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 Entertainment Industry Economics
A Guide for Financial Analysis, Tenth Edition

Already among the most important sectors of the U.S. economy, the enter-
tainment and media industries are continuing to grow worldwide. Fully
updated, the tenth edition of Entertainment Industry Economics is the
definitive reference on the economics of film, music, television, advertising,
broadcasting, cable, casinos, publishing, arts and culture, performing arts,
toys and games, sports, and theme parks. Its synthesis of a vast amount of
data provides an up-to-date guide to the economics, financing, accounting,
production, marketing, and history of these sectors in the United States and
countries across the globe. This edition offers new material on streaming
services, the relationship between demographics and entertainment spend-
ing, electromagnetic spectrum for broadcasters, and music industry sales as
related to GDP. Financial analysts and investors, economists, industry
executives, accountants, lawyers, regulators, and journalists, as well as
students preparing to join these professions will benefit from this compre-
hensive source.

Harold (Hal) L. Vogel, PhD, CFA, was the senior entertainment and media
analyst at Merrill Lynch & Co., Inc. and has taught at the Columbia Business
School in New York and the Cass Business School in London. His books
include Travel Industry Economics: A Guide for Financial Analysis, 3rd
edition (2016) and Financial Market Bubbles and Crashes: Features,
Causes, and Effects, 2nd edition (2018).

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 Entertainment
Industry
Economics
A Guide for Financial Analysis
TENTH EDITION

Harold L. Vogel

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First published 1986
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Fourth edition 1998
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 TO MY DEAR FATHER
– WHO WOULD HAVE BEEN SO PROUD

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 Contents

Preface page xix

Part I Introduction 1

Chapter 1 Economic Perspectives 3

1.1 Time Concepts 3
Leisure and Work 3
Recreation and Entertainment 4
Time 5
Expansion of Leisure Time 5
1.2 Supply and Demand Factors 9
Productivity 9
Demand for Leisure 11
Expected Utility Comparisons 13
Demographics and Debts 14
Barriers to Entry 17
vii

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 viii Contents
1.3 Primary Principles 18
Marginal Matters 18
Price Discrimination 21
Public-Good Characteristics 23
1.4 Personal-Consumption Expenditure Relationships 23
1.5 Price Effects 27
1.6 Industry Structures and Segments 29
Structures 29
Segments 30
1.7 Valuation Variables 35
Discounted Cash Flows 35
Comparison Methods 37
Options 38
1.8 Concluding Remarks 38
Notes 39
Further Reading 46

Chapter 2 Basic Elements 48

2.1 Psychological Roots 48
2.2 Rules of the Road 49
Laws of the Media 49
Network Features 52
2.3 Legal Layers and Limitations 54
Layers 54
Limitations and Concentration Issues 55
2.4 The Internet 56
Agent of Change 56
Big Data and AI (Artificial Intelligence) 61
Long-Tail Effects 62
2.5 Advertising 64
Functionality 66
Economic and Business Aspects 67
2.6 Accounting and Valuation 70
Accounting 70
Valuation 70
2.7 Concluding Remarks 71

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 Contents ix
Notes 71
Further Reading 83

Part II Media-Dependent Entertainment 87

Chapter 3 Movie Macroeconomics 89

3.1 Flickering Images 90
3.2 May the Forces Be with You 92
Evolutionary Elements 92
Technology 92
Capital 95
Pecking Orders 96
Exhibition 96
Production and Distribution 97
3.3 Ups and Downs 99
Admission Cycles 99
Prices and Elasticities 100
Production Starts and Capital 102
Releases and Inventories 104
Market-Share Factors 110
Collateral Factors 110
Exchange-Rate Effects 110
Trade Effects 111
Financial Aggregates 113
3.4 Markets – Primary and Secondary 113
3.5 Assets 117
Film Libraries 117
Technology 117
Utilization Rates 119
Interest and Inflation Rates 119
Collections and Contracts 121
Library Transfers 121
Real Estate 124
3.6 Concluding Remarks 124
Notes 124
Further Reading 132

