As Data Flows In, the Dollars Flow Out
John Anderson and Sharon Rapoport estimate they spend $400 a month, or close to $5,000 a year, keeping their family of four entertained at home.
There are the $30-a-month data plans on their BlackBerry Tour cellphones. The Roanoke, Va., couple’s teenage sons, Seth and Isaac, each have $50 subscriptions for Xbox Live and send thousands of texts each month on their cellphones, requiring their own data plans.
DirecTV satellite service, high-speed Internet access and Netflix for movie nights add more.
“We try to be aware of it so it doesn’t get out of control,” said Mr. Anderson, who with his wife founded an advertising agency. “But, yeah, I would say we’re pretty wired.”
It used to be that a basic $25-a-month phone bill was your main telecommunications expense. But by 2004, the average American spent $770.95 annually on services like cable television, Internet connectivity and video games, according to data from the Census Bureau. By 2008, that number rose to $903, outstripping inflation. By the end of this year, it is expected to have grown to $997.07. Add another $1,000 or more for cellphone service and the average family is spending as much on entertainment over devices as they are on dining out or buying gasoline.
And those government figures do not take into account movies, music and television shows bought through iTunes, or the data plans that are increasingly mandatory for more sophisticated smartphones.
For many people, the subscriptions and services for entertainment and communications, which are more often now one and the same, have become indispensable necessities of life, on par with electricity, water and groceries. And for every new device, there seems to be yet another fee. Buyers of the more advanced Apple iPad, to cite the latest example, can buy unlimited data access for $30 a month from AT&T even if they already have a data plan from the carrier.
“You don’t really lump these expenses into a discretionary category,” said Robert H. Frank, an economics professor at the Johnson Graduate School of Management at Cornell University. “As the expectation of connectedness increases, it’s what is expected for people to be functional in society.”
Americans are transforming their homes into entertainment hubs, which is driving up the amount of money they spend, said Lee Rainie, director of the Pew Internet and American Life Project.
“More people are creating experiences in their homes that are very similar to the kinds of public experiences they enjoy in movie theaters and concert halls,” he said. “Our homes are bristling with technology.”
Most people think home entertainment is cheaper. “Every time I want to go to Fenway Park or see the Killers in concert, I’m paying $50 to $100 each time. But once you build and install that home system, its basically pennies per minute of enjoyment,” said James McQuivey, an analyst with Forrester Research.
But they do not take into consideration the long-term economic effect — both in the maintenance and operational costs — of the devices they purchase. “A subscription model is the perfect drug,” Mr. McQuivey said. “People see $15 per month as a very low amount of money but it quickly adds up.”
Kate Goodall, for example, a 32-year-old director of fund-raising for museums, in Alexandria, Va., said the high costs of home cable and other subscriptions began to eat into her budget. “We saw the writing on the wall in terms of the cost,” she said. “It was getting ridiculous.”
She and her husband disconnected their cable and home phone line so they could more easily afford frequent dinners out and swimming, ballet and art lessons for their two small sons. Instead, they catch shows like “The Daily Show With Jon Stewart” free at Hulu.com and rely on their cellphones as their primary phone lines.
Her husband, Mike Hughes, 37, a project manager, has both an Xbox and a Wii game console, but, in an effort to keep their bills down, she would not let him sign up for any gaming subscription services.
Consumers will have to make tough choices like Ms. Goodall and her husband as the next generation of connected devices — TVs and various mobile devices — that have their own data plan or subscription service come to market. The cable TV companies battle the phone companies by bundling cable, landline phone and Internet services, but most wireless carriers do not yet have any programs to bundle the data plans and offer discounts for myriad mobile devices.
Ms. Goodall says she dreads the day when her sons, 1 and 4, get bitten by the texting craze, as her 12-year-old nephew has.
“We’ll probably have to sign our sons up for cellphones even sooner than we’d like because we don’t have a home phone,” she said. “I’m not looking forward to dealing with that set of issues.”