Cord Cutting with Apple TV May Not Save You Money

Even though it’s not widely done, cord cutting gets a lot of publicity. If you’re caught up in the hype of an Apple TV as your only TV source, some basic analysis is in order because, depending on your TV viewing habits, cord cutting could end up costing you more.

I have seen people agonize over their gas mileage with a pocket calculator, but I have rarely seen the discussion of cord cutting get beyond the argument that “cable costs too much and the price keeps going up. I’m canceling.” Here’s some analysis to help you decide if you want to, say, buy an Apple TV and “cut the cord.”


First, I need to make some assumptions that will make the math easier: 1) An hour of HD video is very roughly a gigabyte of data. More or less, 2) almost all of our watching is in HD nowadays, 3) a month has 30 days, and 4) an average monthly cable or satellite bill is $80 and an average ISP bill for 12 Mbps service is $50.

Calculating the Cost

Let’s look first a cable or satellite TV. It’s unlimited. If your spouse and (optionally) kids have different work/sleep cycles, the TV could be on 24 x 7. That’s 720 hours (gigabytes) a month for $80. That works out to 11 cents per gigabyte.

When internet service was unlimited, the most time you could be on the Internet was also 720 hours a month. If you spent all that time watching video, that would be 720 GB for $50, or 7 cents/gigabyte, a better deal than cable and the source of the historic lure for cord cutting. But now that we have caps, the game has changed. If you want to stay under the cap and avoid surcharges, you’ll be limited to, generally, 250 GB. That’s 20 cents/gigabyte, twice the intrinsic cost of cable.

Even though cable looks better in terms of cost per gigabyte, the rationale for cord cutting is to reduce total out of pocket costs. So if your cable bill is more than than your ISP bill, why not cut the cord and buy an Apple TV. Or a Roku box?

Analyze Your Family Habits

The answer depends on your viewing habits and the availability of the content you like. Research has shown that young people just out of college don’t like paying cable bills and they tend to watch miscellaneous content as opposed to first run TV, much of it free or mildly ad supported for that very reason. It’s older. For example, “Hill Street Blues” on Hulu with modest commercial interruptions. If most of your content is free in that fashion, then cutting the cord is realistic. Also, if you’re not into live sports, then that’s a plus as well because major, live sports broadcasts are only recently and slowing seeping onto the Internet - often with lingering limitations and added costs.

On the other hand, if you’re a more traditional viewer, like me, and you just have to see the latest episode of “NCIS” (CBS) or “Castle,” (ABC) then you may be better off supplementing your Internet with cable or satellite and a DVR. That’s because a DVR allows you to record first run and sports content and then later watch, skipping over the commercials.

The Irony of iTunes

For the cord cutters, iTunes affords an oxymoronic luxury of buying the first run episodes of many (but not all) popular shows on NBC, ABC, and FOX (but not CBS) a few days later that are commercial free. For this luxury, you’ll pay a whopping $3 per gigabyte (a 42 minute episode), enormously greater than the few cents per gigabyte of data delivery. And that’s the key. If you do this three times a week, your iTunes account will be billed $36/month and will easily gobble up the difference between your ISP and your cable bill. But because your iTunes bill shows up buried on a credit card and e-mail, it’s easy to overlook.

The upshot is that if you cut the cord to save total out of pocket costs, you’ll be very financially limited in your ability to buy prime content on iTunes. You’ll be relegated to older content of less value. If you’re into first-run TV and sports, it would be better to keep your cable (satellite) and the DVR and suffer through some button pushing to skip commercials.

Of course, if you just can’t afford both, then the cable TV has to go. The Internet is essential in this era for job hunting and social networking.

Cord Cutting: Lots of Hype

It turns out that because of the economics I cited above, cord cutting isn’t as popular as you might believe. Studies by Nielsen and Frank N. Magid have verified that only a percent or two of Americans have cancelled their cable bill and use the Internet exclusively. (And that may have been due to job layoffs, not technical preference.) In addition, I’ve noticed that a lot of cord cutting articles that fan the flames are by tech columnists who are in experimental mode and want to justify an article about the Apple TV*, Roku or Boxee boxes. Their fun can be a severe case of misdirection for you.

Content Management. Who Me?

The bottom line is that even though cable and satellite charges seem high, you get a lot of content for a pretty low price per gigabyte. Throw in a DVR to skip commercials, and you can save a lot of money compared to $3/episode on iTunes.

Another emerging, nagging issue is what to do with all that content you bought. It’s on a hard disk, taking up space. You have to back it up. That means more attention, more cost. It’s questionable whether you’ll be able to hand an iTunes library down to your kids, and in some cases, if you have a favorite TV series, like “Dead Like Me,” it’s better to buy it on DVD or Blu-ray and physically give it away when the time comes.


In summary, most of us mix and match. The buying experience of movies on Apple TV is superior to that of the cable company, but, in contrast, I don’t need to own a copy of every episode of NCIS. (I do, however, need a copy of every episode of “Defying Gravity.”) So with so many people with so many different interests and needs, it pays to optimize, mix and match, seek the best user experiences, do some math (egads!) and be tolerant of a few commercials that can be skipped with a DVR.

A hasty rush into cord cutting, however, could end up costing you a lot more than before unless you’re one of those people who just never pays for anything. But then, that’s a fairly ascetic life style.


* One of the best kept secrets of the Apple TV is the menu option: Internet -> Podcasts -> Providers where you find a boatload of terrific, free content — more than you could watch in a lifetime. But it may not be your cup of tea either.