Chapter 4 Making and Marketing Movies 134

4.1 Properties – Tangible and Intangible 134

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 x Contents
4.2 Financial Foundations 136
Common-Stock Offerings 137
Combination Deals 137
Limited Partnerships and Tax Shelters 138
Bank Loans 141
Private Equity and Hedge Funds 142
4.3 Production Preliminaries 143
The Big Picture 143
Labor Unions and Guilds 146
4.4 Marketing Matters 147
Distributors and Exhibitors 147
Sequencing 147
Distributor–Exhibitor Contracts 148
Release Strategies, Bidding, and Other Related Practices 152
Exhibition Industry Characteristics:
(a) Capacity and Competition 154
(b) Rentals Percentage 156
Video, Output Deals, and Merchandising 159
Video 159
Output Deals 161
Merchandising 162
Marketing Costs 162
4.5 Economic Aspects 163
Profitability Synopsis 163
Theoretical Foundation 164
4.6 Concluding Remarks 168
Notes 169
Further Reading 198

Chapter 5 Financial Accounting in Movies and Television 205

5.1 Dollars and Sense 205
Contract Clout 205
Orchestrating the Numbers 206
5.2 Corporate Overview 207
Revenue-Recognition Factors 207
Inventories 208
Amortization of Inventory 209
Unamortized Residuals 210
Interest Expense and Other Costs 212
Calculation Controversies 212
Statement of Position 00–2 214

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 Contents xi
5.3 Big-Picture Accounting 217
Financial Overview 217
Participation Deals 223
Pickups 223
Coproduction-Distribution 223
Talent Participations and Breakeven 224
Producers’ Participations and Cross-Collateralizations 228
Video Participations 229
Distributor–Exhibitor Computations 229
Distributor Deals and Expenses 231
Studio Overhead and Other Production Costs 234
Budgets High and Low 235
5.4 Television-Programming Accounting 240
Feature Licensing 240
Program Production and Distribution 241
Development and Financing Processes 241
Syndication Agreements 244
Costs of Production 246
Costs and Problems of Distribution 247
Timing Troubles 248
5.5 Weakest Links 251
Exhibitors: The Beginning and the End 251
Distributor–Producer Problems 252
5.6 Concluding Remarks 253
Notes 254
Further Reading 279

Chapter 6 Music 281

6.1 Feeling Groovy 281
6.2 Size and Structure 284
Economic Interplay 284
The American Scene 284
The Global Scene 289
Composing, Publishing, and Managing 290
Royalty Streams 291
Performances 291
Mechanical Royalties 292
Synchronization Fees 293
Copyright 293
Guilds and Unions 294
Concerts and Theaters 294

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 xii Contents
6.3 Making and Marketing Recordings 295
Deal-Maker’s Delight 295
Production Agreements 295
Talent Deals 297
Production Costs 298
Marketing Costs 298
Distribution and Pricing 299
Structure 299
Pricing 301
6.4 Financial Accounting and Valuation 301
Artists’ Perspective 301
Company Perspective 305
Valuation Aspects 307
6.5 Concluding Remarks 309
Notes 309
Further Reading 325

Chapter 7 Broadcasting 328

7.1 Going on the Air 328
Technology and History 328
Basic Operations and Spectrum 331
Basic Operations 331
Spectrum 335
Regulation 337
Organizational Patterns and Priorities 337
Networks and Affiliates 337
Ratings and Audiences 340
Inventories 342
Independent and Public Broadcasting Stations 343
7.2 Economic Characteristics 344
Macroeconomic Relationships 344
Microeconomic Considerations 346
7.3 Financial-Performance Characteristics 347
Variable Cost Elements 347
Financial-Accounting Practices 349
7.4 Valuing Broadcast Properties 351
7.5 Concluding Remarks 353
Notes 355
Further Reading 367

