Time Warner Cable Inc. (TWC), the second-largest cable operator in the U.S. recently got involved in a legal tussle with a leading entertainment company Viacom (VIA) regarding the streaming of cable TV shows on iPad.
It all started last month, when Time Warner Cable launched a new application that allowed cable television streaming for its subscribers on the iPad while at home. But few media entertainment companies like Discovery Communications Inc.(DISCA), News Corp.'s (NWSA) Fox Cable and Viacom objected to this application and demanded extra fees from the company.
According to these media companies, Time Warner Cable is violating the programme distribution rights by streaming their channels on iPads. These companies have asked Time Warner Cable to remove their channels from the iPad tablets, while Viacom went a bit further by filing a lawsuit against Time Warner Cable. In response to Viacom’s filling, Time Warner Cable also filed a counter-suit against them.
Viacom held Time Warner Cable liable for changing the terms of the contract and has demanded for a compensation of $ 2 million. They also asked the company to remove their channels from the iPad by April this year.
Currently, viewers have more options to watch their favorite TV shows through different devices like television, personal computers, tablets and smartphones. We believe that this legal suit with Viacom will shut many loopholes that exist in this media and cable industries relating to contract terms.
Another cable operator, Cablevision launched its own live TV application for iPad this weekend. Cable industry leader, Comcast (CMCSA), also plans to roll out their live TV application by year-end 2011. Going forward, tablet streaming will become a latent weapon among the cable operators in order to counter the severe competitive threat from cheaper online video streaming companies like Netflix Inc. (NFLX) and Hulu.
Moreover, we believe that after this incident most of the cable companies will redefine or bring more clarity in their contract terms with the media entertainment channels. Hence, giving rise to new business model in the cable-media industry.
We, thus, maintain our long-term Neutral recommendation for Time Warner Cable Inc. Currently, Time Warner Cable Inc. has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
COMCAST CORP A (CMCSA): Free Stock Analysis Report
DISCOVERY COM-A (DISCA): Free Stock Analysis Report
NETFLIX INC (NFLX): Free Stock Analysis Report
NEWS CORP INC-A (NWSA): Free Stock Analysis Report
TIME WARNER CAB (TWC): Free Stock Analysis Report
VIACOM INC-A (VIA): Free Stock Analysis Report
Zacks Investment Research
Be the first to comment