More and more newspaper writers are starting to write
articles about cord cutting and a lot of them seem to take a particular angle
of “You better watch out or else you may not end up saving any money by cutting
the cord.” I’m going to highlight two of
these recently published articles and point out some of the fallacies and
errors with their analysis.
The first article was published on May 15, 2017 in The
Denver Post by Tamara Chuang titled “HuluLive, Sling TV, DirecTV Now and others bring live alternatives to cable, butwatch out for the bottom line”. It
examines the five major streaming services (sorry FuboTV) and compares them to
Comcast on a number of factors including overall cost and the number of
included “top 30 channels”. Compared to
much of the garbage that is written out there, this article is actually useful
in that it’s fairly comprehensive and explains things clearly. However, it does have some errors in its analysis
which I’m going to highlight below.
Error 1: Using the
cost of internet service as an additional (marginal) cost instead of a fixed
(already existing) cost.
The article says “But subscribing to a $20-and-up plan
doesn’t stop at $20. You still must pay for internet service, which can cost
viewers in the Denver area $30 to $65 a month.” and also “ ‘That’s the fallacy
of the argument for cord cutting. You’re not really cutting the cord but
swapping it for another one,’ said James Willcox, senior editor of electronics
for Consumer Reports. ‘Unless you’re getting it over the air, you need
broadband. And if you offload more entertainment to (internet video services)
you may have to speed up your internet plan and pay more for it.’
For some reason, almost every single one of these
articles is under the assumption that the person looking to cut the cord only
subscribes to a pay-tv service and does not subscribe to an internet
service. But only 13%of the population currently does not have internet access. Yes, if there is an individual who currently
subscribes to a cable/satellite television service and does not have internet,
that person would have to pay an additional cost for internet service in
addition to the cost of any streaming service(s) he/she chose to subscribe
to.
It’s also worth noting that there are two primary groups of people who may need to spend more on their current internet service after switching to a streaming service. The first is those that plan on having a large number of streaming devices operating at the same time and/or are currently on a very slow DSL-type (6 Mbps or lower) plan. These people might need to increase their current speed level and therefore, they would incur an extra cost for their internet service compared to what they are currently paying. Another group is people who currently have an internet plan with a data cap who may end up paying more either to remove the cap (i.e. receive unlimited data) or incurring overage fees for going over the data limit. For example, a household with 4-5 heavy TV users using only a streaming service could very easily use up the 1 TB monthly data cap that many internet providers offer. So, again, yes it is true that there are people who fall into the situations described in the article. But these situations would probably not apply to all or even most households, yet the article assumes they would.
It’s also worth noting that there are two primary groups of people who may need to spend more on their current internet service after switching to a streaming service. The first is those that plan on having a large number of streaming devices operating at the same time and/or are currently on a very slow DSL-type (6 Mbps or lower) plan. These people might need to increase their current speed level and therefore, they would incur an extra cost for their internet service compared to what they are currently paying. Another group is people who currently have an internet plan with a data cap who may end up paying more either to remove the cap (i.e. receive unlimited data) or incurring overage fees for going over the data limit. For example, a household with 4-5 heavy TV users using only a streaming service could very easily use up the 1 TB monthly data cap that many internet providers offer. So, again, yes it is true that there are people who fall into the situations described in the article. But these situations would probably not apply to all or even most households, yet the article assumes they would.
Error 2: The comparison cost among the services is misleading
for several reasons.
For each of the five streaming services plus Comcast,
there is a total monthly cost figure given.
However, the criteria that leads to this cost figure is misleading for
the following reasons.
·
As mentioned earlier, the article treats
internet access as an additional marginal cost that would be needed to cut the
cord.
o This
would only apply to at most, 13%
of the population that currently does not use internet
service. Thus, the total price
for each streaming package is $30 more than it would be for most, but not all,
people.
o As
also mentioned earlier, some people may end up paying more for internet by either
increasing the speed of their internet package, paying to receive unlimited
data or by paying overage fees if they go over the allotted data cap. Thus, listing a blanket $30 additional charge
on each streaming package is misleading since it would not apply to all, or
even most, cord cutters.
·
The cost comparison uses a metric “top 30
channels”, which it defines as “the 30 most-watched channels from September to
May, according to the Nielsen ratings service,” to determine an approximate
monthly cost for each service. The problems with this are as follows:
o It
doesn’t even list anywhere in the article what these 30 channels are.
o It
calculates the cost for each service by adding on additional top 30 channels,
if possible, to receive as many as possible.