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 Contents xiii
Chapter 8 Cable 372
8.1 From Faint Signals 372
Pay Services Evolve 373
8.2 Cable Industry Structure 374
Operational Aspects 374
Franchising 378
Revenue Relationships 380
8.3 Financial Characteristics 383
Capital Concerns 383
Accounting Conventions 385
8.4 Development Directions 387
Pay-Per-View 387
Cable’s Competition 388
DBS/DTH and Other (MMDS, SMATV, and STV) 388
Telephone Companies 389
8.5 Valuing Cable-System Properties 390
8.6 Concluding Remarks 392
Notes 393
Further Reading 401

Chapter 9 Publishing 405

9.1 Gutenberg’s Gift 405
First Words 405
Operating Characteristics 406
9.2 Segment Specifics 408
Books 408
Educational and Professional 409
Trade 410
Periodicals 413
Newspapers 413
Magazines and Other Periodicals 416
9.3 Accounting and Valuation 418
Accounting 418
Valuation 419
9.4 Concluding Remarks 419
Notes 420
Further Reading 423

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 xiv Contents
Chapter 10 Toys and Games 428
10.1 Not Just for Kids 428
Financial Flavors 429
Building Blocks 432
10.2 Chips Ahoy! 433
Pong: Pre and Après 434
10.3 Structural Statements 436
Game Evolution 436
Profit Dynamics 438
Coin-Op 439
10.4 Concluding Remarks 440
Notes 441
Further Reading 449

Part III Live Entertainment 453

Chapter 11 Gaming and Wagering 455

11.1 From Ancient History 455
At First 455
Gaming in America 456
Preliminaries 456
The Nevada Experience 459
Enter New Jersey 460
Horse Racing 461
Lotteries 462
Other Wagering Segments 462
Asia’s Jackpot 464
11.2 Money Talks 466
Macroeconomic Matters 467
Funding Functions 468
Regulation 469
Financial Performance and Valuation 471
11.3 Underlying Profit Principles and Terminology 472
Principles 472
Terminology and Performance Standards 474
11.4 Casino Management and Accounting Policies 477
Marketing Matters 477
Cash and Credit 478
Procedural Paradigms 480

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 Contents xv
11.5 Gambling and Economics 481
11.6 Concluding Remarks 484
Notes 484
Further Reading 492

Chapter 12 Sports 497

12.1 Spice Is Nice 497
Early Innings 497
Media Connections 499
Wagering Connections 502
12.2 Operating Characteristics 503
Revenue Sources and Divisions 503
Labor Issues 504
12.3 Tax Accounting and Valuation 506
Tax Issues 506
Historical Development 506
Current Treatments 508
Asset Valuation Factors 509
12.4 Sports Economics 509
12.5 Concluding Remarks 513
Notes 513
Further Reading 525

Chapter 13 Performing Arts and Culture 533

13.1 Audiences and Offerings 534
Commercial Theater 535
On and Off Broadway 535
Circus 539
Orchestras 540
Opera 541
Dance 541
13.2 Funding Sources and the Economic Dilemma 541
13.3 The Play’s the Thing 544
Production Financing and Participations 544
Operational Characteristics 546
13.4 Art Markets and Museums 548
Art Markets 548
Museums 550

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 xvi Contents
13.5 Economist Echoes 550
Organizational Features 551
Elasticities 551
Price Discrimination 552
Externalities 552
About Cultural Economics 553
13.6 Concluding Remarks 553
Notes 555
Further Reading 564

Chapter 14 Amusement/Theme Parks 571

14.1 Flower Power 571
Gardens and Groves 571
Modern Times 572
14.2 Financial Operating Characteristics 576
14.3 Economic Sensitivities 579
14.4 Valuing Theme Park Properties 580
14.5 Concluding Remarks 581
Notes 582
Further Reading 583

Part IV Roundup 587

Chapter 15 Performance and Policy 589

15.1 Common Elements 589
15.2 Public Policy Issues 592
15.3 Guidelines for Evaluation 593
15.4 Final Remarks 597

Appendix A: Sources of Information 598

Appendix B: Major Games of Chance 600
B.1 Blackjack 600
B.2 Craps 601
B.3 Roulette 602

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 Contents xvii
B.4 Baccarat 602
B.5 Slots 603
Notes 604
Appendix C: Supplementary Data 606
Glossary 612
References 636
Index 703

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 Preface
en·ter·tain·ment – an activity that is diverting, amusing, or pleasing and that agreeably
occupies the viewer’s time and attention;

in·dus·try – a specific branch of a craft, art, business, or trade that involves a division of
labor and that requires significant investment capital and employs many people in
organizations with similar technological and organizational structures used to provide
goods and services that are largely substitutable;

ec·o·nom·ics – a social science that studies how wealth is created, distributed, used, and
consumed and that considers costs and returns.

