads, but our hearts won) that it would never end – that there were no ramifications to our actions

And once the extravagant growth subsided, naturally, so too did our spending. But when faced with the rising costs in items such as the price of gas, adjustable mortgage rates and cost of goods sold, led to a much bigger drop then what should have been. Suddenly it not only looked like we didn’t have any more credit (unless you count debt – for we had lots of that), but also every day it seemed another major employer released another 10,000 employees. Suddenly, not only was our money not worth as much but now our jobs, our very livelihood, appeared to be in danger. The continued drop in the markets led to more negativity which led to even bleaker outlooks, which led to more negativity and even greater decreases in spending and tighter grips on our wallets and thus, our growth. Yet even with all of this, after all that we have been through; we still see growth … just not as rapidly as in the past.

The other day the Federal Reserve Chairman found that failing indices in housing, slowing business and consumer spending, and a softening job market were evidence that economic activity is shaky. So what happened, as an indirect result of this article, the Dow Jones dropped 800 points in one day. However, notably, he also said that inflation was holding steady or had eased, import prices were moderating and commodity prices had fallen. That sounded to me like both negative and a bit of positive news. This, coupled with the discussion points above, confirms my belief that our economy is wholly reactionary. I realize that I am not going to win a Pulitzer for this little nugget of a revelation, as it’s something we all learned in High School Economics, but it is pertinent to this story and important to repeat.

In licensing, the point of discussion is obviously the sale of goods and, for our Licensor members, the licensing of designs in the creation of those goods. In the United States alone, over the last seven years, approximately $180 billion dollars of licensed product is sold annually at the retail level. This, on average, equates to $90 billion dollars of licensed product sold at the wholesale level and, with a typical royalty rate of 6%; that means that each year approximately $5 billion is paid to property owners in royalties. With numbers this high, I would definitely say that licensed artists both have a fairly significant effect on our economy and are affected by it as well.

So what can you, as someone whose job was not earned through the expenditure of egregious amounts of money to secure the most votes from the public, do about it?

Well, as I see it, it’s obvious. Now is the time for you, as licensed property owners, to aggressively sell your properties, to design until you can’t create any more, to show your work to more manufacturers then ever before, and to push manufacturers to create new product. For manufacturers, now is when you should be vigorously adding new product and designs to your lines and pushing your retailer customers to increase inventory. So why, you must ask, would I advocate spending money during such tough times? Well, as we discussed, the power of positive actions on our economy is stronger than any other single factor, and is something that each of us has the ability to control. Not until everyone (yes, that means you too – I can see your grimace through the monitor) loosens their proverbial purse strings, realizes the power they hold, and accepts that greater growth will come, will our economy show stronger growth which will result in even more expansion because of the individual changes in attitudes for the better. Moreover, some positive news from the media will also fuel even more positive news which will only continue to feed the growth machine.

Even more importantly, this sort of positivism is healthy for our personal psyches. Many of you are artists, and designing and creating new work is the very essence of your being; it is a drug; it is the rush of adrenaline a race car driver feels; without exaggeration (okay, maybe just a little), it is nearly as important as the very air you breathe. Taking it away is just not an option. More importantly, considering the power it bequeaths, soaking in as much as possible serves only to increase a positive mentality. I know you, and I know that when you are creating, the face in the mirror has a huge smile.

With respect to manufacturers, I truly believe that each and every one of you realizes that this “recession” has a finite life span; that it will get better – after all, it always does. We also know that when there is a Presidential change, the economy grows. Giving the Country some leeway in terms of how long it takes to accept my devious, master plan, I predict a turnaround next spring. Thus, considering a normal business cycle, seeking and licensing new designs for product development must happen now. I realize it requires a financial outlay, and I don’t mean to minimize that; things are tough right now and I know your warehouses are filled with inventory, but if you follow this plan, you will have more than enough great new product ready to capitalize right about the time retailers realize the need to increase their purchases. Moreover, continuing aggressive production ensures jobs which leads to more potential customers for your retailers.

And of course I have not forgotten about the retailers. With all of the above in mind, and considering the ease with which you are able to influence the buying trends of us consumers (like Geppetto to Pinocchio), now is when you should be flooding your stores with all the hot new trends. So spend money now, you will see sales, we are just that easy. For, by purchasing product, you ensure the continued salaries of many people, which means money in their pockets to spend on your goods.

I realize this all sounds much easier than it really is, and many of you will scoff at the idea of spending your hard earned money in a time like this. But, in my opinion, all of the facts laid out above make perfect sense. Thus, this weekend, I think I’ll just go out and spend some of that hard earned … well, earned money that is.