How Much Could I Save With OTT VOD Plan Rather Than Bundled Cable?

Today I am channeling my “inner Milennial” by doing an exercise to determine what would be a more financially responsible choice for my personal T/V viewing:

  • OTT (Over-The-Top) options where I build my own unbundled VOD programming system, or
  • The traditional, bundled cable television subscription I’ve habitually had since the 1980s.

Step 1: Acknowledge the fixed cost that will remain whether I choose OTT or cable:

  • OTT or cable: WiFi service

Step 2: Identify programming elements I most want:

  • Sporting events (pro football, pro hockey, some college football, basketball and hockey, WNBA)
  • Broadcast networks (entertainment, events, PBS)
  • Cable networks (entertainment, events, documentaries, premium networks HBO, Showtime)
  • On-demand (feature films, pay-per-view)
  • News (weather, traffic, local news)
  • TV Everywhere (above programs available on any platform: smart TV, smart phablet, laptop)
  • Netflix, Amazon original programming (“House of Cards,” etc.)

Step 3: Identify programming elements I don’t need through my television:

  • C-Span, home shopping, foreign language, food, travel, fashion, women-targeted, kid-targeted, business news, music, “adult”

Step 4: Understand the cost of buying 350 channels, some of the 4,000 on-demand shows and TV Everywhere from my current cable provider: $146.28 per month.

— DVR Service: $12.95
— TWC Sports Pass: $8.99
— Package Allocation: $0.01
— DVR set-top box: $8.05
— Starter TV: $18.31
— Remote: $0.20
— Standard TV package: $39.48
— Variety Pass: $9.63
— Premium package (HBO/Showtime): $27.95
— Average PPV movies: $10
— Taxes, Fees, Surcharges: $10.71

TOTAL MONTHLY CABLE SUBSCRIPTON FEES & TAXES: $146.28

Step 5: Identify OTT substitute cost of only programming I most want. Total monthly average: $111.78.

— Google Chromecast incl. tax (to link programming from my laptop and smartphone to my Smart TV): $35
— NFL Rewind: $69 /Season + Playoffs (day-after replay is OK for me)
— NHL GameCenter Live:  $169/Season (48-hour delay for nationally televised or blacked out games OK for me)
— ESPN must-see events at friend’s house or sports bars: est. $150 a year
— March Madness on CBS through Aereo (see broadcast networks below)
— WNBA Live Access: $14.95/Season (2013 pricing)
— Broadcast networks (entertainment, events, PBS): Aereo with Cloud DVR or Hulu plus: $8/month
— Cable networks (entertainment, events, documentaries, HBO, Showtime): View after blackout period through cable network online sites or binge-view in future from Netflix, Amazon (see below).
— On Demand (feature films, pay-per-view): Netflix @ $14.99/month and Amazon Prime @ $119/year (anticipating price increases for each)
— Pay-per-view on Amazon and other online streaming outlets or DVD rental: $250/year
— Free online sites for weather and traffic with occasional online subscription for sports: $150/year

Sub-totals 
Annual fees pro-rated per month: $79.76
Monthly fees: $22.99
Monthly estimated sales tax: $9.03

TOTAL MONTHLY A LA CARTE FEES & TAXES: $111.78

Conclusion: I could save at least 23.6% of the cost of my cable bill without losing much in terms of the programming I enjoy — or $34.50 a month, for a total of $414 a year.

To be honest, I thought the savings would be much greater.

Now would be the time to pile on arguments for going one way or the other, depending on your gut feeling about the value of the bundled approach vs. the unbundled OTT approach.  I’ll list a few of the more subjective pros and cons as thoughtstarters:

Pro-Cable (bundled): more predictable pricing; much more choice; less work hunting down programs from various sources; more unified delivery and servicing; TV Everywhere solves multiplatform challenges.

Pro-OTT (unbundled, a la carte): I pay only for what I watch, not for what I don’t watch; the oligopolies of cable and satellite keep pricing unnecessarily high; single companies can no longer dominate T/V production and distribution, and competition among companies is good for consumers; I am helping smaller businesses and technological innovation grow.

In the end, though, the difference is not as large as I had thought before this exercise. So where we will best get our T/V programming needs met is a very personal decision for each of us. I’d love to hear your thoughts in the comments section.

About John Osborn

John R. Osborn is an ad agency veteran, formerly Senior VP, Group Media Director BBDO/OMD. For 23 years, he led traditional and new media efforts for clients Visa, Bayer, Eli Lilly, DuPont, FedEx, GE, Charles Schwab, Discovery Networks, HBO, Lifetime Networks and more. John is a longtime advocate for and action-taker around emerging media technologies through the emergence of Cable TV (Pillsbury, DuPont - 1980s), Interactive TV and Internet (Visa, US Navy - 1990s) and online, wireless, Wi-Fi access and Advanced Television (Ultramercial - 2000s). In 1994 he won BBDO's agency-wide Founders Award for work reflecting the BBDO ethic of quality, creativity and effort. Most recently he was Director of Business Development at Ultramercial LLC, an emerging media company providing a unique business model for TV, Online, Wireless and Wi-Fi access. - Author of “The Next Business Model for Ad-Supported TV?”, published February 20th, 2009 in Ad Age Mediaworks - Facilitated and trained agency staff and clients in Creative Ideation sessions at BBDO/OMD. - “Integrating Creative Leadership” Certificate from the Creative Problem Solving Institute. - Past President and Interim Executive Director of Creative Education Foundation (CEF). - Grandson of BBDO co-founder, CEF founder, brainstorming and Creative Problem Solving process co-creator Alex Osborn.
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One Response to How Much Could I Save With OTT VOD Plan Rather Than Bundled Cable?

  1. Great job! Two ways to expand upon this is to conduct a cost/benefit analysis and to look at opportunity costs. The cost/benefit analysis would take into account all of the costs (i.e., actually putting a dollar amount to time that it takes to research and purchase unbundled opportunities) and all of the benefits (i.e., actually putting a dollar value on the worth of helping small and innovative companies grow) to determine whether the benefits exceed the costs. If the benefits of unbundled OTT exceed the cost of traditional cable TV, then unbundled OTT would be the way to go. However, there is an easier way to make a decision in this case because there are only two options and that is by looking at the opportunity cost of each option. You mention that you save $414 per year by going the OTT route. One would need to compare the value of the traditional cable TV option versus the next best alternative for that $414 — let’s say attending two Buffalo Sabres NHL games. You would be better off going with the unbundled OTT route if spending that $414 in savings to attend two Buffalo Sabres NHL games has more value to you than the complete cable TV package, and you don’t mind the time spent researching and managing the unbundled option. Conversely, you would be better off going with the traditional cable package if the next best alternative for that $414 of attending two NHL Buffalo Sabres games did not have as much value to you as having the traditional cable TV package.

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