Continuous rise in programming expenses has forced
Time Warner Cable Inc
) - the second-largest cable operator in the U.S. to remove
Ovation network from its popular channel lists.
Ovation channel mainly targets U.S. viewers interested in art,
music and film. Its popular shows like Song by Song and A Chance
to Dance will be greatly missed by the audience from January,
2013 onwards as the second-largest cable operator will be least
interested to renew its contract from the beginning of 2013.
During the past few months, Time Warner Cable had been heavily
investing its resources in sports channels. Few months back, the
company started airing two sports channels - Time Warner Cable
SportsNet and Time Warner Cable Deportes to its sports channel
lineups. Moreover, the inclusion of NFL's RedZone to its Sports
Pass tier will help the company to generate dedicated fan base
apart from retaining its subscribers, thereby improving its churn
At present, Time Warner Cable offers video service to 12.159
million video subscribers, of which only 121,590 customers watch
Ovation channel. So, paying $10 million annually to the network
partner as programming cost for just a handful of customers will
continue to hurt margins for the company going forward.
Stiff competition from other pay-TV operators coupled with
easy access of TV networks on Internet have forced Time Warner
Cable to control cost by upgrading its subscriber base, hence
charging same fees from its customers.
Earlier this year, satellite TV giant
Dish Network Corp.
AMC Networks Inc.
) channels from its program list as the former was demanding
higher rates from Dish Network. Likewise, there was a
disagreement between satellite TV market leader
) and TV network major
) regarding programming fees that has led to channel blackouts
for DIRECTV customers.
However, both Dish Networks and DirecTV have settled their
scores with the respective channel owners and also resumed their
services at an increased rate.
However, in this case Ovation has less bargaining power
compared to Viacom and AMC Networks, which offer bundled channels
inclusive of less popular channels. So, the only possibility for
its survival is to slash rates or to host popular shows to gain
We maintain our long-term Neutral recommendation for Time
Warner Cable Inc. Currently, it has a Zacks #3 Rank, implying a
short-term Hold rating on the stock.
AMC NETWORKS- A (AMCX): Free Stock Analysis
DISH NETWORK CP (DISH): Free Stock Analysis
DIRECTV (DTV): Free Stock Analysis Report
TIME WARNER CAB (TWC): Free Stock Analysis
VIACOM INC-B (VIAB): Free Stock Analysis
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