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

This trend should not be very surprising. Companies like The Walt Disney Company (NYSE:DIS) and Time Warner Inc (NYSE:TWX) earn billions of dollars each year from affiliate fees — the amounts pay-TV services pay to carry their cable channels. According to SNL Kagan, ESPN leads the industry with affiliate fees of around $5.54 per month per subscriber. If a cable network gives content away for free on the Internet, it will lose a lot of leverage with pay-TV services, and could thus undermine its business model.

Traditional broadcast TV is still a good free option for many people. The major broadcast networks carry many major sporting events, lots of hit shows, and local and national news. In my case, broadcast TV wasn’t an option: Only one of the four major TV networks has a reliable signal in my area.

Moreover, broadcast TV may not be free much longer. Aereo has made huge waves in the TV industry by capturing broadcast signals for free with its proprietary antennas and then charging users to receive content over the Internet. Broadcast TV networks want to shut Aereo down in order to protect their own cable affiliate fees. If they fail to do so through the courts, several executives have threatened to upend Aereo by ending free broadcasts altogether!

Foolish bottom line
While I may be turning my cable service back on, that doesn’t necessarily mean that cable and satellite operators like Comcast Corporation (NASDAQ:CMCSA) are out of the woods. For many people with different viewing habits than me, cutting the cord may make sense. Steadily increasing pay-TV fees will continue to fuel the cord-cutting movement for the foreseeable future.

That said, there are no comparable alternatives to a pay-TV subscription yet. While Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN) are good at what they do, they provide very different services than a full cable package. Despite the expense, a cable TV subscription provides a lot more value for me today than any alternative.

Full Internet-based TV subscriptions may be coming soon, though, courtesy of Intel. When those services are up and running, they may present a more formidable threat to cable operators. So who knows: I may end up cutting the cord again in a few years!

The article Cutting the Cord? I’m Plugging Mine Back In! originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Fool contributor Adam Levine-Weinberg is short shares of Netflix and Amazon.com and is long December 2013 $275 puts on Netflix. The Motley Fool recommends Amazon.com, Intel, Netflix, and Walt Disney. The Motley Fool owns shares of Amazon.com, Intel, Netflix, and Walt Disney

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