Today’s Show:

Cord Cutting – A Financial Analysis

Cord cutting has been in the news quite a bit lately.  A week doesn’t go by when we don’t receive an email from a listener telling us about how they have cut the cord and couldn’t be happier. Every email prompts us to consider a life without cable bills but inevitably there is something that keeps us from taking the plunge. A recent email from Van in Odenton Maryland got us thinking. Could we combine OTA with a Tivo Box and iTunes and a AppleTV and essentially eliminate our Pay TV bill altogether? For this paper study we will use Ara’s TV usage as the base.

The bulk of what is watched in the Derderian household are the broadcast networks which can be made up via OTA with no issues at all. Its the cable shows and Sunday Ticket that pose the real problem.  Pay movie channels are nice but with Netflix and a deep video server library, there is seldom a lack of things available to watch moviewise. We’ll begin the study with outlining the current cost and capability followed by the replacement solution and finally what if anything has to be given up.

Current Cost for Programming

Ara subscribes to DirecTV Premier Package including locals. The Premier package includes just about every channel including pay channel that DirecTV has to offer. The total cost is $114, but its the fees and add ons that kill you! Check out the itemized list:

• Monthly Fee for the Premier Package $114
• Protection Plan $6.00
• HD Extra Pack $5.00
• HD Access $10.00
• DVR Service $7.00
• Whole Home DVR $3.00
• Additional Receiver $6.00
• Leased Receiver $6.00

Total cost $157 a month plus Taxes. Ara also subscribes to Sunday Ticket which adds an additional $300 a year or $25 more per month. So the base we have to work with is roughly $185 a month. An advantage that using DirecTV or other provider is that you don’t have to buy your equipment and if something goes wrong the provider will fix it for you

Tivo

Part of the solution is a Tivo box that can act as a DVR. Tivo comes with a monthly fee but its a far cry from what you pay at DirecTV. Our solution will use the Tivo Premier which goes for $99 and we’ll connect it to the antenna on the roof. We will have to buy three of them so our cost start up cost will be just about $300 plus tax. In addition to the purchase price Tivo will require $20 a month service fee and since we have three boxes it will cost us $60 a month.

The reason we are choosing Tivo over a basic DVR is that the recording features of the Tivo are quite nice and we have become accustomed to setting season passes and all the other cool features of a modern DVR. Tivo also offers connections to Netflix, Hulu+, Amazon, and Blockbuster so for most people you can stop right there and be quite happy!

AppleTV

AppleTV will be our means of getting cable content that we lose by cutting the cord. Many shows are available in iTunes the day after they air on cable. These shows are in HD and 5.1 audio. The quality is quite good. If you can wait a season, many, but not all, shows end up on Netflix or Amazon so you may not need this option. The AppleTV will run you $99 a piece and we’ll need three of these as well. Like the Tivo we are up to $300 plus tax. For the Derderian’s the season passes that we’ll have to buy are the following:

• Covert Affairs – $40
• Burn Notice – $38
• Sons of Guns – $25
• American Guns – $24
• various shows on ABC Family for the kids – $200
• Budget of another $200 for single episodes or new series not yet discovered.

Total cost for non OTA programming $527.

Now let’s add a budget for movies. We’ll allow 2 HD rentals at $5 and one purchases at $20.

Cost

Let’s add it up and see what it will cost us!

• Hardware (One time Cost)  - Let’s say $650 after you consider tax and incidentals
• Content
  • Season Passes and individual shows on iTunes $527
  • Movie rentals/Purchase $30 ($360 for the year)
  • Tivo Service $60 ($720 for the year)

Total content cost for the year – $1607
Total cost for DirecTV without Sunday Ticket – $1884
Savings $277 ($577 without Sunday Ticket)

In actuality your savings may be more. If you don’t rent or buy movies from iTunes and if you buy a generic OTA DVR without the niceties of the Tivo you can save over a Thousand dollars. In the Derderian scenario we have three DVRs but if you only have one or two you can save quite a bit of money. Finally, this plan requires you to pay upfront for the equipment. In the Derderian’s situation, breakeven would be in just over one year.

What do you give up?

In the Derderian case you give up Sunday ticket. That means about seven or eight less Chicago Bears football games a year. They also give up Food Network and the joy of discovering a program simply by flipping through channels. While this isn’t a big deal for us there have been some Saturdays where this was the only option. Maybe it will free me up to do other things like create more content for the show!

Conclusion

Cutting the cord is probably a great thing for most people out there. Whatever is being missed on the cable channels can be found through Amazon, Netflix, or iTunes so you really don’t have to do without. Live content like news and sports can be found via the old fashion airwaves in better quality than what you would get on cable so there is no loss there at all. The only drawback is that there is an initial outlay of cash that may take a year or two to payback. With all that said, Ara is not ready to cut the cord. He is ready to talk to DirecTV about his bill however! We’ll revisit the analysis in a year or so.

Download Episode #518

Posted by The HT Guys, February 16, 2012 11:18 PM