Cord Cutters a Factor When Buying Cable TV Service

The bulk buying of services has long seemed like good business to co-op and condo boards. But in today’s brave new world of cable TV services, suppliers are making unprecedented demands, often requiring that buildings guarantee a 100 percent buy-in in order to get a bulk-rate discount. As a result, co-op and condo boards are scrambling to keep up with new business models,  changing technology, and changing customer preferences. 

A number of surveys have found that a significant majority of people are abandoning cable TV for à la carte streaming services such as Amazon Video, Hulu, Netflix, HBO NOW, and others. One recent survey found that from 2011 to 2017, the percentage of U.S. households with broadband internet that have never subscribed to cable rose from 9 to 22 percent. And another survey found the percentage of those with at least one streaming service has jumped from 10 to 49 percent.

As the population of buildings changes, millennial “cord-cutters” become another factor that boards need to consider. In a new report, eMarketer forecasts that there will be 22.2 million cord-cutters over the age of 18 this year, up nearly one-third since 2016, according to Business Insider.

In a building with two or more cable TV providers, residents who accept the bulk-rate provider would get a discount, and the association would pay the provider each month for all residents who didn’t want that provider. That means that the monthly maintenance or common charges being paid by those who did not sign up are in essence subsidizing the discount of those who did. That could ruffle some residents’ feathers. 

Moreover, suggests attorney real estate attorney Arthur Weinstein, co-ops may face proprietary-lease issues. “The traditional proprietary lease says all charges must be made on a per-share basis, so it is questionable as to what the law is about spreading out those costs,” he says. “If I have a studio apartment that, for argument’s sake, has 100 shares, and you have a three-bedroom apartment that, again for argument’s sake, has 300 shares, and we each have one TV, you may be charged three times what I’m being charged on the basis of number of shares.” 

There is room for negotiation. One area is the contract’s “cure language” for things like service outages and how quickly the provider must send out a technician and get things up and running again. A breach of such guarantees can void the contract.

“They’re promising a certain level of service,” says attorney Tara Snow, a partner at Novitt, Sahr & Snow. “And, honestly, they want to retain you once the term is up. If they give bad service, people are going to sign with someone else.” 

Sometimes you can even negotiate a free month or free HBO for a year, says Daniel Neiditch, head of River2River Realty and board president at a 650-unit condo. He reports that one provider “offered to do the gym and common areas for free; we have TVs in our gym, laundry room, and sky lounge.” 

Even cash bonuses and revenue-sharing fees – a staple in the old days – are not off the table. Adds Verizon’s Mike Weston, “It’s something we consider in the right situation, but it’s not a standard practice to offer one. We also invest to upgrade the data /TV/phone network at our cost, which is another incentive in a bulk deal.” 

Is such a deal right for your co-op or condo? In small buildings, there’s a chance that most or even all residents would sign up. In large buildings, getting a 100 percent buy-in would be unlikely. In every case, if fewer than 100 percent of your apartments sign on, then either the association has to pay the difference each month or the apartments that signed on will split that difference among them – requiring someone to figure out the new amount each time another apartment signs on or drops off. 

“It’s a great concept because you can tell your people, ‘We’re buying in bulk, and you get a discounted rate,’” says Carl Cesarano, a principal in the accounting firm Cesarano & Khan. “But it can create an administrative nightmare.”