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TWC Considers Adding Netflix Service

Zacks Equity Research

The second-largest cable MSO in the U.S., Time Warner Cable Inc. (TWC) is planning to follow the footsteps of U.K.'s Virgin Media by incorporating Netflix, Inc.’s (NFLX) video streaming services into its set-top boxes. This is expected to widen the movie viewing options for Time Warner Cable’s subscribers.

Cable TV operators are gradually losing video subscribers to large telecom operators, such as Verizon Communications Inc. (VZ) and AT&T Inc. (T) and low-cost online video streaming service providers like Netflix and Hulu. Time Warner Cable is also facing the brunt of growing competition.

During the third quarter of 2013, Time Warner Cable lost 306,000 residential video subscribers. Moreover, the blackout of CBS channels from its program list in August happens to be another prime reason for such a massive subscriber loss.

In order to avoid such service disruption in the near future as well as to retain subscribers, Time Warner Cable is planning to offer multiple platforms to its customers to watch their favorite shows. Moreover, higher adoption of smartphones and tablets have popularized the TV everywhere service. Hence, to tap this opportunity, Time Warner Cable is rolling out such exclusive services.

Few months back, Time Warner Cable extended its agreement with STARZ, thereby facilitating its subscribers to watch a vast collection of movies and TV shows online and on any device.

However, we believe that adding such video streaming services to its set-top box may create disagreements with network companies.

Currently, Time Warner Cable has a Zacks Rank #3 (Hold).

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