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How Much Money Will it Take to Kill Cable Television?

Cable Television

Happy Friday, friends! It has been another wild and crazy week in the Frugal Rules home. It’s starting to get to that time of year when we really can’t let the kids out much as it has been cold and dreary outside. While I love spending time with the little Frugal Rules…I really do, it does make life just a little more on the nutty side.

That said, if you see a rant post running here in the near future you know why! ;-)

Amazon is Entering the Content Production Scene

Mention the term cable television in the PF community and you’re likely to get a myriad of responses. You have those who view it as a plague on society and view it as equal to living off payday loans, then you have those with $200+ monthly cable plans. Of course, that’s an over generalization of the two extremes, but you get my point. That said, I’ve written about how we’re not cutting the cordyet and had a well thought out opposing article to that by my friend Monica. So, obviously, this article on Yahoo Finance stood out to me when I read it earlier this week.

At issue in the article is Amazon, through their Amazon Studios firing another shot at the bow of cable television. They’re sinking just over $1 billion into original new content that will be available on their platform through two new shows – Alpha House and Betas. Amazon identified these two shows as having good potential after testing earlier in the year. As you probably already know, Amazon is not alone in its spending on original content. Netflix is busy spending twice as much to produce its own original content, thus bringing big money into the cord cutting spectrum.

If you’ve not read about Amazon’s plan, it’s actually a good one. They’re going to make the first three episodes of each show available to all and then additional shows will be available to anyone with an Amazon Prime account. According to what I have read, these are only the beginning in a line of shows that Amazon will be premiering over the near future as a means to get more people to use the site and, beyond that, to get more users to sign up for their premium Prime service.

How Long Until Cable Television is Dead?

With that background, we see another attack on the cable television industry. You add Amazon Studios to the growing list of other providers putting out original content and the writing is on the wall – there is more competition for the cable television providers.

Looking at this purely as a consumer, I think this is great for us. Not only does it force the fat cat cable providers to stay on their toes in order to provide quality, but it also means we as consumers have more options. It’s that last part that has the networks scrambling, in my opinion.

Like the landline has become an ancient relic in most homes today thanks to the cell phone, I think at some point in the near future, cable plans are going to become a relic as well. At least, this is the argument made by those on Yahoo Finance – that within five years cable television and our usage of it will be basically extinct.

I don’t know that I think that cable TV will necessarily be gone in that short of a time span, but I do think it’s on the ropes so to speak. Even worse, if these alternative options produce shows that are as good as House of Cards on Netflix, then I’d be worried if I was a cable television executive.

 

How much spending do you think it’s going to take by competitors to kill cable television?  Would you be worried if you were a cable TV executive? Do you have any fun plans this weekend?

 

Photo courtesy of: TheeErin

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I'm the founder of Frugal Rules, a Dad, husband and veteran of the financial services industry. I'm passionate about helping people learn from my mistakes so that they can enjoy the freedom that comes from living frugally. If you're wanting to grow your blog, check out my blog coaching services to see how I can help you take your site to the next level.

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61 Comments

  • Ed Mills says:

    We don’t miss cable TV and its infinite commercials at all. We kicked it to the curb over four years ago:

    http://www.millionaireeducator.com/2013/07/how-were-saving-20000-by-kicking-cable.html

  • If the CEO of a major cable company said it may not be part of their offerings in the future. I would really like to see an “a la carte” option, even though I’m well aware of the reasons why we haven’t seen that yet. I think the biggest takeaway from new companies getting in the production game (and offering games i.e. netflix, roku, etc.) is that inevitably the price will go down.

    Nothing too fun planned this weekend, but that’s okay with me. Actually I do have a friend’s birthday party tonight so I guess I do have something fun planned! Have a good weekend!
    DC @ Young Adult Money recently posted…The Weekly Quick Hits RoundupMy Profile

    • John says:

      I really do wish they would come up with an a la carte option. But, I know why they don’t either. People will generally only want a handful of channels and the home shopping ones would revolt.

      Sounds like a nice, relaxing weekend. Have a good one!

