TWC to Hike Rates on Multiple Deals - Analyst Blog
January 30 2013 - 10:50AM
Zacks
Time Warner Cable
Inc. (TWC) – 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 DirecTV (DTV), AT&T
Inc.’s (T) 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. (DISH) 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 streaming
companies.
Currently, Time Warner Cable has a
Zacks Rank #3 (Hold).
DISH NETWORK CP (DISH): 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
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