The Wall Street Journal’s Matthew Karnitschnig has this piece today that says Time Warner is thinking of lowering its investment stake in Time Warner Cable because, in part, the Internet is emerging as a “viable venue for watching TV.” The question of whether Time Warner should reduce its 84% ownership stake in separately traded Time Warner Cable will even be put before the board at an annual strategic review next month.
The idea that the broadband Internet (which, in North America is primarily delivered via cable) might replace cable’s traditional role as packager of programming is, or rather was until today, an unthinkable and incendiary concept to most cable operators. Even Time Warner Cable CEO Glenn Britt scoffed at the notion during a May 2006 investor conference.
Something obviously has shifted in the thinking of Time Warner for insiders to be leaking this very notion to the Journal.
The fact that Time Warner is even willing to think about a major reduction of its cable holdings is a sign of how much attitudes toward the cable industry are shifting. Despite cable’s recent streak on Wall Street and its success in attracting customers to its bundled offering of Internet, telephone and television service, this is a business some analysts believe will become increasingly commoditized, squeezing profit margins.
However, don’t look for action anytime soon. Cable may become increasingly commoditized, but Time Warner Cable still accounts for the bulk of Time Warner’s cash flow and is the biggest, consistent revenue generator for the media conglomerate.
It’s no surprise that the most content-invested cable company would be the first to publicly brand the Internet as competition in video programming delivery. Time Warner, just as Viacom did back in the early 1990s, could jettison a lot of headaches, but still hold onto the crown jewels — its video properties — if it managed to back out of its physical distribution role. Among the hassles are the constant need to find money to fuel capital hungry cable systems and the ever-present need to deal with local government authorities.
Update: A curious 180-degree view of cable versus web is offered by Time Warner President/COO Jeff Bewkes, heir apparent to take over Time Warner when current CEO Dick Parsons retires next year. Bewkes thinks “Television is very important and increasing in value, and network-based interactive TV is very powerful.” He also thinks the hype about online video is too “one-sided.” Makes you wonder even more about the insider that planted the WSJ story.
Cynthia Brumfield at 7:42 AM|Comments(0)
Blogs We Read