  • Hrm, I bet that’s why I’m getting weekly mail and monthly calls from Cox about getting a cable package with my internet. No thanks!
    Kasey @ Debt Perception recently posted…Wishful WednesdayMy Profile

  • Why I refuse cable TV and not just for money reasons is the fact that you can’t buy your own cable box.

    The FCC is in the pockets of cable companies, I swear, because we were supposed to have universal Cable Cards where you could slip that bad-boy into a slot in your TV and never be tied to the ridiculous box rental fees that cable companies earn off their users.

    The complete closure of ALL of Blockbuster this week should really be a warning sign to Cable— get with the times and be less focused on fees and subscribers and find alternate ways of making money or you’re going to go bankrupt eventually.
    Tara @ Streets Ahead Living recently posted…Aren’t you shopping this weekend?My Profile

  • I’m with DC – I’d love to see any a la carte’ option too. I do love the appeal of Netflix and the like though. This just might be a 2014 expenditure for the Frugal farmer family. On tap for us this weekend? Grandma is coming over today as we celebrate her birthday with a nice dinner and dessert, and Rick is working all weekend (waaaah/yayyyyyy!) :-)
    Laurie @thefrugalfarmer recently posted…Screw ‘em: Doing What’s Best for You in Your Debt Payoff JourneyMy Profile

    • John says:

      As would I Laurie, but I fear too many companies would go nuts – especially the shop from home ones. Sorry Rick has to work all weekend, but it sounds like you have a fun weekend in store otherwise. :)

  • I like a la cart and might consider it if it was reasonably priced. I think the internet is just starting to change the way we watch TV and cable might eventually be like the land line phone.
    kelly @stayingonbudget recently posted…Weekend Reading #10My Profile

  • I agree that cable TV is on the ropes. I don’t think the networks will go away, but the reformatting is on its way. I’m a big fan of the cord cutting, but LOVE TV, so I don’t wish it to go away entirely. As long as I can stream through Hulu I am a happy camper.

    Netflix has been producing some great quality content, which the cable TV networks don’t always do because of the sheer amount they have to put out.
    Broke Millennial recently posted…Frugal Find Friday: Cook in BulkMy Profile

    • John says:

      I agree, I don’t know that the networks will go away, but I think we’re going to see some sort of major reformatting in the near future.

      We’ve only watched House of Cards on Netflix, but we really enjoyed it. If that show is any sign of what they can produce, then they’ve got some good things going for them.

  • Pauline says:

    I would be worried just like I would if I still produced VHS tapes. Cable is a thing of the past. Spending tons to kill it faster shows there is a huge market, and a $10 netflix streaming subscription is much more profitable for companies and customer friendly those days.
    Pauline recently posted…9 tips for UK expatsMy Profile

  • I don’t think companies like Amazon and Netflix will kill cable – but I do think they’ll force cable TV to change. I’m with Laurie and DC on the a la carte service option. If they offered that, they’d most likely get me back as a customer!

    No really exciting plans to speak of this weekend. This week was a little nuts at work and at home, so I think I’ll spend some time getting caught back up on everything! That’s okay though, hanging around the house and being productive sure does make my budget happy :) Hope you have a great weekend with your family, John!
    Kali @ CommonSenseMillennial recently posted…How to Stay Motivated to Reach Your GoalsMy Profile

    • John says:

      I agree Kali, I do think it’s going to force them to change. If we as consumers continue to push for it then it serves them to do so. You have a great weekend as well Kali!

  • Matt Becker says:

    We just cut our cable and got netflix and for our purposes that gives us 95% of what we want. I haven’t missed ESPN too much yet, but it will definitely hurt more once college basketball season starts and I won’t be able to watch my Duke Blue Devils storm the country. But given that realistically I don’t have a ton of time to watch games anyways, it didn’t seem worth the price.
    Matt Becker recently posted…Stop Buying Features. Start Buying Benefits.My Profile

    • John says:

      Oh no…you’re a Duke fan?! Ok, I’ll look past that for now Matt! ;) Seriously though, that is the only thing keeping us from cutting the cord – sports. If I can find a way to get ESPN/Fox Sports otherwise I’d cut it yesterday.

