Can you remember how much you paid, each month, for your cable bill in 2005? According to Federal Communications Commission statistics, it was $43 if you were an average customer. Fast forward five years, and the average bill jumped up to $75, a 74% increase! During the same time period, gasoline, the financial whipping boy for rising prices, only rose 71%. (To help you examine the rising cost of products, read The Consumer Price Index: A Friend To Investors.)
TUTORIAL: Budgeting Basics
Unlike gasoline, which has stabilized at least for the short term, the cost of cable is expected to continue pushing higher because of lower ad revenue and higher licensing fees; from the media companies that fill up the sometimes hundreds of channels that we watch. At a time when most consumers are finding ways to pinch pennies, cable may soon be a luxury that ends up disconnected, but there are other ways to watch your favorite content; but most of these require a high-speed internet connection.
Hulu has two tiers. The free tier has up to five recent episodes of some of your favorite shows and movies, all in standard definition available only on a computer. Hulu Plus has all recent episodes of even more popular shows that you can watch on a TV, computer, smartphone or tablet; in standard or high definition (HD). There is a monthly charge for Hulu Plus which, as of today, is $7.99 per month.
For those who don't want to pay a flat fee for a bunch of channels they never watch, but instead want to purchase content a la carte, iTunes is worth a look. iTunes, with or without the $99 Apple TV, allows you to purchase single episodes of some popular shows and movies.
Netflix, like Hulu, offers a streaming service for a flat monthly fee of $7.99, with no limitations on the amount of content you watch. They also have many of the most popular television series and movies. Netflix is widely considered to have a better selection of movies where it falls short on broadcast TV content.
Over the Air
Gone are the days of those rabbit ear antennas with foil wrapped around them to get better reception. Today, HD antennas are more sophisticated and they allow you to receive local channels free of charge. These are HD quality reception, but beware, some of the same problems exist as they did back in the rabbit ear days. Reception isn't always perfect, and, depending on the particulars of your home, you may not get some of the local channels you would like. (For more on this type of television programing, check out Will Digital TV Allow You To Ditch Cable?)
Call your cable company and ask them about the various plans available. Some have stripped-down services that allow you to receive local channels and have the ability to receive pay per view at a low price. Although attempts at negotiation with the cable company will often result in offers of different bundles to cut price, old-fashioned negotiation is always worth a try.
Can I Ditch Cable?
It depends on what you watch. Hulu has content that Netflix doesn't. So purchasing both services for less than $20 a month will satisfy most of your basic cable TV viewing needs. But what about HBO, Showtime and the other premium tier channels? As of now, you're out of luck. What if you're a pay-per-view fan? Again, you're out of luck, so if your needs go beyond basic- and mid-tier cable services, you'll want to stick with that high-priced cable service.
Are you impatient? Do you want to take part in the water cooler talk about last night's episode of "Family Guy"? If so, you might want to stick with cable. Depending on the current licensing agreements with various companies, the earliest you'll see that new episode of "Family Guy" online is the next day, at the earliest. If you're watching your favorite content through Hulu, Netflix or iTunes, you'll have to avoid those "Family Guy" fan pages on Facebook longer than the cable subscribers.
Also, don't forget that all of these services still require a fast internet connection. If you're somehow still using dial-up, or even the lowest speed broadband service, you're probably going to have to upgrade, and without cable, the monthly cost of your internet connection may rise significantly. At current prices, you'll pay an average of $50 per month for internet service although, assuming you purchased internet service before, you're still saving money by cutting the cord to cable.
The Bottom Line
With each passing year, ditching cable looks more promising, but there remains an unknown and that's licensing. Media companies are, with more frequency, asking for a larger chunk of the profits, which is a large driver of cable prices. How long companies like Hulu, iTunes and Netflix can keep prices low is an unknown. Next, with the exception of Apple, Hulu and Netflix are young companies who are currently going through growing pains of their own. The bottom line may be that TV watchers will have to continually evaluate the many offerings available. (For more option on entertainment, see 4 Entertainment Tech Trends For 2011.)