§ For
example, the Sling Orange base package has 13 of the top 30 channels, but there
are an additional 9 channels that can be added via add-on channel packs for a
total of $35 (Note: I’m assuming that $35 comes from adding Sling Blue for an
extra $20 plus 3 extra $5 channel packs but the article doesn’t explain where
the $35 total came from). Thus, the
total cost for the Sling package comes to over $90 (!) due to this and several
other misleading assumptions (discussed later).
o Listing
the number of top 30 channels available on the both the base package and other
additional add-ons is useful but it should not be included in the total monthly
cost estimate. Doing so misleads the
reader by showing a possibly inflated cost depending on his/her channel preferences. If the article is going to list the total
monthly cost to receive as many top-30 channels as possible, it should also
list the base monthly cost without all the additional add-ons.
·
The total cost for each streaming services
includes the cost of CBS All-Access ($5.99/month) for those that do not carry
CBS.
o There’s
nothing wrong with listing which local channels are included in each service
and/or the options that exist to receive local channels that aren’t included,
but this should not be included with the total cost estimate.
o Including
CBS All-Access for $5.99/month inflates the price of Sling TV and DIRECTV NOW
as it is a purely optional add on. Some
people have no interest in receiving CBS and/or already receive it over the air
(OTA) via an antenna. Voluntary add-ons
should not be counted in the total monthly price cost since they are optional
and thus, not required.
·
The Comcast cost comparison is misleading for several
reasons.
o First,
there are many additional fees (some optional, some mandatory) that can apply
to this package including the regional sports fee, HD Technology Fee, franchise
fees and additional outlet fees, that aren’t listed anywhere.
§ Regional
Sports Fee - I couldn’t find the exact channel lineup anywhere for the
package cited (X1 Double Saver), but it appears to include the Digital Starter TV
package which typically includes any/all local regional sports networks (RSNs)
which would then incur the regional sports fee. The RSN fee costs up to $5/month and is
generally mandatory for those subscribing to Digital Starter and above. This
fee is not mentioned in the article, but I think it should be---assuming that
Digital Starter is indeed the level of TV service included in the X1 Double
Saver promo.
§ HD
Technology Fee – Also absent from the article is that all the streaming
services broadcast in some form of HD, but that the Comcast package price is
for SD service, not HD. HD service
typically costs an extra $10/month from Comcast. Now personally, I don’t mind watching service
in SD (I’ve never paid for HD service as long as I’ve had cable/satellite), but
most people aren’t like me. Thus, to
receive an equivalent viewing experience (in terms of picture quality), the
Comcast package would cost an extra $10/month more (technically $10.77 once you
include the 7.65% sales tax rate for the city of Denver).
§ Franchise
fee – If the city/county you live in has entered into a franchise agreement
with Comcast, then you will most likely be charged a franchise fee, usually
only on the cable television portion of your bill, on your monthly bill. It’s
important to note that this money ends up going to the local franchise authority
(i.e. city or county), not to Comcast. The
rates all vary by location, but it can add an extra 6% (of the pro-rated
television cost) to your bill that would you would not pay for subscribing to
any of the streaming services.
§ Additional
Outlet Fee - The package price quoted is for only one outlet (i.e. TV) of
service; additional outlets cost anywhere from $3.99 (digital adapters that
only receive some chanenls) to $9.99 (full cable box) per month. Thus, the comparison chart is comparing the
monthly total cost for one outlet of service among the options, which is fine;
what it fails to mention though is that for additional outlets, the streaming
service costs would not change (except for Hulu if you one chose to purchase
the unlimited streams option) whereas the Comcast estimate would go up. For example, adding two additional full boxes
(i.e. TV’s), which would allow a household to watch programming on 3 TV’s simultaneously,
to the Comcast service would increase its monthly cost by $20 + sales tax.
o Second,
the Comcast price cited is only a promotional price
§ While
that promo price is valid for new customers, would someone who is a current
Comcast customer and is debating about whether to switch to a streaming service
be eligible to receive it? I have no
idea. There are tons of stories of
individuals on the internet explaining how they called in, threatened to cancel
their service and were granted a much lower price on their cable TV/internet
bill or received an increase in their service level for a negligible price
increase. (Editor’s note: I myself did this
two weeks ago when I called to put in a cancellation date for our internet only
service with Comcast and was offered Blast (200 Mbps download/10 Mbps upload)
for $49.99/month, which is four cents more per month than what I had been
paying for Performance Starter (10 Mbps download/2 Mbps upload.) I was ready to switch to Frontier---and had
scheduled an installation---since the Performance Starter was too slow at times).