  • I think in a few more years the cable industry will be wallowing in the mess they’ve created by sticking to old strategies of delivering entertainment. I just hope that Netflix, Hulu, Amazon, and others can continue to make great programming. That is the key. If all the best programming is online through streaming services (and that is becoming the case) people will gravitate that way in larger and larger numbers.
    Joel @ SaveOutsideTheBox recently posted…5 Reasons to Consider Working For YourselfMy Profile

    • John says:

      I agree Joel – if they don’t adapt. I am assuming that not all of them will and they will be dealing with the fallout.

      I agree, I hope they can continue that. With the shift going on, you’d think most of them would see the possibility they have on their hands and continue to do so.

  • I have really enjoyed House of Cards and Orange is the New Black. Certainly competes with Showtime or HBO series. After seeing what happened to music companies with CD sales, I can’t believe that cable isn’t trying harder to compete with that type model. You’d think they could have learned a lesson. After 4 months of Netflix and an antenna, I don’t miss satellite TV at all. As Netflix and Amazon continue to improve, I think more and more people are going to go that route.
    Kim@Eyesonthedollar recently posted…Making an Extra $600 For Ski PassesMy Profile

    • John says:

      I’ve not heard of that second show – is it on Netflix? That said, we really enjoyed House of Cards and looking forward to the next season.

      That’s a great correlation Kim! I think you’re dead on with the comparison. I am hoping they don’t see it and it just makes it better for us consumers. :)

  • AverageJoe says:

    I heard a recent Planet Money that described the cable debacle, and it all stinks. The content providers pushed cable companies into a corner that they now can’t easily escape from. Cable companies are going away (I’ve cancelled mine for a Roku and haven’t looked back), but it isn’t all their fault.

    By the way, they discussed a la carte as an option, but the way pricing works, they’d have to jack up the fees to offer most programs a la carte. It’s pretty ugly.
    AverageJoe recently posted…How to Live Longer and Prosper (Wait, Where Have I Heard That Before?) – STK 28EMy Profile

    • John says:

      I agree Joe, it’s an absolute cluster in my opinion.

      Good point on the a la carte issue. On one level, I love the aspect of it because I don’t buy jack off of TV and thus having half or more of my channels be them is a complete waste of money. But, I love ESPN and they’re the biggest culprit in terms of the pricing. it’s a mess…

  • I’m so surprised that cable isn’t dead already! With Netflix and all of the other services out there, it’s crazy that people are still spending on cable.
    Daisy @ Add Vodka recently posted…What Could HR Teach You About Money Management?My Profile

  • It is going to take some time to kill cable or even put a big dent into it. While the cord cutters (myself included) are leaving cable companies quicker, we still have to pay for internet. This is where they are going to keep you. As more people jump away from cable, rates for internet will increase. This is how they will recoup their losses. No matter what you do, unless cutting everything, you will still be a part of the cable companies services. They control the pricing.
    Grayson @ Debt Roundup recently posted…Choosing A Credit Card Rewards ProgramMy Profile

    • John says:

      I would definitely agree to a point Grayson. Many of them offer internet so it’s inevitable to a certain extent. That said, we know the VP of Marketing for Cox here in Omaha – who has said this is causing them significant pain. TV is their main deal and the more cord cutters walk away the worse it is for them. But, I do think we will start to see increases in web rates to recoup some of it.

  • ChanceCallan says:

    We watch mostly online shows and Netflix as opposed to cable TV but my husband is not prepared to get rid of cable TV until he has a place where he can watch live NHL games. Anyone know if this is available? Agree with comments on House of Cards and Orange is the new Black……loved them both!

    • John says:

      That’s how I am with college football games. If I can find a way to get them legally then I’ll cut the cord tomorrow. Is that second show a Netflix show as well?

      • ChanceCallan says:

        Yes. One season so far. Orange is the color of her prison garb that has replaced her upscale life and presumably her little black evening dress. It is about a woman who goes to jail for a year for being a reluctant drug mule for someone. The caste of characters is edgy and interesting. Worth checking out. Also, has no one mentioned Sons of Anarchy???

