Time Warner Cable finally embraces streaming
Company management is realizing that quicker adoption of newer technologies is critical in a competitive market.
But recently, the No. 2 cable provider in the U.S. has finally been doing more enhance its pay-TV service with streaming options.
The overall pay-TV industry is headed in this direction, and broadband Internet is increasingly becoming a vehicle for video delivery. Pay-TV companies need to embrace this change to protect their market shares, although Time Warner Cable's adoption hasn't been as fast as Comcast (CMCSA) and Dish Network (DISH).
But recent announcements indicate that Time Warner Cable is shifting gears to adapt to the changing pay-TV industry. (See our complete analysis for Time Warner Cable)
A slow start
Last year Time Warner Cable introduced its streaming app for the iPad, which led to some disputes with content companies. Almost 10 months later, it made the same app available for the iPhone. In the fast-changing entertainment world, this seems like an awfully long wait. The cable company also took several months to offer Time Warner's (TWX) HBO Go app to subscribers.
Meanwhile, competitors have been busy. Comcast has continued to enhance its Xfinity service and embrace mobile devices. Dish Network stepped up its efforts with an ambitious plan to introduce Blockbuster's movie streaming service while developing its own broadband service.
Time Warner Cable's reluctance to embrace these changes have hurt subscriber numbers. It lost more than 120,000 subscribers in the fourth quarter, while Comcast significantly cut its subscriber losses to just 17,000.
Momentum picking up
After unveiling its iPhone app in January, Time Warner Cable recently said it will bring streaming capability to home computers. Subscribers will be able to access live programming from up to 200 channels on their PCs and Macs. Soon after this announcement, Time Warner Cable's digital communication director said the company may be ready with an app for Android-based devices by the end of March.
These are encouraging signs that Time Warner Cable has placed more emphasis on streaming, and that management realizes that quicker adoption of newer technologies is critical in a competitive market. We expect some of these service enhancements to help the company's first-quarter results, and pay-TV subscriber trends might improve thereafter.
We estimate that the pay-TV business makes up a little over 40% of Time Warner Cable's value.
Our price estimate for Time Warner Cable stands at $65.67, implying a discount of about 15% to the market price.
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