§ The
price used for Comcast should be the regular non-promotional price since the
prices listed for all of the streaming services are the regular, every day
prices. This would give a true
apples-to-apples comparison. Using the
promotional price means that the cost comparison guide is only applicable to
individuals considering a streaming service that currently do not have Comcast
TV service.
Overall, this article is more useful and informative than most of the mainstream media articles written about streaming services, but it still falls short in several areas. It repeats the myth that most people who would switch to a streaming service either don’t currently have internet service or would need to pay more to improve their internet service. Counting these extra monthly costs towards the cost of the streaming service for everyone paints a misleading picture about the actual amount of money than can be saved. Additionally, adding in optional packages to receive as many top-30 channels as possible and/or local channels inflates the cost of the streaming services (and thus, deflates the hypothetical amount of savings from cord cutting). Finally, I don’t believe the accurate for Comcast is accurate for several reasons: it leaves out several mandatory fees (Regional Sports Fee, Franchise Fee) that increase its cost relative to the streaming services, it doesn’t mention any of the optional fees (HD Technology Fee, Additional Outlet fee) that may be incurred which the streaming services do not have and finally, it uses a promotional price that may or may not be available to current Comcast customers. Thus, a customer who wants HD service and the ability to watch on 2 TVs simultaneously would pay the listed amounts for each of the streaming services, but would end up paying $131-$137/month (not $117) to Comcast (depending on whether they wanted a full cable box or a digital adapter on the 2nd TV). Unfortunately all those things I just described make the savings amount from “cutting the cord” seem much smaller than it would be in actuality for most people.
(Posted 5/26/2017)
The next article I’d like to examine was published on May
20, 2017, in the Los Angeles Times titled “Cutting the cord doesn't necessarily meancutting the cost.” This article
is actually a lot less useful than first, primarily because it is very broad
and not detailed, but also because of the large number of false and/or
misleading statements in it.
Error 1-The lady
cited in the article is not a true cord cutter.
She didn’t have any TV service and then decided to subscribe to
streaming services instead of cable.
The person cited in the article, Tahlia Hein, moved to
New York City without a TV, but when she & her roommates got one, they
decided to sign up for several streaming services. In other words, this was not a person who had
a cable/satellite TV subscription and then decided to drop that in favor of
streaming services. Rather this person
appeared to be more of a cord never who decided to go with streaming services,
instead of a cable TV subscription, and as a result her monthly expenses
actually went up compared to where they were previously. Typically, a cord cutter is someone who has a
current cable/satellite subscription and then choose to cancel it in favor of
only over-the-air (OTA) programming and/or streaming services, for either
convenience and/or monetary savings. But
this situation is the exact opposite.
Thus, it’s odd that this example is cited since it has very little
relevance to the main point of the headline, which is that cutting the cord
might not be that much cheaper than cable.
Error 2-The cord
cutters statistics are from Dec 2015 and therefore are outdated.
The article then states “Forgoing cable and satellite TV
is a decision that’s increasingly common — 1 in 7 Americans is a cord cutter
and an additional 9% have never had a cable or satellite TV subscription…” However, the Pew Research Center survey these
are linked from is from December 2015, almost 18 months ago. More recent statistics suggest that 25% of US TV households do not have an active cable
or satellite subscription according to GFK.
Error 3-The PlayStation
Vue monthly base fee is listed as $39.99 which only applies to certain markets.
A table which compares the various cable-lite streaming
services lists the Monthly Base Fee for PlayStation Vue as $39.99. However, that cost only applies to the seven
original launch markets (Chicago, Dallas-Fort Worth, Los Angeles, Miami, NYC,
Philadelphia, San Francisco) where all four broadcast networks are included. All other markets start at $29.99/month. The chart should indicate this with some sort
of footnote.
Error 4-Where does
the Sling $45 a month figure come from?
The article says “Until recently, live sports programming
was nearly impossible to watch without a cable-TV subscription. But now sports fans can get their fix through add-on
packages via Sling TV, for $45 a month,…” without any explanation of where the
$45 comes from. The Orange + Blue
packages together cost $40/month. Is the
other $5 from the Orange Sports Pack add-on?