        • John says:

          I just looked it up on Netflix and it looks interesting, thanks for the suggestion. :) I want to watch Sons of Anarchy – I am still working on my wife to watch it. ;)

  • Chrissy says:

    Thanks for this post, I keep going back and forth about TV. I don’t really want the monthly bill, but we keep buying it. I think when it is as simple as plug and play for all people to use internet based TV resources (like the roku box) then Cable will lose more market share. On the other hand, those of us who are major fans of HBO would be willing to switch absolutely, if we could get HBO outside of cable/satellite. Although with True Blood ending next season, I only really have Game of Thrones tying me personally to cable. ;D

    • John says:

      Not a problem Chrissy. It’s a tough call as we really like HBO (I seriously can’t wait for GOT to come back!) and I love college football. We can also afford it, but I’d much rather see the money go elsewhere. I think they are going to see themselves losing market share and it’ll be interesting to see how they deal with that.

  • Every show I love I can now watch online. I could subscribe to netflix, hulu, AND prime and still pay less than I would for cable.
    Stefanie @ The Broke and Beautiful Life recently posted…Failing to Plan Ahead Destroys BudgetsMy Profile

  • I love that there are so many good alternatives available. We haven’t cut the cord but as more and more choices become available – it becomes a real possibility. I would love an ala carte menu too. There are so many channels I don’t watch. Like you, I don’t think cable television will be gone in five years but I do think how we pay for it may look dramatically different. Have a great weekend! It’s going to be sunny and mid-70’s here, so I can’t complain! :)
    Shannon @ The Heavy Purse recently posted…Blog Round-Up: Week of November 4, 2013My Profile

    • John says:

      It’s the same for us Shannon. The last thing we’re (ok….I ;) ) waiting on is college football. Once we get that and we’re goners.

      Ok, I am not going to tell Mrs. Frugal Rules about your weather. It’s supposed to be a high in the LOW 30’s here in a day or two.

  • We haven’t cut the cord yet either, although we may consider that in the future. Like others, there are some programs and channels that we like that are not available online currently, but if that were to change in the future we will be all over it!

    Looking out into our backyard, I foresee some serious leaf raking in my future this weekend!
    Dee @ Color Me Frugal recently posted…Achieve financial success by finding your money meaningMy Profile

  • anna says:

    I do see a lot of cord cutting in the PF-world, but not so much with my real life friends and family so not sure how much it will go away in five years (then again, a lot can happen in five years!). We’re considering it since a lot of the shows I watch I can just find on Hulu, even if delayed. Have a nice weekend, John, maybe you can convince the little ones to play “The Quiet Game” (though that never seems to work out in the parents’ favor. :)).
    anna recently posted…Confessing My Wedding CostsMy Profile

    • John says:

      We don’t see it a whole lot amongst our friends or family either, and it will be interesting to see what happens in five years.

      Lol, the “Quiet Game” for us is when they go to bed. ;)

  • Abigail says:

    I think it’ll be awhile yet, if at all. There are still people who don’t want the hassle of technology, like some older folks. (The only reason my in-laws have Hulu & Netflix is because they live in our guest house and we cut our satellite.)

    Also, there are a lot of people who seem to want all the options. Just because they want to see a Netflix or Amazon special — and I’m interested to see the one with John Goodman — doesn’t mean they’ll forgo cable. People buy songs for a buck a pop, why not an episode or two?

    And while we love our reduced bill with Hulu, there are shows we miss out on and have to wait for DVDs through Netflix. Not a lot, but some. I think there’s probably a surprising number of people with an Amazon prime AND Netflix account and maybe still a cable package. They want their shows available instantly, and they want to be able to surf the channels to see what’s on.
    Abigail recently posted…Freebie FridayMy Profile

    • John says:

      I agree that we’ll likely see resistance from those that are older. So, I think that’ll mitigate it some.

      That’s an interesting point you bring up about the various options. I think it’s great we have the options, but no one has everything…yet.

