Time Warner Cable Inc. (TWC) recently announced that it has finally settled the longstanding legal tussle with Viacom Inc. (VIAB) regarding the streaming of cable TV shows on the iPad. However, details regarding the settlement of the lawsuit were not divulged.
It all started in March last year, when Time Warner Cable launched a new application called TWC TV application. The app allowed live cable television viewing for its premium subscribers on the iPad while at home when both the iPad and the company's cable modem were linked through a Wi-Fi router.
However, Viacom, which distributes popular TV shows, opposed this new viewing option and filed a lawsuit against Time Warner Cable for changing the terms of its contract. Moreover, the company also demanded a compensation of $2 million for violating their contract with Viacom. In response to Viacom’s lawsuit, Time Warner Cable filed a countersuit against them.
Viacom garnered huge support from other media entertainment companies like DiscoveryCommunications Inc. (DISCA) and News Corp.'s (NWSA) Fox Cable. These media networks also demanded extra fees from the cable companies for offering such services to their subscribers.
However, we believe that the settlement of the lawsuit will benefit Time Warner Cable in terms of subscriber retention as well as to combat stiff competition in the satellite and cable industry. During the first quarter of fiscal 2012, the company lost 94,000 residential video subscribers. So the launch of such innovative services will help the company to recoup some lost ground in terms of subscriber addition. Moreover, we believe that after this incident, most of the cable companies will redefine or will bring more clarity into their contract terms with media entertainment channels.
Currently, Time Warner Cable Inc. has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
Based in New York, Time Warner Cable is the second largest cable operator in the United States and offers entertainment and communication services to its customers.
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