Cutting your cable cord could save you $123 a month next year.
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If you go without cable for five years, you save $7,976, according to digital media server PlayOn, which calculated the savings as if the money was invested at current interest rates. Twenty years sans cable will bring savings of $39,076.
At a time when audience ratings are down, cable costs are on the rise. According to market research company NPD Group, TV monthly rates have grown an average of 6% per year as household income has remained essentially flat. If nothing changes, NPD expects the average pay-TV bill to reach $200 a month by 2020.
Living without cable doesn’t seem as boring as it did just a decade ago with the rise of online streaming services like Netflix (NASDAQ:NFLX) and Hulu along with the increase use of smartphones and tablets -- but that doesn’t mean people are ready to part ways with cable.
“Any effect of the rise of online streaming has been on the margin so far,” says Mark Kirstein, president of NPD’s entertainment group. “What we are seeing right now is the highest spenders on paid TV bundles are also paying premiums for online content. They are expanding their spending.”
Many experts have predicted Millennials would lead the cord-cutting charge -- but a recent report shows that isn’t happening yet.
"Millennials are indeed more likely than their elders to forgo pay-TV services, as one would expect of people who have tight budgets and the technological savvy to access tons of free online video," a report from eMarketer concludes. "But they have yet to cut those cords en masse."
Jim Holland, director of marketing at PlayOn, says this age group is missing out on big savings by sticking with cable. At PlayOn, the average user is between 30-65, and its fastest-growing demographic are those between 50-65.
“Last year, the average salary for college graduates was around $45,000. If they use our product they can save 3.5% of their salary; they should think of it as a pay raise.”
Kirstein forecasts cable prices will continue to rise. “There’s been a steady climb in terms of pricing pressure that will continue because of the continuous increase in programming costs. That’s why we are seeing so many negotiations with the big cable operators and big media companies.”
When it comes to these negotiations, he says the media companies tend to have more leverage. “Generally, when there is a discontinuity of service, consumers hold the cable operator responsible. They are the ones people have a direct relationship with, not the TV networks.”