Each year, Americans cumulatively spend at least 175 billion hours and
more than $350 billion on legal forms of entertainment. And globally, total
annual spending is approaching one trillion dollars. So we might begin by
asking: What is entertainment, why is there so much interest in it, and what
do its many forms have in common?
At the most fundamental level, anything that stimulates, encourages, or
otherwise generates a condition of pleasurable diversion could be called
entertainment. The French word divertissement perhaps best captures this
essence.
But entertainment can be much more than mere diversion. It is something
that is universally interesting and appealing because, when it does what it is
intended to do, it moves you emotionally. As the Latin root verb tenare
suggests, it grabs you: It touches your soul. And it provides experiences that
you could or would not otherwise have had.
Although life is full of constraints and disciplines, responsibilities and
chores, and a host of things disagreeable, entertainment, in contrast,
encompasses activities that people enjoy and look forward to doing,

xix

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 xx Preface
hearing, or seeing. This is the basis of the demand for – or the consumption
of – entertainment products and services; this is the primary attribute shared
by the many distinct topics – from cinema to sports, from theme parks to
theater – that are discussed in the pages that follow.
Entertainment – the cause – is thus obversely defined through its effect:
a satisfied and happy psychological state. Yet, somehow, it matters not
whether the effect is achieved through active or passive means. Playing
the piano can be just as pleasurable as playing the stereo.
Entertainment indeed means so many different things to so many people
that a manageable analysis requires that sharper boundaries be drawn. Such
boundaries are here established by classifying entertainment activities into
industry segments; that is, enterprises or organizations of significant size that
have similar technological structures of production and that produce or
supply goods, services, or sources of income that are largely substitutable.
Classification along those lines facilitates contiguous discussion of
entertainment software, as we might more generically label films,
recordings, and video games, and of hardware – the physical
appurtenances and equipment on or in which the software’s instruction
sets are executed. Such classification also allows us to trace more easily
the effects of technological developments in this field.
So accustomed are we now to continuous improvements in the
performance of entertainment hardware and software that we have trouble
remembering that early in the twentieth century moving pictures and music
recordings were novelties, radio was regarded as a modern-day miracle, and
television was a laboratory curiosity. Simple transistors and lasers had yet to
be invented and electronic computers and Earth-orbiting communications
satellites were still in the realm of science fiction.
These fruits of applied technology have nevertheless spawned new art
forms and vistas of human expression and have brought to millions of people
around the world, virtually at the flick of a switch, a much more varied and
higher-quality mix of entertainment than had ever before been imagined
feasible.
Little or none of this, however, has happened because of ars gratia artis
(art for art’s sake) – in itself a noble but ineffectual stimulus for
technological development. Rather, it is economic forces – profit motives,
if you will – that are always behind the scenes, regulating the flows and rates
of implementation. Those are the forces that shape the relative popularity
and growth patterns of competing, usually interdependent, entertainment
activities and products. And those are the forces that ultimately make
available to the masses what was previously affordable only to upper
income classes. As Cowen (1998, p. 2) writes, “economic forces have had
stronger effect on culture than is commonly believed.”
It is therefore surprising to find that most serious examinations of the
economics of entertainment are desultory and scattered among various
pamphlets, trade publications and journals, stockbrokers’ reports, and

