Dumping cable TV is commonplace and Bruce Springsteen’s lyrics “150-channels and nothing on” have never been more true. In 2022, the cable industry lost over 5.88 million subscribers because the most exciting content is now on the new streaming services. Cable TV has become very dull. Most channels feature movies you have already seen, niche channels no one watches and lots of reruns of popular dramas and comedies.
The biggest problem with basic cable is all the mind-numbing commercials viewers have to suffer through. Watching basic cable shows after watching ad-free streaming channels is very hard. And why pay extra for premium cable channels like Showtime with Netflix, Prime Video, Apple+, and Disney+ available.
I cut the cord because my cable bill was embarrassingly high. I had several streaming apps (Netflix, Prime Video, MAX) and was adding more (Apple+, Disney+, etc.). In 2021, my cable bill hit $340. It included Internet & phone, basic cable channels, a few pay channels, and Tivo service among other costs. My taxes, fees & surcharges alone were an additional $51.
So I dumped cable but kept the broadband service ($116 mo). You need high-speed Internet in order to access the new alternative streaming service. I still wanted access to the broadcast networks (ABC, NBC, CBS, FOX & PBS) and some popular cable channels so I signed up for YouTube TV. It costs $72.99 monthly, offering 100+ channels (competitors include Sling & Hulu). Like other streaming apps, it can be used on a your smart TV, phone, tablet, and computer. The service has an intuitive user interface and unlimited recording capability.
The monthly subscription for a streaming service depends on whether you select an ad-free or ad-supported option (if available); whether it is bundled with other streaming services, and in Netflix’s case, based on the number of screens you can watch at the same time and the number of devices you can download onto. If I subscribed to the following services: YouTube TV ($72.99) and ad-free Netflix ($19.99), Disney+ ($15.99), MAX ($14.99), Apple+ ($6.99), and Prime Video ($0.00 with Amazon Prime) my entertainment expense would be $1,571 annually. All you need is broadband service and a smart TV.
I added one piece of hardware, AppleTV ($129/64GB storage or $149/128GB storage). It is not a TV, as the name implies, but a small, powerful media center, specifically designed to work with streaming services. AppleTV displays all your streaming App logos on your TV screen as on your iPhone. The AppleTV remote is easy to use and allows smooth navigation between Apps. Popular smart TV manufacturers like Samsung offer similar App navigation. However, their operating system is not as powerful as AppleTV or similar devices like Roku.
In the short term, cutting cable will lower your entertainment costs and help offset spending on streaming services. However, longer-term, you should spend more time outdoors and reading books if reducing your streaming entertainment costs is a priority. Rate increases are in our future because original content is costly and bidding for popular sports content is happening. Netflix, Prime Video, and Apple+ spend billions making unique original content to attract subscribers. Disney+ exploits the content it owns. This content includes movies, children’s content, and they aggressively create original content based on their popular Marvel and Star Wars brands. Disney owns ESPN and most of Hulu, and offers discounted bundles if you subscribe to two or all three services. MAX offers Warner Bros. movies, HBO, DC Comics, and Discovery content. Paramount+, which owns CBS & Showtime, offers bundles that include popular CBS shows, Paramount movies, Showtime content, and original series based on its Star Trek franchise.
Netflix is still the big dog. They spent wildly on original content to become the industry leader borrowing billions based on new market growth. However, Netflix’s is now a mature subscription business with only limited growth. Therefore, future revenue growth must come from periodically raising rates, offering a low-cost tier with limited advertising, and adding subscribers by forcing people to pay up by limiting password sharing to only people living in same household. It appears to be working based on Netflix’s last earning call and stock price jump. Look for the other streamers to follow their lead.
There will be 3-4 big streaming winners. Niche streaming players will disappear or get swallowed up by a bigger fish. A few big streaming players have powerful advantages. Prime Video is subsidized by Amazon’s massive retail web business and people’s desire to pay $140 annually to get stuff shipped the next day. Apple+ is subsidized by Apple’s hardware sales. Disney is a large diversified, media company that is committed to not be marginalized by its competitors, and Netflix, the industry leader has first-mover brand leadership. Growth drives the value of streaming services and helps lessen the need for rate increases. Unfortunately, all subscription services struggle with annual disconnects, especially when they get big and the law of big numbers come into play. For example, if you have 200 million subscribers and lose 13 percent of your subscriber base a year, you must sign up 26 million subs before you grow your base. Slower growth may cause streaming services to raise rates, and if the monthly cost gets too high too fast, we may be dumping them in a few years.
Hugh Panero, a tech & media entrepreneur was the founder & former CEO of XM Satellite Radio. He has worked with leading tech venture capital firms and was an adjunct media professor at George Washington University. He writes about Tech and Media for the Spy.