In Unfiltered, Kapitall Writer James Dennin offers his take on the weekly news without his usual deference to the norms of financial reporting.
I'll admit that I have a personal bias against Time Warner (TWX), who's cable playback features almost never work and whose shoddy on-demand has a tendency to black out just as soon as you've finally broken down and paid for something. However, it turns out that I'm far from alone in this increasingly rational hatred.
The beleaguered cable provider currently remains under fire for what will today mark the three-week anniversary of its blackout of content provided by the CBS Corp. (CBS). This is not the first time the cable company has provoked outrage by blocking popular content - a disagreement with Madison Square Garden Networks led them to block much of what later became known as "Lin-sanity" the highly watched cache of games in which the New York Knicks point guard catapulted to fame with a series of high-profile performances.
However after 21 days with no service, the pressure is starting to mount, particularly as NFL season approaches. Time Warner's stock has been pummeled while CBS's has remailed largely unaffected - in part because the revenue lost from the total number of blacked-out televisions equals a paltry $400 thousand from unaired advertisements. Time Warner, in the meanwhile, must cope with a class-action lawsuit, which alleges that the cable provider is being "oppressive" and "injurious."
Maybe that's a bit strong. But there's no question that Time Warner's plan - to offer Best Buy (BBY) waivers for antennas so viewers can catch up on their programming via open airwaves - is likely to fall somewhat short in the eyes of the oppressed. It's also getting increasingly less likely that holding out will pay off for them. As many frustrated CBS negotiators have pointed out, the deal that's been offered to Time Warner is hardly any different from the one that's been accepted by Verizon (VZ) and Cablevision (CV).
Time Warner has emerged as the most pugnacious of the cable television providers. It has conducted legal battles with Viacom (VIA) over the use of different iPad and iPhone apps and its music station CMT. It also squared off with the Yes Network - the channel that airs Yankee games. Many sources close to the two companies revealed to the Wall Street Journal this week that part of the problem might have to do with Melinda Witner, a former litigator turned Time Warner Vice President who is said to be ferocious in the ongoing negotiations.
The companies did announce a brief respite in the blackout to air a debate between the candidates for Comptroller in New York City. However, no other major breakthroughs have been made to date. It's time for Time Warner to bite the bullet, and shell out for the content its viewers want. This episode has already done damage to the company and its stock. The ground it aims to keep in its "battle" to hold down television costs, has already been ceded by all of its competitors. Time Warner has no choice but to follow suit.
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1.Time Warner Inc. (TWX, Earnings, Analysts, Financials):Operates as a media and entertainment company in the United States and internationally. Market cap at $56.89B, most recent closing price at $61.26.
2.CBS Corporation (CBS, Earnings, Analysts, Financials):Operates as a mass media company in the United States and internationally. Market cap at $30.97B, most recent closing price at $50.85.
3.Verizon Communications Inc. (VZ, Earnings, Analysts, Financials):Provides communication services. Market cap at $135.43B, most recent closing price at $47.27.
4.Viacom, Inc. (VIA, Earnings, Analysts, Financials):Operates as an entertainment content company in the United States and internationally. Market cap at $38.02B, most recent closing price at 79.65.
(List compiled by James Dennin. Analyst ratings sourced from Zacks Investment Research, all other data sourced from Finviz.)
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