The pros and cons of a la carte streaming

Will replacing your cable company with providers like Netflix, Hulu Plus, and Amazon Instant Video really save you money?

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The pros and cons of a la carte streaming
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The pros and cons of a la carte streaming

Do you hear stories about people cutting the cable cord and streaming all their TV and movie content "for free" and think, "That could be me - saving money!"

Well, before you pick up your phone, you should do some number-crunching, says Russ Crupnick, a senior vice president and industry analyst with NPD Group, a consulting firm that studies consumer trends.

He says that while some people could indeed save money by streaming their content rather than paying for cable or satellite TV, they'd probably have to give up a lot, such as live sports or news for starters. Even then, he's not so sure the savings are there.

"I got out the calculator and asked what would happen if I got rid of cable and some premium channels and replaced those hours with other services. And you know what? I didn't save any money," says Crupnick.

So, is cutting the cable cord and streaming all your content really a money-saver, or just a big headache? Let's dig deeper.

An Outline of the Costs

Before we get into the sometimes messy details of cable and streaming with some real-world examples, let's outline the general costs of some of your options.

Cable/Satellite TV: This cost varies widely depending on your location and provider, but according to one government study cited by Senator John McCain*, "expanded basic" cable service averages $54 for the nation in 2013. A Consumer Reports 2012 article titled "Cut your Telecom Bill" claimed basic cable, which includes local cable and about 20 basic channels, such as CNN, E!, and Discovery ran $25 to $35. If you add premium channels such as HBO, Cinemax, and others, the price goes up.

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Over the Top Content (OTT): This is the streamable stuff - the TV and movies that you can access via an Internet connection even if you don't subscribe to cable. The best known are Netflix ($7.99 per month, streaming only option; no DVDs), Hulu Plus ($7.99 per month), Amazon Instant Video (start at $2.99 per movie or TV episode), Vudu ($2.99 per TV episode; $3.99 and up for movies), and iTunes (about $1.99 - $2.99 per TV episode; 2.99 and up for movie rentals).

Internet Connection: If you want to dump cable and stream all your content, you'll need an Internet connection that has enough bandwidth to stream high-definition (HD) video. This, according to the Consumer Reports article, should be at least 6 to 12 Mbps. Again, the cost varies throughout the country, but Crupnick says to expect to pay about $40 per month (the cost comes down if you bundle it with a cable subscription).

Hardware: Finally, you'll need the actual equipment to access services like Netflix, Hulu Plus, and the others. There is a wide variety of these, from smart TVs that connect directly to the Internet through your web connection, and have apps for favorite streaming services, to DVD players and game consoles that do the same. Cost varies, of course.

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Now for some real life examples…

Free Streaming of Network Shows

It's hard to beat free, and it turns out that many network shows on channels like NBC, ABC, or Fox, are available for free over the Internet on the proprietary website within days or even hours of their original air date. So, if you have the equipment and an Internet connection, this is a viable alternative to cable for watching some of your favorite shows.

It's not all pizza and popcorn, however. Issues do arise, as 52-year-old Ann Cody of Honolulu, Hawaii discovered when she did a "test run" to see what life without cable would be like.

"I was thinking of canceling my cable, but before I did I wanted to see if I'd still be able to watch my favorite shows," says Cody, who pays about $49 for cable and the premium channel HBO.

Cody is "addicted" to three network shows, she says: "Castle" (ABC), "Sleepy Hollow" (Fox), and "Dancing with the Stars" (ABC).

To her delight, those shows were available online the day after they aired, for free, from the network websites. The bad news was that since she didn't have a smart TV (that could access the Internet), she had to watch them on her computer. Smart TVs are expensive, she says, and she wasn't about to buy one - that would defeat her goal of saving money.

"If I had a computer that has an [input for an] HDMI cable, I probably could have bought a cable and hooked it up to my HDTV," Cody says.

So if you have a smart TV, computer with an HDMI input, or if you've recently scored a Chromecast, you can stream many network shows and still watch them on your big screen TV - for free.

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Streaming Premium Channels' Original Series

While network TV shows might be available for free online soon after their original air date, the same is not true for original series aired on premium cable channels such as HBO, AMC, and others.

So, if you're into one of their programs, you'll either have to sign up for cable, or wait for it to come out on OTT providers such as Netflix, Hulu Plus, iTunes, or Amazon Instant Video. In some cases, you may be charged per episode.

But, says Crupnick, the cost is not merely monetary.

"The bigger issue for most people is time. If you want to watch the new season of an HBO or AMC show when it comes out, you'll need cable. Otherwise, you'll have to wait a year or so for it to be licensed to Netflix or Amazon."

And if a $7.99 per month subscription to Netflix sounds like a bargain, it could be. Or it couldn't, as Crupnick himself discovered, the hard way.

Like so many other viewers, Crupnick got hooked on "Breaking Bad," the hit AMC series about a high school teacher turned drug dealer that hooked so many viewers. Unfortunately, Crupnick came to the party late, accessing season one through his Netflix account, which he had in addition to cable service.

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Unfortunately, in real time, on cable, the series was on season five. But Netflix only had seasons one through three at the time.

"So I ended up spending $35 for season four on iTunes to catch up," he says. At that point, he could watch it on cable on its first air dates. And he was happy about that.

But if he didn't have cable, it would have been another $2.99 per episode, he says.

The Soft Costs

The truth is, your decision on whether or not to drop cable might not be measured in dollars and cents, but rather soft costs, says Cody.

She calls one the "spoiler" cost which his amplified through Twitter feeds and Facebook pages, with fans and sometimes even show hosts Tweeting as the show airs.  

There are also things like sports and news, two things that are traditionally considered crown jewels of cable, says Rick Herman, chief strategy officer for MobiTV, which works with network and cable providers to make subscribers' content is available on mobile devices.

"People like to watch news and sports live, as they happen," says Herman. And because these are difficult to access without cable - he says they're critical to your equation of whether or not to cut cable.

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Is A La Carte Streaming Really Cost Effective?

Here's the part where we add up the cost of cutting cable. The trouble is, like the value of your favorite vacation spot, the math gets kind of personal and fuzzy. But let's do our best with the numbers we do have.

Let's say your cable bill is $44.50 a month (the average from the Consumer Reports article's top end of $35 and Senator John McCain's government average figure of $54). 

Now let's assume you cut cable and stream your content. Here are some costs. We'll use the Nielson Q2 2013 Cross-Platform Report, which found the average consumer watched four hours and 43 minutes of TV a day, or 33 hours of TV per week. That's about 140 hours a month.

If you filled those hours with streaming, here's a possible breakdown of how you'd do it and what it would cost. (This assumes you have an internet connection):

Netflix subscription: A stream only option, with limited choices and no DVDs: $7.99 per month.

Hulu Plus subscription: A service that allows you to stream many currently running TV shows, with limited commercials: $7.99 per month.

iTunes or Amazon Instant Video: Three episodes a week of shows you can't find on either Netflix or Hulu Plus using a pay per episode service such as iTunes or Amazon Instant Video: $2.99 per episode; $39 per month.

Grand Total: $54.98.

This price will range depending on what you want to watch after you cut the cord. So, before you make any drastic decisions, make sure to weigh your options carefully to ensure you're taking the route that will actually save you money.

* Congressional Record: Proceeding and Debates of the 113th Congress, First Session; Volume 159, No. 65; May, 2013.  "Sleepy Hollow" is also available on Hulu Plus for subscribers. Cody did not know this.

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