Although, Time Warner Cable ( TWC ) has now launched on-demand video service over the internet for its subscribers who use Apple's ( AAPL ) iOS devices, it is still, as usual, late to the party. Its competitors such as Comcast ( CMCSA ), Dish Network ( DISH ) and others are already providing this service. We have previously stated that Time Warner Cable has been a little slow in embracing industry trends and that habit seems to be lingering on. It appears that the success of its broadband has led to reduced focus on what needs to be done to plug pay-TV losses. But despite continued subscriber losses in its pay-TV business, Time Warner Cable has been able to grow profits and margins on the back of its growing broadband business.
Slow In Adopting Trends
In 2011, Time Warner Cable introduced its streaming app for the iPad, which led to some disputes with content companies. Then almost 10 months later, it made the same app available for the iPhone. But in the fast-changing entertainment world, this was an awfully long wait.
Furthermore, the cable company took several months before it began offering Time Warner's ( TWX ) HBO Go app to subscribers. It also unveiled its iPhone app in January 2012, followed by announcement regarding bringing its streaming capability to PCs as well as Macs. That seemed like a sign of things picking up for the company, but it didn't happen.
On the other hand, its competitors have been more proactive. Comcast has been offering on-demand service for a couple of years longer than Time Warner Cable, and has continued to enhance its Xfinity service as well as embrace mobile devices relatively quickly. Dish Network stepped up its efforts through its ambitious plan of introducing blockbuster movie streaming and wireless broadband service. Time Warner Cable's reluctance to embrace these changes have impacted its net subscriber additions, which still remain the worst among major pay-TV service providers in the U.S..
Is this really sustainable? We believe that sooner or later as more players enter the broadband arena (such as Dish Network and expansion of FiOS/U-Verse), Time Warner cannot ignore its pay-TV business and just rely on broadband. In order to make up for the lost time, Time Warner Cable could look at some potential acquisitions in streaming department to boost its offerings. Netflix (NFLX) could be once such candidate.
Our price estimate for Time Warner Cable stands at $93 , implying a discount of less than 5% to the market price.