Time Warner Cable Inc.
) - the second largest cable MSO in the U.S. - plans to increase
rates on the back of multiple deals signed with different
sporting majors like Los Angeles Galaxy, Los Angeles Sparks, Los
Angeles Lakers and Los Angeles Dodgers.
The demand for sports network is always on the rise. In order
to tap the growing demand mainly across Los Angeles and Hawaii
regions, Time Warner Cable launched two specialized sports
networks namely Time Warner Cable SportsNet and Time Warner Cable
Deportes in October last year.
In an effort to popularize these channels, Time Warner Cable
is continuously expanding its local sports coverage by signing
long standing telecast agreements with Los Angeles-based popular
teams in different categories.
The recently signed 25-year contract with the popular baseball
team Los Angeles Dodgers is expected to cost Time Warner Cable
more than $7 billion. Moreover, the company has already spent
around $3 billion on its 20-year agreement with the basketball
team Los Angeles Lakers.
These hefty fees of more than $450 million per annum will
increase the programming costs for Time Warner Cable. So, to
offset the rise in costs, the company started charging an extra
$2.25 per month from those subscribers, who have taken the two
Lakers channels. However, these channels are free for those who
opt bundle package services. Moreover, the company will also hike
rates on basic programming packages in Los Angeles by 8.2% to
$72.50 and its DVR rental fee by 18.6% to$12.99 per month.
Furthermore, Time Warner Cable will also gain from the
distribution rights sold to other pay-TV majors like
) U-Verse and Verizon's FiOS TV.
The trend to pass over the fees to its respective customers is
gaining popularity across pay-TV industry as both
Dish Network Corp.
) and DirecTV have recently hiked its programming rates. So, in
the near future, the subscribers tend to be the ultimate losers
if these higher rates are not absorbed by these pay-TV companies,
thereby forcing these subscribers to move towards low cost video
Currently, Time Warner Cable has a Zacks Rank #3 (Hold).
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