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Netflix, Inc. (NFLX), Amazon.com, Inc. (AMZN): Cutting the Cord? I’m Plugging Mine Back In!

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Much has been made in the media in the past year or two about “cord-cutters”: People who are dropping their pay-TV service. The average cost of pay-TV service (including some premium channels) was recently quoted at $86 per month! That’s pretty steep, and soaks up a significant chunk of a typical family’s discretionary spending.

For a little over year, I’ve been a part of the cord-cutting movement. Like many Americans, I dropped my cable subscription primarily due to tight finances. However, I quickly discovered that the alternatives to cable (or satellite) TV are not very good: They may cost a fraction of the price, but they also have a fraction of the content.

That’s why I finally gave in and called Comcast Corporation (NASDAQ:CMCSA) to order new service. As of Monday, I rejoined the ranks of pay-TV customers. So far, I’m relieved!

Content is king
My decision to rejoin Comcast Corporation (NASDAQ:CMCSA) could best be summed up by the phrase “Content is king.” Internet video services like Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN)‘s Prime Instant Video are “on-demand” and commercial free, both of which are good things. But neither of those advantages can outweigh the superior content of even a low-tier cable subscription.

Netflix and Amazon’s Prime Instant Video are the top two Internet subscription video services.

For one thing, Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN) — with a few exceptions — do not show current-season TV episodes. (If you’re happy to watch last year’s shows, these services are more appropriate.)

Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN) are also starting to show their own original series, but these efforts are still in the early stages. For example, Twenty-First Century Fox spent $1.5 billion on original content last year. That’s roughly comparable to Netflix, Inc. (NASDAQ:NFLX)’s total domestic streaming content spending last year, including all of its old movies and TV shows. Amazon.com, Inc. (NASDAQ:AMZN) does not reveal its Prime content spending, but it appears to be somewhat below Netflix’s.

Fox runs just one of the four major TV networks, and there are a growing number of cable networks with significant original content. Given the imbalance in content budgets between today’s Internet video services and the networks available on cable, it’s not surprising that there is a big content gap. (Moreover, there is a content “void” for things like live local sports, which are generally not available on the Internet at all.)

The decline of free TV
For many years I found that there was more and better content available for free (legally) on the Internet than could be accessed through pay services like Netflix, Inc. (NASDAQ:NFLX) or Amazon.com, Inc. (NASDAQ:AMZN) Prime. Hulu’s free site is a big repository of current-season network TV shows. Moreover, most TV networks stream full episodes on their own websites.

However, a growing number of cable networks are starting to require a pay-TV subscription to view full episodes of their shows. Time Warner Inc (NYSE:TWX)‘s TNT and TBS channels helped pioneer the concept of cable authentication several years ago. The Walt Disney Company (NYSE:DIS) has gone a similar route with ESPN: You can watch lots of additional content and extra “channels” online, but only after you prove that you are a pay-TV subscriber.

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