The Cost of Cable TV Could Be Going Up Because Of Streaming Services Thanks to Spectrum, Paramount, and Disney





Comcast Cable Truck

When Disney and Charter struck a new agreement to bring Disney+ to Spectrum cable customers, it set a new precedent for how traditional pay-TV and streaming services could be bundled together. But it could also open the door to higher costs for cable TV customers.

This is clearly a new structure that Charter wants to continue, with its CEO Christopher Winfrey saying last week that he wants to strike similar deals with the likes of NBC Universal, Warner Bros. Discovery, and other media companies to include its streaming services like Max and Peacock for subscribers, noting he would be willing to drop all of their channels if they couldn’t reach a deal. As part of their agreement, Disney agreed to let Spectrum drop several cable channels, from Disney Junior to Nat Geo Wild.

The question is, who will pay to cover the costs of bundling these services into cable TV? A hypothetical bundle that includes the ad tiers for Max ($9.99), Disney+ ($7.99), Peacock ($5.99) and Paramount+ ($5.99) would cost around $30. Even if a cable provider were to get a wholesale discount, that would still represent a material increase to their programming costs. Even half that amount would mean another $15 a month per subscriber. That could go even higher if you include other services like ESPN+. Sadly for customers, cable TV companies have a history of passing these costs to its customers.

It’s unclear whether other media companies beyond Disney will go for such a deal. On Thursday, Paramount CEO Bob Bakish revealed on the company’s earnings conference call that he had struck deals with several pay-TV providers to bundle Paramount+ and Showtime services with cable. Notably, he said that in the international bundle deals were struck without the loss of any of its networks, which include Comedy Central and Nickelodeon. This results in cable TV companies being unable to offset the costs of these services by cutting the number of channels they pay for. Clearly, cable TV companies and some networks think bundling streaming services into cable TV will help slow or stop cord cutting.

The revelation highlights the dilemma the cable TV companies face if they pursue this strategy. If Spectrum, for instance, adds Paramount+, Max, and Peacock without giving up any cable channels, as Bakish suggested, it ends up having to bear heavy programming costs along with streaming costs. And history has shown that the burden will eventually be borne by the customer.

“The moment you have a content owner involved, the prices will go up,” said Roger Entner, an analyst at Recon Analytics.

The good news for cord cutters is if you don’t pay for a cable TV service from companies like Spectrum, none of this will impact you. You will still be able to get Disney+, Peacock, and more as stand-alone services.

The New Cable TV Bundle

The risks likely won’t stop such deals from happening. Streaming services want to partner with cable companies because it’s a cheaper, more effective way to grow their audience than going after them directly.

Cable companies, meanwhile, want these streaming services to be part of their bundle because they believe it will help them stay relevant to cord cutters, or younger users who’ve never signed up in the first place. The cable companies are increasingly leaning on broadband as their key revenue driver, with content — streaming or linear — a reason to stick around.

But bundling those streaming services could start adding up, especially if there’s no release on the other end from dropping cable channels.

The pay-TV companies can either bear the cost themselves, or pass it down to their subscribers. Historically, the odds aren’t great for the consumer.

You saw it with DIRECTV, which plans to raise prices starting tomorrow, just two months after it struck a new distribution deal with Nexstar.

“Like other distributors, we’re adjusting our pricing because of the higher cost networks are charging to distribute national and local programming,” a DIRECTV spokesman said at the time.

Keep in mind that those streaming prices are likely to keep going up. Media executives like Warner Bros. Discovery CEO David Zaslav and Paramount CFO Naveen Chopra both teased higher prices for their services down the line.

It all shakes out to a scenario where consumers are likely to get hit with higher bills down the line. And they may not just be blaming the cable providers anymore. 

“Now they can hate Mickey and Goofy and the Mandalorian too,” Entner said.

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