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 Preface xxi
incidental chapters in books on other topics. The widely available popular
magazines and newspapers, biographies, histories, websites and technical
manuals do not generally provide in-depth treatments of the subject.
This book, then, is a direct outgrowth of my search for a single
comprehensive source. It attempts to present information in a style
accessible and interesting to general readers. As such, it should prove to be
a handy reference for executives, financial analysts and investors, agents and
legal advisors, accountants, economists, and journalists. The approach is
holistic; executives and analysts in any one sector increasingly need to also
understand how related and adjacent sectors operate.
Entertainment Industry Economics will, however, most likely be used as
a text for graduate or advanced undergraduate students in applied media
economics and management/administration courses in film and television,
music, communications, publishing, sports, performing arts, and hotel-
casino operations. Instructors should find it easy to design one-semester
courses focused on one or two areas. A minimal grasp of what entertainment
and media economics is all about would require that most students read at
least the first sections of Chapters 1 and 2 and, at the end of the course, the
first section of Chapter 15.
Yet many different modules can readily be assembled and tailored.
Among the most popular would be concentrations on film, television, and
music (Chapters 2 through 8); gaming and sports (Chapters 7, 8, 11, and 12);
arts and popular culture (Chapters 6, 7, 9, 10, and 13); or entertainment
merchandising and marketing (Chapters 2, 7, 9, 10, and 14).
The topics covered in the book have been chosen on the basis of industry
size measured in terms of consumer spending and employment, length of time
in existence as a distinct subset, and availability of reliable data. In a larger
sense, however, topics have been selected with the aim of providing no more
and no less than would be required by a “compleat” entertainment and media
industry investor. The perspectives are thus inevitably those of an investment
analyst, portfolio manager, and economist. Although this decision-oriented
background leads naturally to an approach that is more practical and factual
than highly theoretical, it nevertheless assumes some familiarity, supported by
the appended glossary, with the language of economics and finance.
This tenth edition has been further revised and updated and differs from its
predecessors through inclusion of additional material on the impact of
streaming services on all segments, how spending on media and
entertainment is related to demographics and is affected by changes in
social mood characteristics (socionomics), music sales as related to
country GDP, extended coverage of the economics of leisure, art markets
and museums, and a new section on electromagnetic spectrum auctions for
radio and television broadcasts. This edition also indicates in boldface type
which of the end-of-chapter further reading items can conveniently form the
basis for case studies and class discussions.

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 xxii Preface
I am especially grateful to Elizabeth Maguire, former editor at Cambridge
University Press, for her early interest and confidence in this project. Thanks
are also owed to Cambridge’s Rhona Johnson, who worked on the first
edition, to Scott Parris, former longtime Cambridge economics editor, for
the third through eighth, to Karen Maloney for the ninth and tenth, and to
expert copyeditor Alison Tickner for the tenth.
I am further indebted to those writers who earlier cut a path through the
statistical forests and made the task of exposition easier than it otherwise
would have been. Particularly noteworthy are the books of John Owen on
demand for leisure, Paul Baumgarten and Donald Farber on the contractual
aspects of filmmaking (first edition; and second with Mark Fleischer), David
Leedy on movie industry accounting, David Baskerville and Sidney Shemel
and M. William Krasilovsky and Donald Passman on the music business,
John Scarne and Bill Friedman on the gaming field, Gerald W. Scully and
Andrew Zimbalist on sports, William Baumol and William Bowen on the
performing arts, and Robert Prechter, Jr. on how changes in social moods
(i.e., socionomics) drive fads, fashions, and crazes and thereby influence
what’s popular (or not) in all entertainment products and services. Extensive
film industry commentaries and data collections by A. D. Murphy of Variety
(and later, The Hollywood Reporter and the University of Southern
California) were important additional sources.
My thanks also extend to the following present and former senior industry
executives who generously took time from their busy schedules to review and to
advise on sections of the first edition draft. They and their company affiliations at
that time were Michael L. Bagnall (The Walt Disney Company), Jeffrey
Barbakow (Merrill Lynch), J. Garrett Blowers (CBS Inc.), Erroll M. Cook
(Arthur Young & Co.), Michael E. Garstin (Orion Pictures Corp.), Kenneth
F. Gorman (Viacom), Harold M. Haas (MCA, Inc.), Howard J. Klein (Caesars
New Jersey), Donald B. Romans (Bally Mfg.), and James R. Wolford (The Walt
Disney Company). Greatly appreciated, too, was the comprehensive critique
provided by my sister, Gloria. Acknowledgments for help on data are also owed
to Arthur Gruen, Arnold W. Messer (Columbia Pictures Entertainment) and
Angela B. Gerken (Viacom). Gratitude for improvements and updates of tenth
edition music figures and advertising estimates is also respectively owed to
Jonathan Handel and to Brian Wieser of Pivotal Research (and now of
GroupM).
Although every possible precaution against error has been taken, for any
mistakes that may inadvertently remain the responsibility is mine alone.
I’ve been greatly pleased by the success of the previous editions and, as
before, my hopes and expectations are that this work will provide valuable
insights and a thoroughly enjoyable adventure.
Now . . . on with the show.

