Does cord-cutting save money?

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:

2 responses to “Does cord-cutting save money?”

  1. lee dorner

    As someone who is currently in the middle of a move, and just signed up for a new cable + internet bundle a few hours ago, I can attest to the frustration of being forced to choose a bunch of channels as part of a package when you really only want one or two of them. Given the choice between paying the exact same price for 10 channels I wanted plus another 20 I didnt want from a traditional cable company, or 10 I wanted and nothing else from a Youtube TV type of provider, I would probably go with the latter, just to support the cause of disrupting the traditional model.

  2. rasmeet mohar

    This is interesting Geet! The first thing I thought about when I read your post is Facebook’s current entrance into TV programming on their website. Although, the difference is they are not charging for cable programming like YouTube is , instead they are allowing for programs to be watched for free ! There are a lot of different comments about this. When it comes to news, Rupert Murdoch argues that Facebook should pay publishers to post news channels specifically because he is concerned about inaccurate news being displayed across the world, especially with Facebook’s global reach. However, if this causes Facebook to charge people to watch programs , I think Facebook will still be able to make profits – especially after reading your findings on Youtube’s TV model. Facebook has even hired a TV Network CEO to secure rights of major sports channels in order to live stream games which is sure to be a major hit.

    I personally agree and believe that the success of Youtube TV and the Facebook TV model is the fact that its convenient to the every day user because you can watch it from multiple screens – especially from your phone.


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