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TWC to Restore Ovation Network

Zacks Equity Research

Time Warner Cable Inc. (TWC) – the second-largest cable operator in the U.S. – has decided to include Ovation channels in its program list which was earlier dropped by the cable giant. Both companies have entered into a fresh contract where Ovation will resume its service from the beginning of next year.

Ovation channel mainly targets U.S. viewers interested in art, music and film. The lack of popular content coupled with mounting programming cost has forced the cable company to slash the Ovation channel from its list.

Of late, Ovation has been expanding its offerings by airing popular TV series like A Young Doctor’s Notebook. Moreover, the network company has also started an in-house production unit, Ovation Studios. The company has also decided to offer 200 hours of original TV shows from 2014 and it will gradually increase to 250 and 300 hours in the next couple of years.

Time Warner Cable is assessing cost, viewership and content before renewing contracts with TV network operators.

Earlier, Ovation had a viewership of 121,590. Now, the launch of much original content may have induced Time Warner Cable to strike a deal with the channel operator.

Few months back, Time Warner Cable faced a channel blackout from CBS Corporation’s (CBS) as the latter had demanded higher contract renewal fees.  Last month, Time Warner Cable reinstates CBS Corporation’s programs on its list.

Last year, DIRECTV (DTV) and TV network major Viacom, Inc. (VIAB), differed on the issue of programming fees. This had led to channel blackout for DIRECTV customers. Finally, the satellite giant had to renew its contract for a period of seven years with a significant 20% rate hike.

In most cases, payTV operators accept the conditions of the TV network majors at the time of contract renewal. However, Time Warner Cable will enjoy an advantageous position while striking a deal with a less popular channel like Ovation.

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

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