Personal Finance

Entertainment Return on Investment

Merry Christmas to everyone who celebrates that sort of thing! Mike did an excellent Christmas post, so today’s post will only be slightly related to the season.

A funny perspective on entertainment that I’ve discussed with a few friends is the idea of “entertainment time per dollar spent”. The idea behind this being, you’re going to do/buy things for fun in your life (hopefully), and which do you get the biggest bang for your buck from? If you’ll forgive a little math, consider:

Entertainment ROI = Enjoyment * time / cost

Enjoyment is hard to quantify, so I’ll ignore it for this post, but I think it would be fair to factor in the idea that you enjoy something twice as much as something else.

Perhaps a clarifying example is in order. Say I go see a 2 hour movie and I pay $12. My “EROI” is 0.17 (2 hours/$12). You watch an hour of TV each day, and cable costs you $50 / month, your EROI is 0.6 (30 hours / $50). So if someone was trying to save money, and enjoyed both watching TV and seeing movies, they’d probably be better off keeping the cable and stop going to movies for a while (even though cable costs far more then a movie ticket).

I talked about this idea with a friend who is addicted to “World of Warcraft”. He defends it saying it’s his primary entertainment in life, and it offers an incredibly good deal ($13 / month). A “moderate” player probably plays 10 hours / week at least, so this really is a killer deal (3.1 + the cost of the computer and internet access). For someone playing it 40 hours / week, they’re getting an unbelievable deal (but it’ll probably lead to other problems in their life if they’re playing that much).

The extremes are things that you pay for and never use or free things you use often. Say you buy your kid a toy and he never plays with it, the EROI is zero. Alternatively library books can give you hours of enjoyment for free, for a EROI of infinity.

This is one of those ideas that might be worth considering, but it’s probably best not to go overboard with it. The EROI of an evening out with friends is quite low, but it’s a lot more fun than reading a library book at home, so you should still do it. If you find there’s some entertainment you’re doing on a regular basis that has a low EROI compared to other things you enjoy doing equally well (say a gym membership you don’t use, expensive theater tickets you don’t enjoy, a motorcycle, etc), it may be worth cutting out the low EROI activities.

For those who get gifts today, I hope they all have a high EROI!

18 replies on “Entertainment Return on Investment”

A very interesting post.

I dropped my opera season tickets last year when the Met startet broadcasting their operas in movie theatres. I get the same pleasure for about 20% of the price.
Now that’s improved my EROI!

Great post. I’ve done a similar calculation on certain things surrounding monthly payments (like cable, internet, etc.) although not so much as to actually put it into a formula or anything – more of an eyeballing exercise. I found that since I never really downloaded big files, I was happy paying less for internet access that made me wait 1 or 2 seconds longer to load up most of the websites I go to. This is certainly a situation where the “enjoyment” factor would play in as for the odd time I DO download a larger file – it’s not that fun waiting… but somehow I manage to survive… 🙂

Slightly off topic, but I read about a different entertainment ROI yesterday… 20th Century Fox’s stock went up 450% when they released the first Star Wars movie!

Merry Christmas Mike and Lise!

Great way to cut down on expenses, with the same time and enjoyment, Lise.

I had the same thought Mike. Add up the air fare and spending and whatnot, then divide by 16 hours per day (or whatever seems reasonable) and determine the EROI for trips. It’d probably be not *THAT* bad (just because there’s so many hours in most trips).

Happy holidays Preet (sorry I missed responding to your post earlier, for some reason it just showed up now). Truth be told, I mostly eyeball it too (believe it or not, I’m not calculating the return on EVERYTHING I do 🙂 ).

[…] Comment on Entertainment Return on Investment by Mr. Cheap By Mr. Cheap Merry Christmas Mike and Lise! Great way to cut down on expenses, with the same time and enjoyment, Lise. I had the same thought Mike. Add up the air fare and spending and whatnot, then divide by 16 hours per day (or whatever seems … Comments for Quest For Four Pillars – […]

Hey Mike;

I like that you’ve actually attempted to quantify something that we already do.

To whit, my fianc? and I lived without cable, but regularly went to the cheap seats for movies and popcorn (Reba (like $16/each) and Pinky & the Brain, we’d eliminate nearly all of our TV-watching. Truth is, the only thing left is sports. If we could by the “only sports” package for a monthly fee, we’d probably do that and give up all of the other channels.

Maybe it’s a just a “time value” thing. But TV DVDs have more pleasure “density”, they’re on when I want to watch them and they’re easy to re-watch. (Buffy in 44 minutes is 33% more efficient than seen on TV!)

Either way, I think it’s great “paradigm” exercise. Trying to peg a number to your enjoyment really gives you a sense of where your money is going.

Love the Entertainment Return! I never thought about my hobbies like this! My gym membership is fantastic…knitting is pretty great…However, rock climbing is not such a great return….hm….

SD – don’t forget to try to compare the enjoyment of the activities as well – rock climbing might be expensive on a per hour basis but if it’s your favourite activity then it might still have a good EROI.


This Weeks Blog Festivities…

Mrs Micah hosted the Carnival of Personal Finance. Some posts that caught my eye:Your Greatest Assest is Your Ability to Generate Income @ Cash Money LifeEntertainment Return on Investment @ Quest fo……

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