The Value Of TiVo
This post is why the Freakanomics blog is a must read. An excerpt:
As much as I agree with the general direction of the analysis - I'll propose some words of caution. This kind of thinking can get you to waste a lot of money if you're not careful.
I watch about six hours of television programming per week. The miracle of the "30-second skip" button means that I haven’t watched an advertisement in years. Consequently, six hours of programming only takes me four hours to watch, and TiVo saves me two hours per week.What a fantastic analysis. After reading this, how could you not buy a Tivo (or lease a DVR)?Let’s say my hourly wage is $100, and so I value these marginal couple of hours at around $200. I’m home around 50 weeks per year, and so Tivo gives me a total of $10,000 worth of time per year. I will get to enjoy this benefit for the rest of my life, and so we should take a net present value of this benefit stream. Using a discount rate of 5 percent, this yields a total TiVo-related bonus of $200,000 worth of leisure.
As much as I agree with the general direction of the analysis - I'll propose some words of caution. This kind of thinking can get you to waste a lot of money if you're not careful.
- If you always value your time as your actual hourly wage (or worse, 2x your hourly wage), many things will become not worth the time to do them
- You must take into consideration the non-monetary benefits involved (e.g., reading a book is usually better than just being told the story, even though you can save a lot of time being told the story). These benefits are usually tough to quantify, but essential to a fair analysis
- If you're choosing between two non-wage producing activities (e.g., watching a commercial v. reading a book), then the marginal benefit is probably not 1-2x your wage rate
If this guy truly valued his time, he would not be watching so much TV. I am guilty of wasting many hours in front of the television, but a TIVO would probably just allow me to watch a few more episodes of Seinfeld or Family Guy each week (major waste of time, mainly because I've seen them all already). Though the analysis is interesting, I believe it's main effect on me is forcing me to realize just how much of my life I waste...Will anything change? Probably not....at least not right now................This analysis reminds me of a similar (albeit off-topic) argument promoting the benefits of waiting in line for 4 hours in the freezing cold on "Black Friday" to save a couple hundred dollars on a TV. That $200 savings over 4 hours works out to $50 per hour -- which is pretty good for your average Joe. If you're not earning any money from 2am to 6am, then this wait appears to be worthwhile. However, last Friday in a Walmart a few miles from my house, a security guard was trampled to death by people eager to save that $200....I hope those people enjoy their new discounted TVs.
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I don't think 6 hours a week is very much TV, but everyone has their own standards.
Maybe I should've been more clear - I said you have to be careful with this analysis, not that it was invalid. I'd argue that a TiVo or DVR is a pretty worthwhile expense for most people with cable television. No matter how much TV you watch, it allows you to watch what you want, when you want. The ability to pause live TV allows you to never miss part of the game again. The ability to rewind allows you to go back and catch something you missed the first time. I sound like a commercial, but it's all true and they are all extremely valuable features.
Just like call waiting, caller ID, cell phones, and cable television - TiVo and DVRs will soon become ubiquitous in the average American household. It may take a little longer with the economy in the tank, but it'll happen. Have you ever heard of someone getting a TiVo or DVR and then subsequently canceling the service? I haven't - because I'm pretty sure it doesn't happen.
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i must have misread those hours....6 hours a week is not much at all.
Don't get me wrong, the DVR is a good idea, and the author makes an interesting argument by assigning a monetary value to that DVR time.
I personally think DVRs should be standard on cable boxes and we shouldnt get charged extra. I'm still not sure how I would use the extra time though...it might simply result in the absorbption of more television content per period of time....that's what worries me.
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