Why Cutting Cable May Not Save Money
So you think you're saving around $100 every month by cutting the cable cord. That may be true today, but streaming could get a lot more expensive as companies launch pay-per-view channels.
Last week, YouTube, the largest source for free video entertainment, unveiled its first paid channels. And a number of companies, whose owners believe their content is attractive enough to get people to pay for it, jumped on board, too. In less than a week, available channels climbed from 30 to just over 50, ranging in price from $0.99 to $9.99 per month (the latter a package that includes seven channels).
Here's how quickly such à la carte subscriptions can add up:
- Jim Henson Family TV: $2.99
- PGA Digital Golf Academy: $4.99
- Pets.TV: $1.99
- UFC (Ultimate Fighting Championship): $5.99
That comes to $16, about the price people pay to add HBO to their basic cable subscriptions.
If you add Netflix and Hulu Plus, and include the cost of high-speed Internet, monthly entertainment costs get pretty close to cable. Throw in a few on-demand movies from iTunes or Amazon, and your savings from dropping cable will barely cover a couple of bags of microwave popcorn and a six-pack of Coke. [See also: Is Netflix the New HBO? ]
The current YouTube offerings primarily target those with special interests, including golf, woodworking and photography, but if people show their willingness to pay, you can bet more YouTube entertainers will jump on board. Would you pay a dollar or two a month to watch Machinima, JennaMarbles or Smosh?
Nielsen found that among the 5 million households who don't watch TV (over-the-air or cable), but do watch streaming entertainment, more than half were under the age of 35.
Consider a young, 20s-something couple in Salt Lake City who fit Nielsen's Zero TV definition. Both go to school and work, leaving limited time for TV. Their Internet service runs about $60 a month, and they subscribe to Netflix and Hulu Plus. In addition, they purchase current episodes of "Mad Men," "Sons of Anarchy" and "American Horror Story" each week from Amazon Instant Video for $2 each; that's an extra $24 a month. Grand total for a typical month is $100.
The temptation to spend more on entertainment will grow. Last week, Pheed, a new social network that has attracted mostly teens and young adults (86 percent of its users are 15-25 years old), updated its app to let people use their iPhones to subscribe to pay-per-channels, which range from $1.99 to $34.99 a month. Musicians such as David Guetta charge $4.99 to subscribe to their feeds.
The next generation of entertainment consumers may not be complaining about the high cost of cable, but their streaming subscription fees may become just as expensive.