The link which is listed in that sentence goes to a San Diego Union
Tribune article, “A sports junkie's journey to cut the cord”, but that article does not mention
the $45 monthly cost anywhere? It’s just
weird that this reference is used when there is no package defined at $45/month
instead of say PlayStation Vue’s Core Slim package for $35/month (or $45/month
in select markets) which has virtually all the same sports channels that Sling
TV would have, except for Pac-12 Networks.
Error 5-The
$103/month average TV & internet bill price is misleading as it is deflated
by much cheaper TV + internet packages such as Internet Plus or Internet Pro
Plus (Comcast plans). Also the average
internet only monthly price ($52.29/month) is from a different survey than the
average TV & internet monthly cost.
The article cites figures for the “average cost for
pay-TV service nationwide, including plans bundled to broadband and sold on
their own”, $103/month, and “the price of Internet access only, without pay TV”,
$52.29/month. It then uses these figures
to compare the cost of cord cutting to the cost of cable. But there are several issues with that
comparison.
First, due to the rise of cord cutting with many
households wanting to subscribe to internet-only service, many cable companies introduced
internet + very basic cable (usually only local channels plus some shopping
channels) + a premium channel packages to try and keep these individuals as “pay
TV” subscribers. And, more importantly,
they frequently run promotions on these packages, instead of the internet-only
packages, to make them cheaper than subscribing to internet-only service, even
after all the taxes & fess are included.
For example, Comcast has Internet Plus & Internet Pro
Plus packages which include limited basic cable, internet service (25
Mbps-Plus, 100 Mbps-Pro Plus) and a premium channel (either HBO or
Showtime). The regular price of these is
more than the regular cost of standalone internet. However, the difference is usually small
enough so that the package is cheaper than the cost of subscribing to internet service
and HBO separately. Additionally, they
will offer promotions on these packages making them cheaper than the comparable
internet-only service.
Why would Comcast do this? Basically, for promotion and advertising
purposes. Not only does Comcast get to
inflate its number of “TV subscribers” for advertising purposes, i.e. the more TV
subscribers it has, the higher rates it can charge for ads even if only on
local networks, but they also get to use the good publicity whenever quarterly
subscriber figures are announced. Every
household that was moved from an internet-only package to a “skinny bundle” now
counts as a new TV subscriber and every household that wanted to cancel their
TV service remains a TV subscriber, i.e. the number of subscribers doesn’t
decrease as it would if that household became internet-only. Thus, I believe the $103/month average figure
is misleading. Instead the median figure,
the cost at which half pay more and half pay less, would probably be more
useful when trying to compare the cost of cord cutting vs a cable/satellite
subscription. Or at the very least, the
median figure would show how the TV subscribers are in fact distributed in
terms of cost.
Second, and more importantly, the two figures used are
from two completely different surveys compiled by two completely different companies
in two different years. Thus, you cannot
use them as a basis for comparison. The
studies could have completely different methodologies, sample sizes, etc. and
on top of that aren’t even from the same time periods (2016 vs 2017 Q1). Taking the internet-only cost figure from
2017 and using that (along with streaming costs) to compare to the average pay
TV & internet bundle cost from 2016 is not an apples-to-apples comparison.
Lastly, a hypothetical example based on average costs is
not helpful to most consumers. What
really matters is how much would a streaming service cost for me versus the
amount I currently pay for cable/satellite TV.
Just showing an example with average costs is useless unless the person
who is considering cutting the cord happens to be close to the average amount
for their current costs.
Error 6-The person
cited in the article disproves the entire hypothesis; she found a cheaper rate
with streaming services than cable.
The person mentioned in the article, Ms. Hein, ends up
cancelling her streaming services and signing up for a cable TV package. Is it because the cable company offered her
something cheaper? Nope. Although that would seem the logical
conclusion since it would prove the entire hypothesis of the headline, the
offer she got was in fact more expensive, by ~ $20/month. She just decided to switch to cable TV
because of the convenience of it. Which
means that this anecdote has absolutely nothing to do with the premise of the
article. In fact, this example disproved
the article’s headline; cutting the cord DID in fact cut the cost for Ms. Hein,
by $20/month or ~$240/year. Now, maybe
the monthly savings weren’t as much as she expected. But that’s completely different than what the
article was meant to explore.
