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Cutting the cable cord: Moving to Internet subscription servies

Published: Tuesday, Nov. 5 2013 9:55 a.m. MST

A small but growing movement of budget-conscious consumers are saying goodbye to their monthly cable subscription Internet subscription services like Hulu Plus, Amazon Prime, and Netflix.

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When Tammy Zelahy’s “techy” husband suggested ditching their cable subscription, Zelahy was skeptical. She liked being able to pick up her remote and easily access her favorite shows, and she was hesitant to disrupt the routine of her two daughters, who loved watching cartoons in the morning.

It’s been six months since the suburban Philadelphia family decided to finally cut the cable cord, and Zelahy hasn’t looked back.

“It was a scary decision at first,” said Zelahy. “I love shows like 'Modern Family' and 'Grey’s Anatomy.' I was afraid of losing that, but I found out you don’t have to at all. There are so many options out there to get what you want for cheaper or for free.”

Instead of a traditional cable subscription, the Zelahys pay just for Internet service and subscriptions to Amazon Prime and Hulu Plus. They also bought HD antennas, modern-day versions of the classic “bunny ears” and a Roku, an over-the-top device that allows them to stream Internet content on their television set.

Zelahy’s back-of-the-napkin math shows that the family is saving $75-100 a month, even when they have to pay for a season of a show — "American Horror Story" is a favorite — on Amazon.

A small, but growing movement of budget-conscious consumers like the Zelahys are saying goodbye to their monthly cable subscription in favor of OTT devices like the Roku and AppleTV and Internet subscription services like Hulu Plus, Amazon Prime, and Netflix.

The FCC reports that the cost of cable subscriptions has been increasing about six percent annually, and consumers balking at the cost are pulling the plug. A report from SNL Kagan, an industry research group, found that in the second quarter of 2013, the cable industry lost 607,000 subscribers, double the amount of the prior three months.

And experts say that these changes mean consumers can expect to see a wider variety of ways to get TV content in the future, providing more options for consumers at differing price points as providers scramble to adapt to the changing marketplace.

“There’s competition for the living room,” said Rob Aksman, co-founder of BrightLine TV, an interactive television advertising company. “And that wasn’t always the case. People didn’t have options. Now we have a broadening array of ways we can watch TV, and companies are raising the bar. And that is a good thing for TV consumers. The consumer is the one who wins in this battle.”

Pulling the cable plug

Americans love their television. According to a report released this March by industry research firm Nielsen, average Americans spend more than 34 hours in front of a TV per week. But as Web-based options have entered the marketplace, the number of people subscribing to traditional cable TV declined. The SNL Kagan report found that the number of basic cable subscribers decreased by 1.8 million in the past 12 months, and cable’s share of the consumers who pay for service is now down to 55.3 percent, compared with 65.4 percent in 2006.

One of the reasons some budget-conscious are looking to cut cable is that the costs of subscriptions has been on the rise, outpacing inflation. According to NPD Group, a market research company, the average pay-TV subscription bill for basic and premium channels reached $86 a month in 2011. The NPD report said that if the industry doesn’t change, the average bill will reach $123 a month by the year 2015 and $200 a month by 2020.

Some consumer advocates blame the traditional cable “bundling” model, where a subscriber must pay for all cable channels rather than selecting the ones they want to watch. The Canadian government is requiring cable providers unbundle their channels, and Senator John McCain, R-Az., has proposed similar legislation in the U.S.

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