In today’s digital age, the question of whether cable is dead is the subject of considerable debate, especially in the multifamily property space. As streaming services continue to dominate, it’s clear that traditional cable TV’s role has dramatically shifted. This trend has significant implications for property owners and managers, particularly in terms of ancillary income.
But while cable may no longer hold the same position it once did, it can still serve as a strategic pairing with managed internet services to enhance net operating income (NOI). Keep reading to learn about the impact of streaming services on multifamily properties and how owners and managers can adapt to maximize ancillary revenue.
Is Cable Dead?
The short answer: Cable TV is quickly disappearing from multifamily properties. The exception is senior living communities. Currently, only about 15% of conventional apartments use traditional cable. This marks a substantial decline that has cost owners up to $100 per unit per month in auxiliary income over the last decade.
“About seven years ago, we started to see cable phasing out of the multifamily space,” says Dustin Johnston, Vice President of MDU (multidwelling unit) Sales at Touchstone 1. “Student housing — which is always the trendsetter — was the first to cut the cord. This quickly spread to luxury apartments and other segments, especially as steaming services were priced much more affordably at the time.”
According to The New York Times, approximately five million people abandon cable TV every year. However, cable isn’t being completely phased out . The same report indicates that 75 million Americans still subscribe to traditional TV, and analysts predict that 40 to 60 million will continue to do so in the coming years.
“Even though cable is still around and will continue to be, at least for a while,” says Dustin, “its role is shifting, and properties need to reevaluate how they offer it in order to maximize profits and keep residents happy.”
Multifamily Cable in The New TV Landscape
Today, 99 percent of households subscribe to at least one streaming platform like Netflix, Hulu, and Amazon Prime.
Why are so many people getting rid of cable? It’s hard to resist the convenience of on-demand viewing that streaming services offer, allowing users to watch what they want, when they want.
As a result, cable has transitioned from an essential service to an add-on. “There’s not enough revenue for owners and operators to prioritize cable,” says Dustin. “Cable isn’t cheap. It costs about $29 at cost, and upselling it around $40 leaves a minimal profit margin.”
However, cable TV still offers potential revenue when bundled with a profitable internet service. “Cable by itself is a losing proposition,” says Dustin. “But when tied to a strong internet service, it becomes a valuable add-on that enhances NOI.”
This ancillary income potential increases significantly with DirecTV Stream, a newer alternative to both cable and traditional streaming.
DirecTV Stream vs. Cable
Thanks to their large customer base, streaming platforms have been raising their rates as well as restricting the number of devices for a single account, leading to growing dissatisfaction from users.
Consider a typical family’s monthly streaming expenses:
- $15.49 for Netflix
- $17.99 for Hulu without ads
- $16.99 for HBO Max
- $14.99 for Amazon Prime
- $13.99 for Disney Plus
- $13.99 YouTube Premium ($19 on the app, family plan $22.99)
This adds up to $93.44 per month.
Compare this to DirecTV Stream, which offers packages starting at 75 channels for $79.99 per month and also allows sharing with up to eight friends and family who don’t live in the same household.
Not only that, as users stream over the internet, DirecTV Stream doesn’t require infrastructure or installation labor, making it appealing to multifamily properties.
At its current pricing, DirecTV Stream can offer a profit of $30 to $60 per unit for property owners. However, its success hinges on having a strong and stable internet network.
“If your connection is slow and laggy, you’re not going to be able to maintain a high-quality streaming experience. This makes a robust internet infrastructure critical,” says Dustin. “You need top-notch access points, wiring, and bandwidth to support it.”
This introduces another potential revenue stream for properties. For internet services through a managed service provider, multifamily properties can expect to pay an average of $20 per unit.
“Right now internet plans for most individuals are falling between $60 and $120 a month. This means owners can expect a profit of $40 or more per unit for most apartment complexes just for the internet,” says Dustin.
It adds up fast: On the low end, with 370 units, owners can expect a profit of $40 per unit for internet and $40 per unit for DirecTV Stream, which comes to nearly $30,000 per month in additional revenue — a profit of $1.4M over a four-year contract.
Managed Services vs. Bulk Internet
This brings us to a critical consideration: the difference between managed service internet and bulk internet.
“A lot of owners don’t realize that signing bulk internet agreements with traditional cable providers allows those companies to upsell residents directly,” Dustin explains. “Residents get bombarded with upgrade offers and sales pitches, even right on the property through door-to-door sales.”
Moreover, cable companies often provide lower upload speeds. It’s common to find that upload speed is one tenth of the download speed with a cable company. For instance, a 300 Mbps (Megabits per second) internet plan from Comcast might offer a 300 Mbps download speed but only 30 Mbps upload speed, with no guarantee on performance during peak times.
In contrast, managed service providers like Touchstone 1 offer symmetrical speeds (e.g., 300 Mbps download and 300 Mbps upload), guaranteed in the Service Level Agreement (SLA). If speeds drop below the agreed levels, providers must compensate for downtime in the form of liquidated damages.
“Upload speed and network congestion are major concerns for residents, especially for video meetings and gaming,” Johnston notes. “Residents expect to get the speeds they pay for, both for downloads and uploads. This is what makes managed service WiFi so attractive to properties.”
Grow Your NOI in the New TV Landscape
While cable TV might be on the decline, it can still be a profitable add-on when paired with a robust managed internet service. Managed service internet provides higher returns on investment compared to traditional bulk internet agreements, ensuring faster and more reliable internet speeds for residents. Additionally, DirecTV Stream offers residents better value in their streaming services and high revenue potential for multifamily properties.
Looking to grow your property’s ancillary income? Contact Touchstone 1 today for a free consultation. Our team of multifamily WiFi experts will provide a custom quote based on your property’s size and infrastructure and recommend cost-effective solutions.
