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Sunday, January 20, 2013

Disruptions: Impulse Buys, Straight to Your Screen

I was tallying my spending of the last year, and much to my surprise, I spent $2,403 in one category. No, that wasn’t on clothes. It wasn’t on my most recent vacation, either. And it wasn’t the total of all my parking tickets (though that did feel as if it came close).

The $2,403 is what I spent on digital media.

But wait, people are spending money online On media Didn’t music industry executives espouse, “People won’t pay for things online!” Yes, as did movie industry executives. TV, radio, book, newspaper and magazine bigwigs, too, have all made similar claims over the last decade.

Well, those apocalyptic predictions turn out to be wrong.

I am spending more on digital media than I used to spend on the physical stuff. (The federal government says the average American family spent $2,572 on all entertainment, not just digital, in 2011.) And I know why I am spending more on digital media.

Digital media, nlike its slow cousin, is immediate. In the past, if friends mentioned a good book they had just finished, people made a note (mental or on a scrap of paper) to pick it up during their next visit to the bookstore or library. The same went for other physical media like CDs, DVDs or magazines.

Now, when someone does that at dinner â€" “Oh, I just finished Cormac McCarthy’s latest book, you’d love it!” â€" we pull out our smartphones, hop into a wormhole to Amazon or iTunes and buy it on the spot. No notes; no forgetting the book’s name; no driving to a store. The book or song is just transported to our pockets.

With one-click shopping and smartphones, buying media online becomes an impulse purchase, like the candy or gum by the cash register.

And it all adds up. Quickly. Last year, I bought 47 e-books. That’s $475 on digital books alone. In the past, I likely bought 20 physical books a year, at most, and given that half of those were from used bookstores, my annual literar! y budget rarely passed $200.

I’m paying less but buying more.

I also spent $359 on music subscription services last year, including Rdio and Spotify. Then I frittered away $318 on other music downloads. I paid $95 for a Netflix subscription ($8 a month adds up); $396 on apps and games; $60 on an Xbox Live subscription; $316 on movies and TV shows; $239 for subscription or one-offs of several digital magazines, including The New Yorker, Wired, The Economist and Popular Photography. (As an employee of The New York Times, I have free access to its digital offerings, otherwise I’d gladly pay for that, too.)

I’ve had to pay $120 a year for online storage to back up all my media purchases, and Internet service was almost $100 a year for my iPhone, iPad and home connection. And these numbers don’t include the money I spent on Kindles, iPads and headphones. Granted, $2,403 might seem igh for a bunch of zeros and ones. That could be, in part, because I live in Silicon Valley, where people slurp up digital content with the same frequency that rock stars would inhale cocaine in the ’80s. Out here, we all tend to live a few years in the future. If it’s happening here now, it will usually happen elsewhere several years later.

“This is the same thing we saw with e-commerce five years ago, where people said it was just going to be across a small segment of the Valley,” said D. J. Patil, a data scientist in residence at Greylock Partners, a prominent venture capital company based in Menlo Park, Calif. “Now we are seeing hundreds of millions of dollars a year in online transactions.”

So where am I spending less On traditional media. I rarely go to the movies anymore, where I have to sign over the mortgage for my home for a bottle of water and bag of popcorn. I don’t pay for cable TV either.

Observing things here in the future, I’m willing to make a predi! ction: th! at digital spending number will continue to grow.