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Extra
Fast-forward and grow rich
If you consider the 61 hours of ads the average American sees each month, there's nothing more expensive than free TV. Here's why the alternatives pay off.
By Scott Burns
Time is money. Time is always money. The consequence changes markets and our behavior.
I had this sublime but massively unoriginal thought after spending four hours watching television. To celebrate our first day as a post-rabbit ears family -- now brutally empowered with 75 channels of Comcast cable TV -- my wife and I watched "The Godfather" on the Spike TV channel.
My wife, bless her enduring innocence, had never seen the 1972 classic. This was my third time -- and I still loved the most famous line in the film:
"Leave the gun. Take the cannoli."
But as several of the ads were run for what seemed the hundredth time, I began to wonder if it was worth it. The original film clocks in at 175 minutes. Sliced up with advertisements, the run time was four hours.
Why free TV is the most expensive
That means we voluntarily sat through 65 minutes of advertising -- which is typical for four hours of prime-time programming -- when we could have rented the DVD for a few dollars and found a better use for the 65 minutes each of us lost.
Small wonder the video rental business has done so well: If you put any value on your time, rentals are cheap and programmed television is expensive. Too expensive. The value of time also explains the wild success of TiVo, which allows you to record programs, watch them at will, and fast-forward through the advertisements.
Time economics is simple. If you put a value on your time, your "return on investment" quickly rises to astronomical levels. Suppose you rent three films at a time from Netflix, the online service that sends an unlimited number of movies for a $20 monthly subscription fee. Rent a handful a month, and you've spent less money than you'd spend at Blockbuster, avoided late fees, and saved the time and expense of driving to get the DVDs.
Fast-forward and grow rich
But the biggest saving is time. Each 90-minute film watched saves you from about 30 minutes of advertising. If you value your time at only $8 an hour, you'll save as much in the value of your time as you spend on the service.
It's the same, but better, with TiVo. Each hour watched, with fast-forwards, saves more than 15 minutes of your time. At only $8 an hour, you'll recoup the cost of the basic $100 TiVo machine in the first 12.5 hours. You'll recoup the $13 monthly cost of the service by recording 6 1/2 hours of programming. After that, it's all time "profit."
According to the Nielsen organization, the average household now watches about 53 hours of television a week. This means fast-forwarding through advertisements can save about 14.3 hours a week, or about 61.5 hours a month. That's a 3,700% monthly "return" on the $13 monthly cost if time is valued at only $8 an hour.
The economics are the same for on-demand movies. Any entertainment delivery that allows you to avoid advertising time loss is a high-return investment if you put any value on your time.
The decline of the TV commercial
So consider the destiny of television advertising.
When there were few alternatives, television could collect a large and varied body of viewers. It was a productive advertising medium. It delivered a larger audience at lower cost each year for decades. That productivity, however, peaked in the early '80s, when cable networks started to siphon off viewers.
But that's history.
In the future, television advertising will reach an audience that is increasingly poor and unemployed. This isn't a snotty cultural pronouncement: It's the inevitable economics of time. The more valuable our time becomes, the more we will do (or pay) to eliminate the things that waste our time.
See Scott Burns' Web site.
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