Subscription Math

For the sake of this post, a "subscription" is a service for a monthly fee. Examples include cable, magazines, NetFlix, cell phone plans, TiVo, etc. There are all sorts of subscriptions, for many things that can be bought 'a la carte' otherwise- and sometimes they're worth it, and other times not so much. It's all in the math.

These thoughts were prompted by the post The A La Carte Method: Use Psychology Against Yourself to Save Money at I Will Teach You To Be Rich. The question I immediately had was, When do subscriptions make sense? The obvious answer is: When I'd spend more for the product or service a la carte. Let's look at some numbers.

Cable TV:

The local basic Comcast package is $51.74/month

The a la carte alternative: Broadcast TV (which we watch less than an hour per month of) and TV shows on DVD.

To take into account the latter, I'd have to throw in a DVR. The DVR with Comcast is $15.95/month.

Over the last 12 months, a liberal estimate of what we've spent on TV shows on DVD is $80 (2 seasons of Star Trek TNG. We're nerds, I know).

  • What a comparable cable+DVR subscription would cost per year: $68/month = $816/year
  • Cable without the DVR, plus the DVDs we bought anyway: $704/year
  • Just buying seasons of TV shows we like, no cable: $80/year.
  • Bonus: With broadcast stations, we really don't watch TV, and spend our time on more productive activities.
Savings using "a la carte" vs subscription: ~ $600+/year plus many, many hours.
Cell phone:
This is one I've been curious about- I don't feel like I use my cell phone all that often. Looking at the raw numbers (which there were lots of! Because I could download the month-by-month call records! How cool!) I discovered that, in this case, based on our current usage, having a subscription IS a better deal.
  • Currently we pay $60 a month for both our phones
  • The 'a la carte' option would be a Pay-as-You-Go plan
  • Assuming we continue to use our phones as we have for the last 4 months*, a Pay-as-you-go plans would cost us $93.75 a month
  • The subscription saves us $405 a year*
I could explain all the calculations I used to get those numbers, but it could get long. If you're interested, check out the spreadsheet I made with our current usage and a la carte calculations.

* This is not a particularly safe assumption. Just as we watch less TV because we don't have cable, if we didn't have an unlimited plan, we wouldn't use our phones as often, resulting in a lower bill than the stated number.
Movie Rentals
Many of our friends use Netflix and love it. We tend to rent movies once every 3-4 weeks from RedBox, typically with a coupon code to make it free- I think we've paid for a movie from RedBox twice, so, we probably spend about $0.50/month on movie rentals. To make Netflix worth it, we'd need to get 6 or more movies a month, assuming we went with the $5/month plan and we were paying $1 per movie rented with RedBox. Even with the subscription, it is unlikely our habits would change so significantly. A movie rental subscription doesn't not make sense for us.

Magazines - Rather than believing the advertising and seeing how much you're getting off the newsstand price, ask yourself how many of this particular magazine you'd actually buy from the newsstand over the course of the year. If (the number you'd buy from a newsstand x newsstand price) is less than the subscription price, the subscription's not worth it.

Mental Floss magazine currently offered at $17.97/year! 50% off the newsstand price!
But, if I didn't have the subscription, would I buy 6 issues throughout the course of the year anyway?
Landline phone and internet: I already looked at these numbers in a couple posts.

I guess my bottom line is, I want to evaluate my current habits and all my options before signing up for a "money-saving" subscription.

There are exceptions to this rule-
Insurance, for one. We spend more on health insurance than we would even paying out-of-pocket for the one or two doctors visits and medicines we get per year- but, for the emergency situations that could dwarf the per-paycheck payments, insurance is worth it, even if I can't demonstrate it with math like above (Yet. Because we haven't had an emergency. Or a pregnancy.).

What other subscriptions could you gauge the value of using this method? Which subscriptions save you money?


Matt Moberly said...

That's a good way to look at all monthly expenses. Good math.

The cable TV one is a different kind of animal in my mind, because you aren't subscribing to specific TV shows, blocks of TV time, or even a number of hours of TV viewing. Your $700/year is for an always-on connection to many channels, of which you can watch a maximum of one (or for $100 more, DVR a second one at the same time for watching later).

Just like with an internet connection, what you're really paying for is opportunity to watch any of their large catalog of shows. With the increasing availability of TV shows on DVD and TV over the Internet (by either legal or questionable means), the price of that opportunity is getting harder and harder to justify. Do I need 150 channels on all the time just to be sure I can find something to watch when I'm ready to watch TV? No way. I can go find it on demand any time I want on my laptop. Sorry, cable.

Of course, if I wanted to play the devil's advocate, I could point out that you paid $80 for 2 seasons of a show that was broadcast on network television for free. :-D

Kacie said...

I love this post! It's always worthwhile to break down costs and see if we're actually getting the best deal.

The area's Comcast bill seems a bit high, though. That sounds like the price for channels including Discovery, Nickelodeon, TLC, etc.

Our 'basic' cable is network channels, TBS, and CSPAN and the sort, and it's $12ish for that portion of the bill.

Unknown said...

Yes, use Redbox :)

Joanna said...

Matt W- You would say that. You know I'm a fan ;-)

Paula Wethington said...

I like Trek too!


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