The Economics of Entertainment

Let’s do some math. Don’t worry, it will be entertaining; or at least it will be entertainment themed.

As it stands right now, cable TV and Netflix eat up greater than 75% of my wife and I’s monthly entertainment budget. With our imminent purchase of a house, that budget could be shrinking. This has sparked a conversation in our home about how to maximize the value of the money we set aside for this most paramount of line-items. What follows is my plan to reform our entertainment budget (I will keep the numbers rough so this conversation flows quickly).

Current Spending

Currently we pay $130 per month (including tax) for cable and Internet — our provider strategically bundles them so that consumers can’t easily decipher the actual value of either. We also pay $20 for Netflix, totaling $150 per month or $1,800 per year. When we move to the new house our cable provider will graciously lower our rate for a period of time. I believe that rate is somewhere between $90 and $100 (let’s say $95 to keep things simple). With Netflix, our total monthly expenditure will fall to about $115. That isn’t too bad, but I can break it down further.

Recently a friend of mine, who has the same Internet and cable provider, decided to cancel his cable TV subscription. It took some negotiating, but he ended up with a monthly price around $50 for Internet by itself. Assuming that anyone could negotiate this same rate, we can value the cable subscription portion of the bundle at $45. That’s not all that bad for a few hundred channels, right? In our case that is dead wrong!

In our home At least 90% of the purposeful TV viewing, meaning we sit down to watch a specific program and not channel surf, is done on network television stations. That means that we pay $45 per month, $540 a year, for background noise. Why? D-V-R!

Those three simple letters are a thorn in my side. We pay $540 a year just for the ability to skip commercials.

Step 1: Cancel Cable

My first proposal is that we cancel our subscription to cable TV. This will immediately free up $45 a month. Although it would probably be best to save this money, I would be happy if it were simply spent on things we actually received value from: date nights, clothes, food, etc. However, if it is determined that we can not live without the ability to record live TV, I suggest that we purchase Elgato’s eyeTV HDHomeRun wi-fi enabled dual HDTV tuner. This product, costing $180, will give us the ability to record the network TV stations which are broadcast in HD and are free. Its features are far superior to our cable provider’s DVR and it would give us the ability to watch recorded programs on our iMac, AppleTV or iPad. The $180 cost would be offset in just 4 months of not paying for cable; making the total savings for the first year $360.

Step 2: Cut Netflix Spending by Half

But wait, there’s more! My second proposal is to dramatically reduce Netflix spending. Our current Netflix plan includes 1 DVD by mail and unlimited streaming content. The combination of our busy lifestyle and a toddler make it nearly impossible to sit down and watch a movie from start to finish. The result is that our 1 DVD by mail sits on a countertop for weeks before we get around to watching it. By eliminating this portion of our Netflix plan we would reduce our bill by half. Yes, $10 doesn’t seem like a lot; but, would you go to theater and purchase a movie ticket just to go home without viewing the film? Me thinks not! We can find a better ways to waste it than having a DVD delivered to our house that we aren’t even in the mood to watch. Besides, we can use RedBox to rent the occasional new-release or rent a movie through the AppleTV and still come out ahead.

Recap

There you have it. My plan in its entirety: Eliminate cable TV and cut Netflix spending in half; for a monthly savings of $55 and a yearly savings of $540 ($360 with the purchase of the HDHomeRun system). Please note that these proposals do not take into consideration the expected increases in productivity – which are quite substantial.

Let’s put it to a vote! Yea or nay in the comments below.

Advertisements

11 thoughts on “The Economics of Entertainment

  1. Hmmm…I guess I would say netflix because I too have those disks sitting around for 2-3 weeks at a time. I already cut the netflix in half a month ago, but I am close to canceling to save some more money.

  2. Very good points…I have just recently went through the same mental turmoil…the question is “is it adding any value to your life” or “where’s the profit in it?”. With endless TV shows, netflix, ipad’s, youtube’s…it is over-stimulation…why do we have to have a screen in our face “all the time”…

    I cancelled cable TV, my productivity increased exponentially…not to forget, clarity of thought, as no “junk” is taking up my mindspace anymore…

    Try it for a month…you will be pleasantly surprised…

  3. Why is it so interesting to read what other people do for entertainment and how much they pay for it? I was RIVETED by this post. We don’t have Netflix, not because we don’t want it, but because it seems like there is never any time to watch anything besides what piles up on our DVR. We are typically 6 eps behind on hour-long shows and 2-3 eps behind on 30 min shows. My wife still has 4 Grey’s Anatomy eps from LAST season on our DVR and is dying to see last week’s season premier of this season. My friend calls us DVR hoarders. Why has this comment become my DVR rant? sorry. Great ppst though! Sorry I have no vote to contribute, you’re a smart guy, you will do the right thing!

    • Wow, it does sound like you have a bit of “DVR hoarding” going on!

      Before we had kids, it seemed like my wife and I had plenty of time to consume enough media to make having a full cable subscription and 2 Netflix DVDs a week a real value. Now though, I think we just have more important things to do after we put our son to bed. Would you say that having your son changed you TV/movie viewing habits, too?

  4. Many times over the past 20 months since Dane was born, I’ve almost taken that leap into no cable TV territory. But then we remember that we like having people over to watch Husky football, and the occasional M’s or Seahawks game, and decide we just can’t stomach not having it. One thing I did do last month was call Comcast and reduce our Internet plan down to the Economy package. Since we don’t typically watch live streaming video or play online games, we don’t even notice the difference, saves us about $18 a month.

    • We aren’t really tethered to sports so we won’t have that problem. Mandy does watch the M’s games from time to time, but I would rather not pay for cable and actually go to more games. As far as internet, we are pretty heavy users and I could never downgrade the speed. But nothing is sacred. Thanks for the comment.

  5. Just read this:

    http://techcrunch.com/2011/09/27/cable-providers-mull-switch-to-a-la-carte-subscriptions/

    I think it’s too little too late. Cable’s days are numbered.

    BTW – Philip, you may want to check out the Tivo DVR deal:

    http://www.solidsignal.com/

    Tivo has come down on their hardware prices and are currently offering the guide service for $10/month instead of $20. I have a Windows 7 based DVR and think the Tivo might be a bit more family friendly than anything PC based.

    • Thanks for posting that article. It would be nice if cable providers did provide those types of options, but I agree that it is too little to late.

      The Tivo could be a better option, although Elgato’s software comes with iOS apps that allow you to set recordings from your iPhone or iPad so that does help make it more family friendly.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s