Harold L. Vogel
New York City
January 2020

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 Part I
Introduction

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 1
Economic Perspectives
To everything there is a season, and a time to every purpose
under the heaven. – Ecclesiastes

Extending this famous verse, we can also say that there is a time for work and
a time for play. There is a time for leisure.
An important distinction, however, needs to be made between the precise
concept of a time for leisure and the semantically different and much fuzzier
notion of leisure time, the initial topic. In the course of exploring this subject,
the fundamental economic forces that affect and motivate spending on all
forms of entertainment goods and services will be revealed. The
perspectives provided by this approach will enable us to see how
entertainment is defined and how it fits into the larger economic picture.

1.1 Time Concepts

Leisure and Work

Philosophers and sociologists have long wrestled with the problem of
defining leisure – the English word derived from the Latin licere, which
means “to be permitted” or “to be free.” Leisure has, in fact, usually been

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 4 PART I INTRODUCTION
described in terms of its sociological and psychological (state-of-mind)
characteristics.1 And closely tied into this is the more recent notion that
“play” is a fundamental aspect of life.2
The classical attitude was epitomized in the work of Aristotle, for whom
the term leisure implied both availability of time and absence of the
necessity of being occupied. According to Aristotle, that very absence is
what leads to a life of contemplation and true happiness – yet only for an elite
few, who do not have to provide for their own daily needs. Veblen (1899)
similarly saw leisure as a symbol of social class (and status emulation as
a driver of demand). To him, however, it was associated not with a life of
contemplation but with the “idle rich,” who identified themselves through its
possession and its use.
Leisure has more recently been conceptualized either as a form of activity
engaged in by people in their free time or, preferably, as time free from any
sense of obligation or compulsion.3 The term leisure is now broadly used to
characterize time not spent at work (where there is an obligation to
perform).4 Naturally, in so defining leisure by what it is not, metaphysical
issues remain largely unresolved. There is a question of how to categorize
work-related time such as that consumed in preparation for, and in transit to
and from, the workplace. And sometimes the distinctions between one
person’s vocation and another’s avocation are difficult to draw: People
have been known to “work” pretty hard at their hobbies.
Although such problems of definition appear quite often, they fortunately
do not affect analysis of the underlying economic structures and issues.

Recreation and Entertainment

In stark contrast to the impressions of Aristotle or Veblen, today we rarely, if
ever, think of leisure as contemplation or as something to be enjoyed only by
the privileged. Instead, “free” time is used for doing things and going places,
and the emphasis on activity corresponds more closely to the notion of
recreation – refreshment of strength or spirit after toil – than to the views
of the classicists.
The availability of time is, of course, a precondition for recreation, which can
be taken literally as meaning re-creation of body and soul. But because active re-
creation can be achieved in many different ways – by playing tennis or by going
fishing, for example – it encompasses aspects of both physical and mental well-
being. Hence, recreation may or may not contain significant elements of
amusement and diversion or occupy the attention agreeably. For instance,
amateurs training to run a marathon might arguably be involved in a form of
recreation. But if so, the entertainment aspect would be rather minimal.
As noted in the Preface, however, entertainment is defined as that which
produces a pleasurable and satisfying experience. The concept of entertainment
is thus subordinate to that of recreation: It is more specifically defined through its
direct and primarily psychological and emotional effects.

