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Why Cord Cutters Actually Are Saving a Huge Amount Over Cable Subscribers

July 23, 2018, 4:01 PM UTC

Wall Street analysts sometimes like to make misleading comparisons purporting to show that people who drop their cable TV service won’t save much money. But a new survey of actual consumers found cord cutters averaged $85 a month in savings, even including the amounts spent for Internet service and streaming video providers.

The average monthly telecom and entertainment bill for cord cutters was $118 versus $203 for those still paying for pay TV services like Comcast’s (CMCSA) Xfinity or AT&T’s (T) satellite DirecTV offering, research firm cg42 reported after surveying 3,385 consumers.

One reason for the substantial savings versus Wall Street’s view was that pay TV subscribers were often already also paying for Internet video services like Netflix (NFLX) or Hulu. Cord cutters only spent about 10% more on streaming services than cable subscribers, the survey found. Another reason was that analysts sometimes cited limited time promotional prices to estimate how much consumers paid for cable TV, while the cg42 survey participants revealed what they were actually paying: an average of $92 a month.

The cable industry has been buffeted by the growing ranks of cord cutters, and so-called cord never’s, a millennial-heavy consumer segment that never subscribed to cable in the first place. While 77% of Baby Boomers and 81% of Gen Xers still pay for standard cable or satellite TV service, only 63% of millennials paid over the past year, cg42 said. About 5.4 million cable subscribers, or almost 6% of the total, are expected to cut the cord this year, the researcher said.

Cord cutting hit a record rate of 3.4% of subscription TV customers last year, up from 2% in 2016 and 1% in 2015, as seen in the financial results of the largest providers.

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The biggest factor for consumers dropping cable is price, cg42 said. The rising price of the typical cable bundle has become increasingly unappealing as consumers have turned in droves to more flexible and less expensive video offerings, from services like Netflix and Hulu that feature traditional TV and movie formats, to shorter programming from YouTube, Facebook, and a host of others. The cord cutting trend, which started decades ago with consumers dropping landline phones for mobile numbers, is even starting to hit Internet service. Aided by the return of inexpensive unlimited wireless data plans, one in five consumers said they relied fully on mobile Internet service last year, up from 13% two years earlier.

Major retailers are helping drive the cord cutting trend, cg42 said in its report. The big box chains are pushing sales of smart TV sets that include built-in access to Internet video services, sometimes called over the the top, or OTT, services.

“A visit to Best Buy and Walmart, two of the largest US consumer electronics retailers, should terrify Paid-TV executives and shareholders: their representatives used to roam the floors capturing TV buyers as new subscribers, while retailers are now encouraging consumers to cut the cord by offering free technical support and free trials of OTT services,” the research firm wrote.