  • It’s tough to say. Shows on showtime and HBO do incredibly well, and often overshadow network TV shows during awards season. But, a lot of those shows are available on Netflix either streaming or via dvd, so who knows. I haven’t had cable in a long time and use the streaming services and love it. I have rabbit ears in case I want to watch something live, but to me streaming is like cable and tivo wrapped into one. So time will certainly tell.
    Budget and the Beach recently posted…We’re Doing The Best We CanMy Profile

  • Peter says:

    I think the only thing that has kept us from completely canceling our cable is the fact that it’s still not easily to legally get sports via online streaming if you’re a big sports fan like I am. There are also a few shows that my wife watches that aren’t super easy to find online. So for now we’re soldiering on, and still using our Amazon Prime to stream a ton of content.
    Peter recently posted…2014 Traditional And Roth IRA Contribution Limits And Phase OutsMy Profile

    • John says:

      We’re the same exact way Peter. We had season tickets to my alma mater before we had kids, so the only way to see the games is on cable. I am not willing to get it illegally, so what can you do? Other than that, we could get everything off the web.

  • I think it will happen when companies like Netflix strike deals to stream live sporting events. You can get some streaming services now (like WatchESPN) but they are all tied to you having a subscription with a cable company. More along the lines of what MLB does would work. With baseball, I can purchase a streaming package direct from their site, bypassing the need for cable, and stream it through my PS3 onto the TV.
    Brian @ Luke1428 recently posted…Stealing From Your EmployerMy Profile

  • Micro says:

    I think sports has a huge hand in helping cable companies stay alive in many homes. There are simply no alternatives for many games other than going out to a bar to watch. Granted, that actually is cheaper if you crunch the numbers for most people but they like the convinience of watching from home. NBC I know offers the option to stream the Sunday night game online. If the other networks start following suite, cable companies are going to be hurting.
    Micro recently posted…October 2013 Mission BriefingMy Profile

  • Netflix is essentially a la carte`. With Amazon now heavily invested, I think we will see a la carte` eventually come from the cable companies. Like you’ve said, there are several channels that will make a bunch of noise over this, but it will eventually happen.
    Bryce @ Save and Conquer recently posted…Taking Criticism with a SmileMy Profile

    • John says:

      I agree that they are to a certain extent. As long as they carry the shows you like. They don’t have agreements with all the studios, so there can be some limitation. That said, I think you’re spot on with Amazon now coming into the mix with original content – it’s going to force the traditional powers to adapt…hopefully. :)

  • I am definitely forward to the day that I can cut the cord myself. Actually I am probably closer than I think. After Comcast took away the (free) OnDemand Disney section and most of the shows I watch are OnDemand for scheduling reasons, transitioning to streaming will probably be happening shortly. I would love to dump my cable bill and apply those monies to something more worthwhile.
    Chad@thstockmarketandi recently posted…S&P 500 close November 8 2013 at 1770.61My Profile

    • John says:

      I believe we’re a lot closer than I think as well. I just need to find a legal way to get around not having college football. Once I have that then we’re goners.

  • People said that the newspapers will be gone with everything going digital, but that still hasn’t happened and I am sure they’re going to stick for quite a while. I think that the same can be said about cable television, mostly because there are so many people who are used to watching TV and still against going for streaming. In my parents’ room, for example, the TV is on constantly and many of their older friends consider the cable television something that’s as important as water and air, while the computer is the seed of the devil. So there will probably be at least a few generations before cable TV will lose its popularity and get close to a coma.
    C. the Romanian recently posted…October 2013 Income Report and Spending ReportMy Profile

    • John says:

      Lol, love the comparison between cable & the computer! I think it’s the older generations that’ll help keep cable afloat, though I don’t know that it’ll be for generations.

  • I so desperately want to cut the cord, but can’t quite justify it at this point. We need fast internet at home and we do value the live sports aspect of cable TV. We don’t have a terribly expensive cable package, so once you consider the internet we’d be paying for, it isn’t a huge amount of money each year to be paying for our TV and phone service.
    That all said, the day Google Fiber comes to Richmond is the day I cut the cord!
    Brad @ RichmondSavers.com recently posted…The Power of a Saved DollarMy Profile

    • John says:

      Sports is really the main reason we have it as well, well that and internet. I feel the same way about Google Fiber – we get it in Omaha and we’re switching. I hear Google is in exploratory talks with ESPN, so there is hope. :)

  • Cable television will have its niche for a long long time. If it does “die” those stations will still exists in their own platforms, but that is a long time off. I’m just thankful for all the options out there.
    Lee @ The Value Geek recently posted…How I managed to extricate myself from financial doomMy Profile

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