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 Economic Perspectives 5
Time
Most people have some hours left over – “free time,” so to speak – after
subtracting the hours and minutes needed for subsistence (mainly eating and
sleeping), for work, and for related activities. But this remaining time has
a cost in terms of alternative opportunities forgone.
Because time is needed to use or to consume goods and services, as well as
to produce them, economists have attempted to develop theories that treat it
as a commodity with varying qualitative and quantitative cost features.
However, as Sharp (1981) notes in his comprehensive book, economists
have been only partially successful in this attempt:
Although time is commonly described as a scarce resource in economic literature, it is still
often treated rather differently from the more familiar inputs of labor and materials and
outputs of goods and services. The problems of its allocation have not yet been fully or
consistently integrated into economic analysis. (p. 210)
Investigations into the economics of time, including those of Becker (1965)
and DeSerpa (1971), have suggested that the demand for leisure is affected
in a complicated way by the consumption-cost of time. For instance,
according to Becker (1965; see also Ghez and Becker 1975):
The two determinants of the importance of forgone earnings are the amount of time used per
dollar of goods and the cost per unit of time. Reading a book, getting a haircut, or
commuting use more time per dollar of goods than eating dinner, frequenting a nightclub,
or sending children to private summer camps. Other things being equal, forgone earnings
would be more important for the former set of commodities than the latter.
The importance of forgone earnings would be determined solely by time intensity only if
the cost of time were the same for all commodities. Presumably, however, it varies
considerably among commodities and at different periods. For example, the cost of time
is often less on weekends and in the evenings. (Becker 1965, p. 503)
From this it can be seen that the cost of time and the consumption-time
intensity of goods and services – e.g., commitment, is usually higher for
reading a book than for reading a newspaper – are significant factors in
selecting from among entertainment alternatives. “Time is what remains
scarce when all else becomes abundant.”5 Time indeed is money.

Expansion of Leisure Time

Most of us are not commonly subject to sharp changes in our availability of
leisure time (except on retirement or loss of job). Nevertheless, there is
a fairly widespread impression that leisure time has been trending steadily
higher ever since the Industrial Revolution of more than a century ago. Yet
the evidence on this is mixed. Figure 1.1 shows that in the United States the
largest increases in leisure time – workweek reductions – for agricultural and
nonagricultural industries were achieved prior to 1940 and had already been
reflected in rising interest in entertainment as early as the 1920s.6

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 6 PART I INTRODUCTION
Average weekly hours Average weekly hours
75 75

70 70

65 65

Agriculture
60 60

55 55

50 ALL 50
INDUSTRIES
45 45

40 40
Nonagriculture
35 35
0 0
1850 ’60 ’70 ’80 ’90 1900 ’10 ’20 ’30 ’40 ’41 ’42 ’43 ’44 ’45 ’46 ’47 ’48 ’49 ’50 ’51 ’52 ’53 ’54 ’55 1956

Figure 1.1. Estimated average weekly hours for all persons employed in agricultural
and nonagricultural industries, 1850–1940 (ten-year intervals) and 1941–56 (annual
averages for all employed persons, including the self-employed and unpaid family
workers).
Source: Zeisel (1958).

But more recently, the lengths of average workweeks, adjusted for

increases in holidays and vacations have scarcely changed for the
manufacturing sector and have also stopped declining in the services
sector (Table 1.1 and Figure 1.2). By comparison, average hours worked in
other major countries, as illustrated in Figure 1.3, have declined markedly
since 1970.
Although this suggests that there has been little, if any, expansion of
leisure time in the United States, what has apparently happened instead
is that work schedules now provide greater diversity. As noted by
Smith (1986), “A larger percentage of people worked under 35 hours
or over 49 hours a week in 1985 than in 1973, yet the mean and
median hours (38.4 and 40.4, respectively, in 1985) remained virtually
unchanged.”7
If findings from public-opinion surveys on Americans and the arts
are to be believed, the number of hours available for leisure may
actually at best be holding steady.8 But occasionally the view that
Americans are actually working more hours than previously has been
expressed.9

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