ITCOMO

Why is Cable TV so Expensive?

The two main reasons cable TV costs so much is 1) Lack of competition and 2) Lack of consumer control over content. Here's what I mean by that.

Lack of Competition: That's an easy one. When there's only one gas station in town, the owner can charge pretty much whatever he wants, yes? It costs huge amounts of money to lay cable to homes and businesses so the barrier to entry for a new cable TV company is high. Making things worse, the existing cable cos have managed to buy off our legislators making it difficult or flat-out illegal in many areas for new companies to come in, thereby protecting their precious monopolies.

Lack of Consumer Control over Content: This factor is not well-understood by most but it makes a big difference. With traditional cable TV, you watch what is provided and when. Your only control is choosing which channel to watch from those available in the package you subscribe to. That's it. You have no control over what is transmitted or when. Except for some minor time-shifting using a DVR, you are hostage to the cable co's schedule. And even with a DVR, the program still has to "air" before you can record it.
 

Said another way...    Imagine if the brand of car you were allowed to buy was based on where you lived. Maybe you live in a small town where only Ford was allowed to sell cars. Or maybe your town is a little larger and you had your choice between Ford and Toyota, but no one else. Now, further imagine that each car maker had their own gas stations and you had to buy their gas. As you can well imagine, the car itself would be pretty expensive (because you had little or no other choice) and the gas to make it run cost $10 a gallon because, again, you had no other choice.

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That would suck, yes?

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That's what the cable TV industry is like. Most people have only one choice for cable TV -- or two (sort of) if you count satellite like DirecTV. And since the cable TV company also controls the programming available they have no incentive to reduce costs. Why should they? Where else are you gonna go? You either watch the channels and programs they offer or go pound sand. It's not like you can shop around for cable TV. It's just like my outrageous car and gas example above.

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In short, what streaming does is unbundle the cable TV model -- decoupling transmission from content. Transmission is the physical cable infrastructure itself (the "pipe") and content is the stuff going through the pipe. In the old cable TV days, both those things were handled by the same company. That's bad.
 

The internet turns this entire model on its head. With streaming on the internet, the consumer chooses what to watch, from whom, and when. Internet service is what we call a "dumb" or "empty" pipe. You are paying your internet provider (Mediacom, CenturyLink, AT&T, Comcast, etc.) only for the pipe and not the shows that fill the pipe. You, the subscriber, have complete and total control over what goes through that pipe. And that, dear reader, changes the economic ecosystem of paid television in a huge way.

That freedom to choose unshackles you from the cable co's content provider agreements* letting you choose whatever content providers you want, including those with no agreement with your cable co. You might call that "content competition" -- and that is what's missing from traditional cable TV.

 

* Contracts with the various media companies that provide all the shows and channels

An Industry Quaking in their Ferragamos

This very idea of content competition that cord-cutting gives consumers has the entire television and movie industry unable to sleep at night. There are countless billions of dollars flying around annually in all different directions between numerous interests in this industry: Between cable providers, studios, networks, advertisers, etc.

No one knows how the cord-cutting endgame will eventually work out as all the players are frantically trying to secure their respective futures in this seismically shifting paid television landscape.

This is mostly good news for consumers.

À la Carte Finally Arrives (sort of)

Cable TV subscribers have been clamoring for years for à la carte pricing (picking only the channels you want) yet it's nowhere to be found. Even today, the cable companies love to tout the huge number of channels they offer. But who cares? According to Nielsen Ratings, the average US home receives close to 200 channels but those subscribers only watch about 17 channels! Less than 10 percent of channels have regular viewers.

So why do the cable companies lard their lineup with all that crap, over 90% of which goes pretty much unwatched? To be fair, the fault doesn't lie entirely with your cable company. Most of the popular channels are owned by media companies and studios like ABC, CBS, NBC, Fox, HBO, Time Warner, Disney, and others. If your cable company wants to carry a popular channel they are often obliged to carry some or all the crap channels offered by that media company as well. It's a huge money grab and the American TV consumers are the ones being fleeced. This makes à la carte pricing pretty difficult.

But not with streaming providers which are not owned by the cable cos. No longer are you forced to pay for content that doesn't interest you. Streaming is the way to get the à la carte pricing model that's been teased for so long but never came about with traditional cable TV.

 

It's not perfect but it is better. For a true à la carte experience, there would be only one or a few providers that offered completely unbundled  services. e.g. When you visit a restaurant or cafeteria, you have an independent choice of any item(s) on the menu.

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Streaming Only, no Cable TV.
 

