Fed up with the rising cost of cable television, consumers have increasingly “cut the cord” on traditional cable television. I’ve been interested in seeing how these services compare and what developments have since occurred in the area of internet television. This is where YouTube TV comes in.
YouTube TV offers the same channels as your cable TV provider but bypasses the cord and delivers its service via a broadband connection. However, YouTube TV, which is currently only offered in the US, costs $35-$40/month in addition to the cost of your internet services. This is not much cheaper that what cable would cost when included in a bundle. So does cord cutting really make economic sense?
I came across an article (referenced below) that states that cord cutting and moving over to services like YouTube TV does not save money for consumers when the savings from bundling are considered. According to M Science’s findings, the average internet television subscriber paid $15 more than the average cable TV subscriber.
The article provides two possible reasons for this finding. First, the effect of unbundling services penalizes the consumer when each individual service starts to cost more on average. Second, consumers increase broadband speeds to support better quality and higher usage, which eats into the cost savings from switching to internet television.
If switching to internet television is not primarily motivated by cost saving, what other reasons could explain the increasing popularity of services like YouTube TV? According to the article, the idea of being able to pay for the channels you want is accepted with open arms after decades of being forced to purchase packages with channels that subscribers never watched. Moreover, the ability to watch live television from a multitude of screens means that the subscriber is no longer restricted to consuming television from the set-top box but rather the convenience of consuming content on mobile devices is desired.
Some background on YouTube TV and Hulu TV: https://www.cnbc.com/2018/01/22/youtube-live-has-about-300k-subscribers-and-hulus-live-has-450k-sources-reveal.html