In fact, radio boasts the second-shortest interval between introduction and adoption by 75 percent of U.S. households, topped only by the black-and-white television, even though radio completed the last third of that journey during a major financial crisis. At the time, radios were not cheap. In 1929, the average set cost $133, when per capita GDP was only $850. Yet Americans continued to buy them even as the Depression deepened. They did so partly because a radio could substitute for so many other goods: phonograph records, concerts, lectures, newspapers, even movies. The percentage of Americans who attended a weekly movie reached an all-time high near 70 percent in 1930, and then dropped like a stone. By 1934 it had fallen to 40 percent, where it hovered for the rest of the decade. Americans, it seems, regard paying someone else to entertain them as a frivolous expense that can be cut—but buying equipment that does the same thing as an imperative.
Historical parallels are never perfect. But this one is pretty strong. Netflix, the online movie-rental site, had a great year in 2008, increasing its subscriber base by 26 percent; it raised its profits by 70 percent in the beginning of 2009. Redbox, which provides movie rentals from vending machines in supermarkets and other retailers, is also booming, and recently announced plans to expand from about 13,000 locations to 20,000 by the end of the year. Even in a recession, $1 a movie, or $8.99 a month, seems like an affordable luxury.
Preliminary data suggest that Americans are also making substantial capital investments in home entertainment. Although DVD sales are down, sales of pricey Blu-Ray discs during the first three months of 2009 were double the level of a year earlier. Kindles and iPod nanos have also seen strong sales. Even flat-panel televisions, the iconic unnecessary consumer good of the past decade, have proved surprisingly resilient. Corning, which makes the glass for many of the televisions, reported February sales up at least 30 percent over last year in most countries, and expects a further 9 percent increase overall in 2009. Lee Scott, the former CEO of Wal-Mart, reported strong flat-panel sales in the beginning of January, after a disappointing Christmas season.
Of course, sales were concentrated among the value models with thin profit margins. Meanwhile this spring, Pioneer announced that it was exiting the plasma-TV market and abandoning its Kuro line, widely regarded as both the best and the priciest consumer flat-panels available. The company was unable to persuade budget-constrained consumers to pay for quality.
This looks a lot like what happened to radios, which increased their market share in the early ’30s largely by getting a lot cheaper, quickly. In 1930, manufacturers cleared out inventory by slashing prices on existing models by more than 30 percent, while making sets with fewer components and no pricey wood cabinets. By 1933, $10 “peewee” models brought the average spending on a new radio down to just $35.