Does Cord-Cutting Always Automatically Save You Money?

For the past several months we’ve been working our way through real customers’ pay TV bills one by one, and one piece of reader feedback keeps bubbling up again and again: Why pay for TV at all? This is the age of the cord-cutter, right? Just ditch cable already!

So we got curious: how much money, if any, would one of our real live customers save by swapping entirely to online video?

As a yardstick, we’ll price against what our sample Comcast customer was paying. Their bill was nominally $99 for a triple-play package, plus $39.93 in taxes, surcharges, and fees, for a total of $138.93 per month. For the sake of easy math, we’ll round that off to a $140 bill, and work from there.

First Comes the Internet

You can’t watch online video without a broadband connection, so we need to start there.

Since we’re comparing against our sample Comcast customer from before, we priced out internet packages for new customers living in the same neighborhood where that customer lives. In that area, as in thousands of others, Comcast is the only available broadband provider so we’re sticking with them.

Under their current triple-play package, our subscriber has been getting 75 Mbps service. Assuming they don’t want to drop to a slower tier, Comcast will charge $79.95 (we’ll round to $80) per month for the same service level.

But Wait! You Also Get…

There’s a “but” (there’s always a but), but in this case it’s not a bad thing for our customer.

As Comcast presents it, that $80 internet service is the fool’s option. Because Comcast also offers “Internet Pro Plus HBO” for $55 per month — a $25 savings for the same level of internet service, plus a 45-channel TV package as well as HBO (which of course would then also include HBO streaming access through HBO Go).

In other words, cutting cable out completely will cost this triple-play customer $25 per month more than simply letting Comcast hook them up with some channels. Comcast, clearly, is pushing incentives very, very hard to keep video subscribers.

Of course, if there’s anything we learned from researching our bill guide, it’s that the promised rate is not what it appears. If the customer takes the cheaper offer, they will end up being charged $10 per month for the included X1 box, even if they never use it. They also may owe another $8 in Broadcast and Regional Sports fees.

That said, $55 + $18 is $73 — so even with taxes and pay-TV fees with the bundle, that bill is still going to be less than, or at least not more than, $80.

Most consumers, when faced with a choice between “please charge me less for more” or “please charge me more for less,” are going to go with the former and therefore end up with more stuff — which probably helps explain why Comcast, in their latest quarterly report, is mysteriously bucking the industry-wide cord-cutting trend and says their video subscriptions are up.

Anyway, for the sake of argument, let’s assume that when all the taxes, fees, and surcharges are included on Internet Pro Plus HBO, that in most jurisdictions (including this one) it comes to about the same as just paying outright for internet only. Given that, we’ll assume this customer’s monthly Comcast bill, no matter what, now drops from $140 to $80. That leaves us $60 worth of streaming TV to play with.

The Golden Age of Watching Things

So now that our customer is shopping over-the-top services, there a lot of big-name ones they can choose among:

• Amazon Prime, charged monthly, is $8.99.
• Hulu Plus, with commercials, is $7.99.
• Netflix, in HD, is $9.99.
• Starz, as an add-on to Amazon, is $8.99.
• Showtime, as an add-on to Hulu or Amazon, is $8.99.
• HBO Now, through any provider, is $14.99
• PlayStation Vue is between $29.99 and $44.99
• Dish Sling is $20 (unless you buy add-ons)
• CBS All Access is $5.99

We have $60 in our budget to play with, and there are a lot of different ways of putting that together. A few ideas:

• Sling ($20) plus Amazon Prime ($9) plus Netflix ($10) plus HBO Now ($15) = $54
• Vue ($30) plus Amazon Prime ($9) plus Starz ($9) plus Showtime ($9) = $57
• Amazon Prime ($9) plus Netflux ($10) plus Hulu ($8) plus Starz ($9) plus Showtime ($9) plus HBO ($15) = $60

…and so on and so on. The combinations are not infinite, but they are plentiful.

But let’s say our customer actually likes some of the basic cable channels they could get through Sling or Vue. In that case, the best way to save money, or to maximize the amount of programming they get for the same cash, is for our customer to… let Comcast keep selling them TV.

If the subscriber buys the “Internet Pro Plus” package, they do not need an HD antenna, an HBO Now subscription, or an alternative over-the-top bundle like Dish Sling or PlayStation Vue to get that content. This customer, for the $60 difference left after paying that Comcast bill, could buy Amazon, Hulu, Netflix, Starz, and Showtime — and still have $15 left over in the budget.

In Conclusion: Always Do Your Own Math First

Although dropping to one billed service from three billed services should be a price-saving option, by most common-sense metrics, it might not be.

If our customer wants a basic cable or cable-like package and HBO, they’re financially better off letting Comcast sell it to them. Comcast will basically pay them not to go be a Sling or Vue customer, and there’s no reason not to take advantage of that offer if that’s stuff this family will watch.

That said, every cable provider is going to have a different plan on the table, and that’s always going to change your math too. Time Warner Cable’s 50 Mbps plan, right now, costs $65 and only offers internet access. Charter, on the other hand, offers 60 Mbps internet-only plans for $40. And Verizon offers new FiOS subscribers 50 Mbps FiOS plans for $50.

And there’s one last hurdle: a cord-cutter is, by definition, an existing customer. You may not be eligible for the plans offered to new customers… but calling to cancel may also get you a retention deal as good or better. Our tip? Figure out your budget, the content you want access to, and whether or not you’re willing for your provider to call your bluff before you cancel cable.

by Kate Cox via Consumerist