Cutting the cord with cable has become more popular as alternatives to traditional pay-television have become both better and more numerous. It's easy to see the appeal of dropping a bill that generally tops $100 month and can often approach (or exceed) $200, especially when you can replace it with much cheaper alternatives.
The reality, however, is that cord cutting does not make sense for everyone. There are some individuals -- and even more families -- that still benefit from the traditional cable package. And while it seems expensive compared to paying for a few popular streaming services, it's a question of value and how much you actually use (or don't use) what you pay for.
A person points a remote at a television.
Live sports is often harder to watch if you ditch cable. Image source: Getty Images.
Should you cut the cord?
When my wife, teenage son, and I moved to Florida we briefly tested cutting the cord. Then we found that our building did not get reasonable reception via an HDTV antenna, meaning we could not reliably get over-the-air channels for free, which immediately soured us on the experiment.
The major broadcast networks carry NFL games, local news, and a number of shows my wife and I watch. Some of the shows -- like Law & Order: SVU, The Simpsons, and Better Call Saul -- can be found on streaming networks at varying times after they air, but that's not the case with live sports.
When we tested cutting the cord, we did the math and found that the replacement cost was not worth it, and the viewing experience was less than ideal. We were paying around $150 for cable that included HBO. To replace that, we went with the following:
Sling TV: $35
HBO: $15
Netflix: $11.99
Hulu: $7.99
WWE Network: $9.99
Loss of internet bundling discount: $10
That only comes to roughly $90 in costs, but with that package I'd have to go out to watch sporting events more often, and the costs of the drinks and food I would consume would add up fast. In reality, the sacrifices were only part of why we did not cut the cord; the fact that we'd have so many different interfaces was another factor.
The market for skinny bundles
Skinny bundles like DISH Network's (NASDAQ: DISH) Sling TV and Alphabet's (NASDAQ: GOOG)(NASDAQ: GOOGL) YouTube TV offer a lot of cable-like choices, but they don't offer a similar viewing experience. Sling, for example (which we subscribe to for our second home), does not really make it easy to "flip" channels. It's great when you want to watch something end to end, but even "flipping" during a commercial is awkward and both have incomplete channel lineups compared to traditional cable.
Those limitations have not stopped the segment from growing. Sling TV added 26,000 paying customers in the third quarter, bringing it to 2.37 million total customers. That's actually more than the roughly 1.8 million customers DISH has lost on satellite side, but the numbers are a bit deceiving since Sling -- even the more expensive packages -- generally costs much less than DISH's satellite service.
Alphabet does not break out YouTube TV numbers but for both companies it's not really about where they are now but where the market is going. The cable universe still contains about 86 million homes -- down from nearly 95 million at its peak. This isn't Alphabet trying to maintain share. It's the company seeing that not only are those 86 million remaining cable homes in play, but so are tens of millions of Millennials who never had a cord to cut in the first place.
YouTube TV and Sling TV give consumers the option to have at least some live TV without paying for a full cable package. That's almost certainly something that's going to increase as consumers look for ways to cut their bills, so while I haven't made the switch, it's easy to see the appeal. Furthermore, it's also a valuable market to help DISH offset subscriber losses, while offering Alphabet yet another way it can grow.
It has to be right for you
Now that my son has moved to mostly watching YouTube videos and non-traditional TV content, my wife and I may take a look at YouTube TV, which offers local channels in many markets (which would solve some of the sports issues for me). It's not a guarantee, however, that we'll cut the cord.
If cutting the cord means my wife can't watch the true crime shows she likes or the cooking programs we both like, price may not be the overall deciding factor. Yes, we pay around $300 a month for cable and streaming services, but my wife and I watch about 90 minutes of TV together at night, and at least an hour separately while getting ready for work and/or preparing dinner during the week. On the weekend, we probably each add three hours of solo viewing for sports (me) or whatever she watches when I'm out.
That's a combined 25 hours of viewing on weekdays and roughly 16 on the weekends -- 41 hours a week, or 164 a month. That means that while we're spending a lot, it's still less than $2 an hour -- and for us, that's still probably math that works.
You don't have to use the same logic when it comes to your decision. You just have to consider what you save versus what you give up if you cut the cord, and figure out the point where it's worth it to you. Whether you cut or not, the trend continues to grow, and DISH and Alphabet are taking steps to deliver content however people want to get it.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Walt Disney. The Motley Fool has a disclosure policy.