Most people by now have at least one streaming service. If you have Amazon's 2-day Prime delivery service, then you automatically have Amazon Prime Video. Not everything on Amazon video is included, but a lot of stuff is, especially Amazon's original content. You might also have Netflix.

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Surveys on Statista indicate that younger people are less likely to subscribe to traditional cable TV or satellite. In fact, only about 1/3rd of the 18-29 year old segment subscribes to traditional cable TV or satellite. But that percentage grows considerably at higher age groups with the 65+ year old segment topping out at 81 percent.

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Even the 65+ segment uses streaming services. But they are also paying for traditional cable TV. The reason for this is likely a combination of inertia, unfamiliarity, or the lack of technical savvy to implement and commit 100% to streaming as the only source of programming.

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So while using streaming services is great and wonderful, you aren't going to save any money unless you cancel your regular cable TV. In fact, it's costing you even more.

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Be careful though: You do not want to cancel your internet service! Only the TV portion of your telecom services.

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Today's streaming landscape is larger and more diverse than ever. We're in the middle of a massive change in how people watch TV. A world where people can subscribe only to what interests them and leaving all the other cable company mandated crap behind.

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Significant Streaming Service Fatigue

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But while all these choices seem like a good thing, there are downsides. Years ago, Netflix pretty much had streaming all to themselves. That was great. You could watch most shows without hassle all for one comparatively small monthly payment. But there was no way the media industrial complex was going to leave all that money on the table.

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I mean, when you had something like 90 million households subscribing to cable TV at an average cost of about $1,000 per year each, that's around 90 billion dollars(!) per year. As people by the millions started cutting the cord over these last 10-15 years or so and subscribing to 2 or 3 streaming services for $25-$35/month ($300-$420/yearly), you can quickly see tens of billions of dollars of industry income potentially vaporizing.

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There was and is no way the TV entertainment industry would allow that to continue.

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So these last few years (as of this writing in mid 2024) have seen a big increase in the number of streaming providers, balkanizing the offerings. No longer would just one, two, or three services like Netflix, Amazon, and Hulu suffice. Now there are multiple dozens, each offering their own mix of programming, some of it original content

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Most shows stream only on one provider. So if you like and follow a bunch of shows then you might need quite a few subscriptions. That can get expensive, easily hitting $100 a month and more. To cut costs, people often respond by subscribing, bingeing for a few months, then cancelling. Rinse and repeat, cycling between perhaps a couple dozen streaming services. Subscribe to all those at once and, well, you're back to paying cable TV prices or worse. It makes watching your shows either inconvenient and cheaper or convenient and expensive. Pick one.

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We all know that bingeing is the TV-watching equivalent of gobbling down a whole bag of Halloween candy. Most people don't really enjoy watching their shows that way (ok, some do). You get overloaded, but then you also don't want to stay subscribed to whatever random service it's on for a whole year or more just to watch that one show at a leisurely pace, either. Can't blame you for that!

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The streaming services have been on rate hike binge of late, too. Customers are spread thin due to the sheer number of services so they are hiking their rates trying to make money. That, in turn, creates ever more subscriber churn.

 

In turn, some of the larger streaming companies are courting each other to merge, trying to consolidate subscribers. It's a highly fluid and unstable industry, constantly changing. What I knew about the streaming world five years is useless today.

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As of late, streaming companies are now introducing lower cost tiers that include advertising. Pay a few bucks less in exchange for watching ads. This is the hot topic right now. People hate advertising but they hate large monthly streaming costs even more. So streaming providers are trying to crack that code -- optimum pricing vs. inclusion of ads or not based on their particular demographic, their income status, and their level of advertising revulsion.

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Some streaming companies are experimenting with yearly subscriptions in exchange for a discount. Watch for this to become more common as a way to stabilize flighty subscriber bar-hopping.

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Pay-Per-View Services

There's also a number of pay-per-view services that require no monthly subscription. Maybe you want to watch a recent movie that's not yet available on your favorite subscription streaming service. The beauty of PPV providers is they cost nothing to have around. You only pay when you use it, hence being called pay per view.
 

• Amazon Video

• Apple iTunes

• Vudu / Fandangonow

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Movie rentals generally have a time window in which you must watch after you click the rent button.

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For movies, I may pay $4 to rent a movie on PPV, but at $15 or $20, I would never buy unlimited viewing. If I want to own a movie that I can watch any time, then I'll buy the actual DVD or Blu-ray -- used from Amazon or eBay, if possible.

