I pulled a similar switch. I dropped TV service while bumping up the speed of my internet service, cutting my bill from about $120/month for both down to $40/month for the net. I picked up a Roku2 XD for $99 for the TV in the living room. I already had a PlayStation3 which could have handled most of what I had in mind, but I like the Roku. Then I added Netflix and Hulu Plus for about $8 each. I already had Amazon Prime for the free 2-day shipping at $79/year, but if you wanted it just for the streaming service that'd be about $6.58/month for that. Add in Crackle for a few more movies, Pandora for music, and a smattering of special interest channels like TED Talks, because I can. Those channels are free.
Everything about it is essentially on-demand. I can even purchase pay-per-view-like timed rentals on Amazon or the like if I really want.
To make it all even better, I installed Plex Media Server on a Mac that I use as a server. On that, I can load any video, audio, or photo files that I want. The Roku has a Plex channel that can see the media server and play its content, including any channels that are available on Plex but not on Roku. Further, I've got the Plex app on my iPhone, which can display any of Plex's content over the net from home so I can watch it anywhere. This means that if I want, I can download content via iTunes or some similar service. Now, if I were the sort to be into downloading less than legal content, I could also set up Sickbeard and Couchpotato on the Mac so that Plex would have all sorts of content.
Total price, if you ignore the value of Amazon Prime outside of its streaming service and discount the up front investment in the Roku, is roughly $62.58/month, or a touch over half of what I used to pay. What I'm missing is sports and pay channels like HBO. Although there are some sports channels on Roku and Plex, I suspect that sports fans may find the selection lacking. HBO and the like I can live without, but if I couldn't I've read right here on Slashdot that most of those shows have become the internet download darlings on bit torrent and the like.
Next project? Installing Asterisk and converting the house to VIOP.