It's Almost Time to Kiss Your Cable Bill Goodbye

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Time Warner's (TWX) HBO and CBS (CBS) last week become the latest networks to announce plans to reach consumers who aren't interested in traditional cable and satellite TV packages.

CBS is charging $5.99 a month for CBS All Access, a digital platform that provides streams of current seasons of 15 prime-time shows the day after the episodes air. Past seasons will be available for eight shows, and several CBS classics including "Star Trek" and "CSI: Miami" will be in the mix. There is also live streaming of more than a dozen local CBS TV stations, but "some sporting events, including NFL coverage, are not available," CBS says.

HBO wasn't as forthcoming with details on pricing and availability, but the leading premium movie channel did back reports that in 2015 it would be rolling out its first domestic service that doesn't require a pay-TV relationship. HBO tested an HBO Go-like platform in Scandinavia last year as a stand-alone offering.

Nothing but Net

It's not just HBO and CBS joining Netflix (NFLX) and (AMZN) with what the industry calls "over-the-top" streaming platforms, which don't require contracts with satellite and cable providers.

Earlier this month Disney's (DIS) ESPN turned heads with a new deal for pro basketball. The sports programming leader struck a deal with the NBA that includes the ability to stream out-of-market games to folks who don't have existing pay-TV arrangements. ESPN -- just like HBO -- had previously limited streaming access to those who could verify cable and satellite subscriptions that include the respective channels.

Disney, CBS and HBO have been served well by the service providers that bundle channels together at high costs to consumers. However, they also realize that younger consumers are cutting the cord -- or never paying for cable or satellite TV because they believe everything that they want to watch is online. "There is a millennial consumer out there who has a different approach to the traditional cable or satellite package," NBA commissioner Adam Silver said in response to the new ESPN deal.

The Future Will Get Complicated

Consumers are generally fed up with paying for a ton of channels that they don't watch, but this doesn't mean that the future will be cheaper. The more popular channels will want to charge more for direct access.

Media-research firm SNL Kagan finds that consumers are paying a median monthly cost of just 14 cents per channel, but that goes as high as $6.04 for ESPN. You can be sure that ESPN will charge more than $6 for monthly access to its content.

Cord cutters may be able to cherry-pick from among more channels, but things will add up in a hurry as the streaming services pile up. Another concern is that the same companies that provide pay-TV providers often control online connectivity. The country's two largest cable providers account for 33 percent of the pay-TV market, and they also command 36 percent of the broadband audience.

Motley Fool contributor Rick Munarriz owns shares of Netflix and Walt Disney. The Motley Fool recommends and owns shares of, Netflix, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. Check out our free report on high-yielding dividend stocks.
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