Over the past decade, more and more people have been “cutting the cord” and canceling their cable or satellite TV subscriptions in favor of streaming online video and a return to free over-the-air network television programming. Read just about any personal finance blog that talks about frugality and eventually they will advise that anyone interesting in cutting costs should ditch cable*. I disagree; I believe that cutting the cord can be much more expensive than you think it is.
(it’s going to be too unwieldy to keep saying cable/satellite or “cable or satellite subscription” so I’m just going to call it all cable for the sake of simplicity)
Now, to be fair, I”m not saying that you shouldn’t cancel your cable subscription. Just remember that there may be fees involved and other areas of your entertainment budget may increase.
Cutting the cord can bring early termination fees
For a long time, cell phone providers have trapped users into contracts with incentives. In recent years, cable tv has been catching onto this practice. Instead of discounting equipment, they discount your bill. A recent mailing from DISH offered half off of my bill for the first year if I switched to them with a two-year commitment. Sorry, but I’m only 11 months into my two-year contract with DirecTV!
Right now, my cable bill is $45. Because I have over a year left on my contract, canceling now would cost $300. That is equal to nearly 7 months worth of cable bills! Cutting the cord would be like pre-paying for over half a year’s worth of tv service, but not actually receiving the service.
If you are certain that you want to cut the cord, you might as well ease into the transition by maintaining your service through the end of the subscription.
Cutting the cord can lead to increased costs elsewhere
Proponents of cutting the cord like to point out that there are numerous options for getting your TV fix without cable. However, depending on your situation, there can be several flaws in any of these options.
Free-to-air programming
Network tv has always available for free to anybody who wants to watch it. The catch is that you need to live in or near the city from which your local network affiliate broadcasts. The further away, the weaker the signal and the larger the antenna needed.
For me, the local stations primarily broadcast from Denver, approximately 60 miles to the south. The FCC has a handy tool to determine approximate signal strength of different stations in your area, as does Antenna Web. According to the DTV Reception Maps, most of the stations would come in with moderate strength requiring an high-quality indoor antenna or a small outdoor antenna. As a renter, an outdoor antenna is obviously out, not to mention rather pricy. Digital antennas (as opposed to simple rabbit-ear or loop antennae), run around $40-$100.
Then of course, you need to have either a tv with a built-in digital receiver (sold after 2007), or a separate digital converter box. These run about $30-$100. So it could wind up costing you as much as $200 to watch “free” tv.
If you can watch it when it airs. Of the average of 3 nights per week that there is a prime-time, network television show that I watch, I’m not home when it is one for one and a half. Either some sort of DVR (could do a VCR if you can still find blank tapes) for another $100+, you try streaming.
Streaming video
Cord cutters LOVE to talk about streaming video options. Netflix, Hulu Plus, Amazon Prime, iTunes. Subscribing to Netflix streaming ($6.99/month), Hulu Plus ($7.99/month) and Amazon Prime ($79/year) works out to $21.56/month. That’s half of what I’m paying for my DirecTV. Of course, with a laptop and some know-how, you can get Hulu on your TV for free.
Of course free Hulu has some down-sides as well. They now won’t let you watch new shows within 8 days of airing unless you have a cable subscription. Even more restrictive, there are only a handful of companies that have worked out deals. My DirecTV doesn’t qualify me for watching timely episodes. The networks’ own websites are no better. In fact, that’s where the restrictions originated from.
And it doesn’t even cover the cable/foreign TV shows I watch like Falling Skies, Being Human, Lost Girl, and, of course, Doctor Who. Or all of the episodes of Chopped I watch on Food Network, or shows like Income Property or Property Brothers on HGTV. Or my wife’s MTV shows such as Awkward and Teen Wolf. And don’t forget Game of Thrones, True Blood, and Shameless on HBO and Showtime (thankfully the shows are on at different times of the year so we can switch between the two pay channels). That’s twelve cable shows on throughout the year. If we call the average season 15 episodes, that works out to 180 episodes that would need to be purchased separately
Average price of a TV show on iTunes is $1.99. That works out to over $350 per year or roughly $30 monthly, averaged out.
Combining that with the cost of all those streaming services, and cutting the cord would actually cost me $6 more per month than what my current subscription is costing me. In that case, it is more frugal to keep my cable!
Have you cut the cord? If not, did you do an analysis like this and determine it was cheaper not to?
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