Cutting the Cord

Why Condo and Co-op Boards Should Reconsider Cable Bulk Agreements

As a co-op and condo efficiency consultant, we analyze our clients’ operating expense and income line items as well as their contracts. When we hear that they are in a cable bulk agreement, we immediately review it to get the end date so that we can cancel it at the earliest possible date. Why? Because it’s a losing proposition that is very expensive for most buildings.

In the past, bulk agreements with cable providers were a popular option for co-op and condo associations. The board signed an agreement with the building’s cable provider that provided the residents with a reduced rate for cable services that were then offered to all residents in the building. Some co-ops and condos include this in the maintenance or common charges as a “free” amenity, whereas other boards decide to bill those residents who subscribe to the cable TV service.

Decades ago, when there were no alternatives, the cable companies had monopoly and later duopoly, and they offered these reduced bulk rates based on a guaranteed amount of the building’s residents signing up, not infrequently nearly 100% of the apartments. However, with the rise of streaming services like Netflix, Hulu, and Sling, it has become clear that these bulk agreements can be very expensive for the association and its residents.

The fact is, more and more people are cancelling their cable subscriptions and opting for streaming services instead. This trend is particularly evident among millennials and younger generations who are more tech-savvy and have grown up with the internet as a primary source of entertainment. In fact, according to a recent survey by Deloitte, more than half of American households now subscribe to a streaming service.

This shift in consumer behavior presents a significant financial risk for co-op and condo boards that have bulk agreements with cable providers. As more and more residents cancel their cable subscriptions, the board will be left with a dwindling pool of subscribers that the co-op or condo need to pay for as part of the bulk agreement. This makes it a losing and often costly arrangement for the association, and the owners since ultimately they pay for all shared costs.

One of our clients just signed a five-year bulk agreement a few months prior to hiring us. Their association charges those residents who subscribe to the bulk-rate cable provider in their building, which allows us to see how much they pay out-of-pocket. The association’s net cost is $48,000 per year for those who have cancelled their cable subscription.

In writing this article, we Googled bulk-rates and found one real estate listing that lists bulk rates as an amenity. The same listing has maintenance at over $4 per square foot - our goal is to get our clients’ maintenance to below $2.20/square foot. This board needs our help!

Although we were not the only ones, we saw this coming many years ago and cancelled the cable bulk agreement for our first building in 2015. Habitat Magazine wrote To Get This Bulk-Rate Cable, Everybody Must Sign On as early as 2017.

Additionally, streaming services offer a wider range of options and flexibility compared to traditional cable subscriptions. With streaming services, residents can watch their favorite shows and movies on-demand, at any time, and on any device. This flexibility and convenience cannot be matched by traditional cable subscriptions.

So, what should co-op and condo boards do in response to this shift in consumer behavior? The answer is simple: reconsider your bulk cable agreement. If you do sign on, make sure that only a fewer amount, for example 50% of residents, need to be enrolled, but with an increase in alternatives, it is possible that this number should be 25%. This number will depend on your current enrollment and the rate of loss of subscriptions.

One possible option is to negotiate a bulk agreement with a streaming service provider. Several streaming service providers, such as Amazon Prime and Hulu, offer bulk subscription options that are comparable to traditional cable bulk agreements.

Our recommendation is to shift away from offering television services altogether.

In conclusion, the rise of streaming services is an expensive wake-up call for all co-op and condo boards with cable bulk agreements. It is time to reconsider these agreements and explore alternative options that will better serve residents and protect the financial interests of the co-op and condo owners, who ultimately pay for the loss. As a board member myself, I urge my colleagues to be proactive in responding to this shift in consumer behavior and to embrace the future of television consumption.

 Need help with reducing your greenhouse gas emissions to avoid LL97 fines for your building, a second opinion on your insurance premiums or any other building costs? The Folson Group provides ESG consulting services to assist co-op and condo boards in minimizing their building’s operating costs. Set up a strategy call with us.