Friday, May 16, 2008

"Investing" entertainment experiences

Mass-market entertainment gets cheaper as it ages. Examples:
  • movies start showing at dollar theaters
  • shows on premium TV channels become available for rental through Netflix
  • DVDs, CDs, video games, and books become available used
And on longer time frames,
  • libraries add media to their collection
  • movies are broadcast on over-the-air television
  • media formats go obsolete (e.g. VHS tapes now, CDs and non-HD DVDs soon) and become extremely cheap
As I discussed in my post on old video games, this creates an opportunity to enjoy media for pennies on the dollar. Instead of paying for entertainment when it first comes out, set it aside until its price lowers to a "strike price" you're comfortable with. The cost becomes much smaller, so you can either
  1. consume more with the same amount of money, or
  2. use a lot less money for the same amount of consumption.
There are two big downsides:
  1. you don't get to experience the excitement of premieres at the same time as other people
  2. if you're excited about something you have to wait until it eventually shows up under your terms
At first downside #2 is discouraging because it effectively cuts off your flow of entertainment. I.e. if you decide to only watch movies at a dollar theater and you've already watched everything that's showing there, then you can't watch any movies. However once you wait through an entire release cycle you will enter a "steady state" where movies debut at the dollar theater at the same rate as a first-tier theater, just offset a few months later.

These tradeoffs parallel those of investing. Let's say you decide to invest $1,000. Then you are depriving yourself of the short-term gratification of $1,000 worth of consumption now, for the promise of much more than $1,000 worth of consumption later. If you choose to wait to see Iron Man until it's at the dollar theater or on Netflix, in a sense you are "investing" the experience of watching Iron Man for the promise that the experience becomes much cheaper in the future.

We apply this mentality to the media we consume. When something comes out we make a quick assesment as to where our "strike price" is. A movie is either worth seeing at a full-price theater, a discount theater, renting on Netflix, or not seeing at all. In addition to saving money, this moment of reflection also helps us sort out the movies that are actually worth our time, from the ones that we're only interested in due to marketing pressure.

1 comment:

Rose S. said...

Daniel has taken full advantage of my department's library at UT Austin. The Fine Arts Library here has a large audio selection where he often makes lists of cd's for me to check out for him. He takes them home, uploads them on our computer, edits them into his itunes, and burns a copy of the albums he likes, filing them into his cd collection (which is now over 900 albums).

i don't think he'd be up to do this say, three years ago, but now to save money to buy albums he really wants an original of, he's found a lot of benefit in checking out others from the library. i think people often forget that libraries are a good source for things other than books, such as cd's, dvd's, videos, vinyl records, etc. i'm happy you mention it here in your blog.

before i forget, one of daniel's other strategies to save money for his music fix, is only buying used cd's. he rarely buys cd's for full price.