Time Warner Signs Deal with DirecTV - Analyst Blog
November 20 2012 - 7:30AM
Zacks
Time Warner Cable
Inc. (TWC), the second largest cable multi service
operator (MSO) in the U.S., has inked a deal with
DirecTV (DTV). The deal will allow the largest
U.S. satellite TV provider to broadcast the cable MSO’s two sports
network in the Los Angeles (LA) area. The deal could be
significantly beneficial for Time Warner as DirecTV is one of the
biggest pay TV distributors in California with a customer base of
about 1.2 million.
On October 1, 2012, Time Warner
launched two new sports channels – Time Warner cable SportsNet and
Time Warner Cable Deportes – that broadcast the LA Lakers
basketball games in addition to games from LA galaxy soccer teams
and LA Sparks Women Basketball team.
Last year, Time Warner cable paid
about $2 billion to gain broadcasting rights of LA basketball games
for 20 years. DirecTV became the fifth company to ink such a deal
with the cable MSO, who earlier announced similar deals with Cox
Communications, Verizon Communications Inc. (VZ),
AT&T Inc. (T) and Charter
Communications Inc. (CHTR).
The deal puts DirecTV in a winning
position against arch rival Dish network, still negotiating with
Time Warner cable over a possible deal. The deal will allow the
DirecTV customers to connect better with their teams as Time
Warners’ exclusive partnership with LA teams allow it to provide in
depth team analysis and behind-the-scenes coverage unlike ever
before.
Sports entertainment has become the
most expensive form of programming with nationwide sports channel
charging as much as $5 per subscriber while regional sports channel
is charging only $2-$3 from their customers.
New York-based Time Warner is
negotiating with various pay TV firms to offer the two sports
entertainment channels and is looking for a monthly average fee of
$3.95 per subscriber. We believe such deals will allow Time Warner
Cable to cover its hefty contract fees and at the same time hedge
its escalating programming cost by offering these less expensive
regional sports network.
We maintain our long-term Neutral
recommendation on Time Warner Cable. The company also retains a
Zacks #3 Rank, implying a short-term Hold rating.
CHARTER COMM-A (CHTR): Free Stock Analysis Report
DIRECTV (DTV): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
TIME WARNER CAB (TWC): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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