When Mary Sherwood was injured in a motorcycle accident two years ago, she knew she’d have to make room in her budget for the unexpected medical bills. Her $115-per-month cable subscription was the first thing to go.
Even though Sherwood can now afford to renew the subscription, she isn’t interested. The 34-year-old account supervisor from Lee’s Summit, Mo., is one of a small but growing number of Americans who choose to forgo cable or satellite television in favor of streaming video on the Internet – for a fraction of the cost.
For about $23 a month, Sherwood can watch all her favorite programs through the streaming subscription services Netflix, Amazon Prime and Hulu Plus.
To catch Kansas City Chiefs football games, she tunes into free over-the-air network TV using a low-cost “rabbit ears” digital antenna, which sells for as little as $8.
“Once you make the switch, I don’t know why you would want to go back,” Sherwood said.
The vast majority of Americans – 95 percent – still watch television using traditional cable or satellite options, according to Nielsen. But the number of households that choose to opt out of cable or satellite TV is on the rise, from 2 million in 2007 to 5 million in 2013, Nielsen’s data show.
“This scares the bejesus out of the cable and satellite people,” said Jim Barry, a spokesman for the Consumer Electronics Association in Arlington, Va. “I think it’s going to change the business model.”
Streaming ups the ante
Rapid advances in streaming technology and faster broadband speeds make the transition easier than ever for those looking to “cut the cord.” Consumers can get high-definition images and a la carte content with few or no commercials. And streaming allows viewers to watch television anywhere they go, on laptops, smartphones or tablets.
Catching on to the trend, cable and satellite companies have begun to offer “watch anywhere” services that allow subscribers to get live TV and streaming content on their mobile devices.
Online streaming services upped the ante, in turn, by producing their own original programming – popular shows such as “Orange Is the New Black” and “House of Cards” – that can be seen only by Netflix subscribers via the Internet.
Cord-cutting won’t work for everyone, however. Streaming isn’t ideal if you watch a lot of live television, whether you’re a sports addict or news junkie, or if you just can’t wait until tomorrow to catch the latest “Breaking Bad” episode. And premium channels such as HBO or Showtime are available only through cable or satellite.
“At this point, (cord-cutting) is not a realistic option for most households just because the amount of choice that they want is not going to be available online. But it’s only growing, so I think that cable companies are definitely aware of this and reacting to it,” said Jerry Brito, a senior research fellow at the Mercatus Center at George Mason University and the director of its Technology Policy Program.
As a result, consumers might see lower prices and more choice in the future, Brito said.
A main driver behind the high cost of cable and satellite in recent years is the expensive license fees networks pay sports leagues to broadcast their games. The cost gets passed on to consumers to pay for the “bundles” of channels they get with their cable satellite subscriptions, whether they plan to watch sports or not.
The Walt Disney Co., which owns ESPN, held preliminary talks recently to offer its channels through a Web-TV provider such as Google or Sony, Bloomberg reported last month. But even if such an online-only package became an option, it likely would be very pricey.
The first step, if you’re ready to cut the cord, is to see whether you can get good, free over-the-air reception, either with an antenna or online subscription service such as Aereo.
Aereo relies on tiny antennas located in the company’s data centers that pick up local channels’ signals and beam them over the Internet to customers. For a monthly membership of $8 to $12, Aereo customers can watch the channels streaming live online or save them on virtual digital video recorders for later.
Although it’s available in only a handful of cities – Miami, Boston, Houston, New York, Salt Lake City and Atlanta – Aereo is expanding soon to Raleigh-Durham, Kansas City, Dallas, the District of Columbia and other metro areas.
TV networks have responded: ABC, CBS, Fox, NBC and PBS are suing Aereo, claiming that its service violates copyright law by selling access to their content without their permission. A federal appeals court ruled in Aereo’s favor earlier this year, determining that because the company assigns control over a single antenna to each subscriber, the transmission is a private service, not a “public performance,” and therefore doesn’t break the law. The case is pending.
To supplement the limited number of free over-the-air channels available via Aereo or antennas, cord cutters also can buy “smart” TVs with built-in streaming capability or stream Internet videos from gaming systems such as Xbox, Nintendo Wii or Sony PlayStation using low-cost subscription services such as Netflix ($8 per month), Hulu (free), Hulu Plus ($8 per month) or Amazon Prime ($79 per year).
Another alternative is to add a set-top box or dongle to transform a non-Internet-enabled TV into a “smart” TV. A Roku or Apple TV set-top box costs $100 or less, while a thumb-drive-sized dongle such as Google’s Chromecast sells for $35.