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Your tastes may vary, but I generally don't rent individual TV episodes as that can get expensive. For a 26 week season at $2 a pop, that's $52 for a single season of most TV shows which is quite a lot of money. If you want to watch old TV shows and it's not available as a stream except on PPV, then I'd recommending buying the DVD or Blu-ray disks used from Amazon or eBay. They often cost far less than the streaming rental price and then you'll actually own it and can watch any time. Or resell them and recoup most or all your money.

Over the Air

Rabbit ear antennas may be a thing of the past, but receiving OTA (Over The Air) TV is definitely not dead! You can watch local channels (network affiliates and the independents) by setting up a digital TV antenna. The antenna costs around $50 or so and installation isn't difficult. No monthly fees! Just like the old days -- commercials and all.

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Often you can simply mount the antenna to a window. But sometimes the signal is too weak which may require an outside installation, possibly on a mast.

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Some HOAs (Home Owner Associations) have rules prohibiting outdoor antennas. Don't let that stop you. Federal rules specifically allow certain antennas and disallow HOA prohibitions. If your HOA has such prohibitions, contact them and politely explain that such prohibitions are unenforceable and to grant you a variance.

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More on your rights to install an outdoor antenna here and here and here.

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Monthly Data Caps

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On an internet connection, everything you do results in data being transferred -- mostly downloaded to you. Streaming a movie or TV show is no different - it's just another form of data that is downloaded. It all counts against your monthly data caps (if you have caps). Very few customers actually hit those data caps, however. You'd had to be watching many hours of streaming TV per day.

 

Data caps vary, but for most traditional cable-based internet plans, you'll get 1 TB. Wireless and satellite generally have lower caps. Netflix estimates that SD (standard definition) programming consumes 0.7 GB per hour of viewing and HD consumes about 3.0 GB per hour. You could watch about 333 hours of HD streaming before you hit a 1 TB monthly data cap. That's about 11 hours per day of non-stop viewing on a single TV. Or about 5 1/2 hours per day non-stop on two TVs. Unless your family are all couch potatoes, you are unlikely to hit these caps.

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Here Today and Gone Tomorrow

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Streaming providers are constantly changing their offerings. e.g. If you find a good but older show on Netflix with many past seasons (lots of episodes) to watch, like How I Met Your Mother or Friends, you may find that Netflix drops the show before you've finished watching the entire series. That sucks!

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Why does that happen? Because Netflix and the various content providers sign a contract specifying, among other things, how long Netflix will carry a particular show. The show is dropped when the contract expires. Maybe it'll come back later, but most likely not. Even worse, sometimes content providers drop their own shows because of quirks in the tax law. Congress has talked about fixing that.

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What can you do? There are ways to permanently copy shows from Netflix and other streaming providers to your computer ahead of time so that even if they drop a show before you are finished watching all the episodes, you won't be left out in the cold. Then you can cast the saved show to your TV and watch at your leisure with no concern about it being yanked.

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Obviously Netflix and other providers don't approve of this but there's practically speaking little they can do about it. This requires some amount of technical savvy or knowing a friend that can do it for you.

 

Our Approach

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Our approach is to wait till a show has wrapped then buy the entire series on Blu-ray disks. Yes, you'll be behind. But there's advantages to this approach if you aren't an impulsive type.

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1. You'll know if the show actually wrapped as planned and ended organically; not having been cancelled prematurely. Many (most?) shows are cancelled at some point in their run without a proper wrap leaving plot lines unresolved and fans wanting. That's very aggravating.

2. Buying the entire series as a boxed set at its conclusion is cheaper than buying individual seasons while the show is still in production. I can sometimes find a used copy but even new copies are generally not very expensive.

3. You can read reviews, talk to friends, and decide if the show is actually worth watching before investing a lot of time in it. In the past, we've suffered from a few bad shows that looked promising and finally bailed on them. Reviews certainly aren't conclusive proof that you'll like or dislike a show, but they can help.

4. You can watch it again years later even if no streaming provider has it available or sell the disks and recoup some money.

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Our approach requires a more specific-show-centric mindset rather than menu surfing whatever that streaming provider offers -- most of which is probably not very compelling.

Closing Commentary

TV watching has changed a lot over the years. Broadcast network TV shows, renting movies at Blockbuster, then cable TV, and now streaming. One of the best features of streaming is that, finally, after long last, it's possible to completely avoid commercials and watch what you want, when you want.

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It's true that cutting the cord requires some change in how you enjoy TV. But I submit the "old way" of watching cable TV is simply a learned habit and is no more the right way than a streaming-only option. You can unlearn the old way and enjoy the new way just fine.