This was a huge week for Cord Cutter news. Both CBS and HBO announced new streaming services. But is this the beginning of the a la carte dream cord cutters have been waiting for? Some say no, be careful what you wish for, because in the end it will mean only less channels for higher prices.
According to FierceCable and the Wall Street Journal the prices for a family that will choose several streaming services (e.g. HBO, CBS, Netflix) might end up being MORE than the typical Cable bill. Really? That doesn’t seem obvious to me but let’s do some back of the envelope calculations.
Let’s say I’m a basic basic cord cutter, with just Netflix and an Antenna and I decide to add the new CBS and HBO streams to have those additional channels. I’ll call this the:
Basic Streaming Bundle
But I’m missing a lot of cable content, reality shows, other networks, etc. so I’ll add Hulu to pick up some of them. And of course the cord cutters Achilles heel – SPORTS. Assume the best and that ESPN finally gives in to unbundling. We have to take a guess at the cost but assume it will be something more than any of the above services and I’ll go as others have speculated with $25 per month. I’ll call this the:
Premium Streaming Bundle
So as you can see, making a few assumptions and guesses, we have a monthly bill of $62.97 – not cheap but still less than the average Cable bill of $90+. Of course it wouldn’t be hard to exceed $90 just by adding another new streaming service or two.
But there is something missing with the argument that unbundling will lead to higher prices – the market. It’s a fallacy to assume that ESPN or HBO can simply charge what they want.
One leading theory is that if you unbundle content the price per consumer goes up because the content is no longer subsidized by all those cable customers being forced to take it. Wrong! The market drives the price and if the consumer is willing to pay only $1.00 per month say for the Golf Channel, then that’s what will determine the price.I f the Golf Channel goes out of business at this rate, so be it. Or think about it another way: why is Netflix only $8.99 per month?
In a way the great unbundling does open a Pandora’s box for content providers. The internet has made every other service cheaper – consider music, travel, consumer goods, through the process called disintermediation. If Cable becomes unbundled it will be no exception.