[Paleopsych] NYT: How to Tame an Inflated Entertainment Budget

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How to Tame an Inflated Entertainment Budget
http://www.nytimes.com/2005/11/19/business/19money.html

    Your Money
    By DAMON DARLIN

    You probably spend more on entertainment than you do on groceries,
    clothing or gasoline.

    If you don't believe it, take a few minutes to total your monthly
    costs, starting with the services that have you locked in: basic cable
    television, and any premium channels, like HBO or Showtime; Netflix to
    rent videos; TiVo for digital recording; your high-speed Internet
    connection; and perhaps, satellite radio and streaming music like
    Yahoo Music. You are already up to about $200 a month, or $2,400 a
    year.

    Don't forget your iTunes music and video downloads, plus magazines,
    movie rentals, movie tickets, live shows and sporting events.

    Add in your cellphone and any of its video, data and premium content.

    The average American spends more on entertainment than on gasoline,
    household furnishings and clothing and nearly the same amount as spent
    on dining out, according to the Bureau of Labor Statistics.

    Among the affluent, the 20 percent of households with more than
    $77,000 a year in pretax income, more money is spent on entertainment
    - $4,516 a year - than on health care, utilities, clothing or food
    eaten at home.

    The average income of households in that quintile is a little more
    than $127,000. Because they account for a disproportionate share of
    spending in the economy, they are the group that trend watchers and
    marketers focus on. (From the unexplained fact department: People in
    the western part of the country spend about 20 percent more on
    entertainment than the national average, the government statisticians
    also show.)

    Over the last 10 years, outlays for entertainment outpaced overall
    expenditures. Spending on health care and education, which almost
    doubled in that period, grew faster.

    Entertainment budgets will only grow larger. With a proliferation of
    electronics like giant flat-screen TV's, video iPods and devices to
    send music, photos and video from room to room in your house, not to
    mention a proliferation of services to deliver entertainment on
    cellphones and laptops, you will be opening your wallet more often.

    How do you get a handle on it?

    Take up shadow puppets, perhaps, and enjoy good conversations in front
    of the fireplace?

    Not likely; for all the talk of the Information Age, we are really in
    the Entertainment Age, where our lives are centered on the pursuit of
    happiness. Nevertheless, innovation may actually offer ways to trim
    costs, if technology does not first spur us to consume ever more
    entertainment.

    Consider Netflix. Before Reed Hastings came up with the idea of
    mailing DVD's in a flimsy red envelope, your only option was renting
    movies at the neighborhood video store for $3.50 a pop (before sales
    tax).

    Netflix charges a flat fee of $17.99 plus tax a month for all the
    videos you can watch. If you watch six DVD's a month, you are doing
    better than the video store. Watch enough of them and you can drive
    the cost below 75 cents a movie and save $120 a month over going to a
    video store. The trick is, of course, to watch the movies right after
    receiving them and return them as quickly as possible.

    A middle school science teacher in Seattle, Justin Baeder, wondered
    whether he saved very much getting his DVD's through the mail. So he
    created an Excel spreadsheet that calculates exactly how much he does
    save. It turned out to be just a little, about $6 a month, but he
    loves Netflix and keeps using it.

    He's posted the calculator on his Web blog, the Republic of
    Geektronica at www.geektronica.com. All you need to do is download it
    and paste your Netflix rental history, which Netflix provides on its
    site, into the spreadsheet.

    Netflix's success - it now has 3.6 million subscribers - has attracted
    other entrepreneurs to its business model. For $15 a month, Gamefly
    sends two video game discs for any of the game machines like the
    Microsoft Xbox and the new Xbox 360, DS from Nintendo or PSP and PS2
    from Sony. As with Netflix, as soon as you send one back, you are sent
    another one.

    A subscription looks pretty smart when you consider a new game costs
    as much as $50 and your children (O.K., you) get bored with it after
    eight hours of play.

    Another option is to buy used games from stores like EB Games or
    GameSpot. (New releases show up quickly and go for about half price.)

    The game industry is trying to push prices higher for the hottest
    games, to as much as $60, but even at that price, on a
    dollar-to-minutes-of-enjoyment basis, video games may be one of the
    best values, about 12.5 cents a minute for the easily bored, or
    fractions of a penny for those who can play "Half Life" their whole
    life.

    Among the worst?

    Live opera works out to about 37 cents a minute, for a middling seat
    in the New York Metropolitan Opera house to hear "Aida," compared with
    7 cents a minute for "Harry Potter and the Goblet of Fire" at a Loews
    Cineplex.

    But a Gwen Stefani concert, in again, middling seats, is about $1.25 a
    minute and that's with a serving of Black Eyed Peas thrown in.

    If you accept statistics that the average American's TV is on eight
    hours a day, a $100-a-month cable bill is really only a bit more than
    half a cent for each minute of entertainment.

    Yahoo Music adopted the subscription model as well. Instead of paying
    99 cents to download a song on iTunes, Yahoo charges $5 a month, if
    you pay for a year's subscription upfront, so you can download as many
    songs as you want onto your computer or MP3 player.

    It's cheaper than iTunes, though the selection of music isn't as
    extensive. Napster and RealNetworks have a similar service.

    There is a rub. As long as you keep paying the subscription, Yahoo
    lets you keep the music; when you stop, the music stops. In fact, it
    will disappear right off your computer.

    That is the genius of subscriptions. But in Yahoo we also see just how
    costly the reliance becomes. Just a few months after starting the
    service, Yahoo doubled the price. If you don't pay it, you lose the
    music. That may be one reason it has been slow to catch on despite
    being cheaper than iTunes.

    Here's a tip: If you want to put payment of your subscriptions on
    automatic, use a credit card rather than have payments deducted
    straight from a bank account. It's easier to manage credit card
    payments and it may be easier to monitor for price increases.

    But we've only been nibbling around edges so far. It's the D.S.L.,
    cable and phone bills that are bleeding you. The Federal
    Communications Commission recently studied cable prices and found that
    in those areas with competition, fees rose 3.6 percent in 2003
    compared with a rate of 5.6 percent in those regions without
    competition. In the 1990's, they were sometimes rising as much as
    three times the rate of inflation.

    The cable industry says that rate increases have moderated so that
    they now are just a bit more than the overall rate of inflation and
    wage growth.

    A new pricing system may offer some temporary relief. Since cable
    companies offer Internet service and phone service, Internet service
    providers offer phone service, and phone companies offer cable TV and
    Internet service as well as cable TV services over the Internet, they
    are trying to lock up consumers in this new topsy-turvy world with
    bundled services.

    It is called triple play or quadruple play (four-play presumably being
    too racy), and it offers some advantages to consumers. Sprint Nextel
    recently announced a joint venture with five of the largest cable TV
    companies to offer a co-branded wireless device next year that will
    stream video over a wireless network.

    SBC Communications, soon to be renamed AT&T, says that 66 percent of
    its customers already have some form of bundled service, usually phone
    and Internet service. It is offering a "super bundle promotion" of
    D.S.L. Internet service, satellite TV and long-distance phone service
    for $100. One can also throw Cingular wireless phone service into the
    bundle. It claims that a consumer can save $89 to $179 a month
    depending on the level of phone service they get.

    Companies are finding that because consumers perceive a value, they
    end up upgrading to higher tiers of service.

    "There is a barrier to exit," admitted Frank Mona, executive director
    of consumer marketing for SBC, "but it is not huge. In this
    competitive environment, we can't afford not to do that."

    Of course not. As long as we get more entertainment, we'll pretend not
    to notice.

    E-mail: yourmoney at nytimes.com