When contract negotiations failed and CBS was blacked out for a month on Time Warner Cable systems, the results proved disastrous for TWC. For the third quarter of this year, TWC lost 306 k cable subscribers and 24 K broadband customers. And given that TWC is in both Los Angeles and New York, consumer were able to switch to satellite or telco providers like U-Verse and FIOS. It clearly hurt TWC in the financial wallet, but I speculate that CBS also felt it, with lost license fee and advertising revenues as well as higher marketing expenses to tell consumers to switch providers. How fast consumers switched and how much CBS was hurt has yet to be heard. But at the end, both sides lost.
So where does TWC go from here? The threat of competition from other cable providers as well as from streaming platforms, the continued loss of subscribers quarter over quarter, and the need to keep margins by lowering costs. Is consolidation a sound strategic fit? John Malone believes it to be so and would like to merge TWC with Charter to find more efficiency and lower license fees with a larger footprint to serve. It may still end badly as customers are not happy with the high cost of cable and the wish to cut those costs through a la carte and lesser number of channels in cheaper packages.
Also, consumers are placing more importance on broadband service and higher speeds than on its cable subscription. And that may soon turn our cable companies into dumb pipeline providers. Unless the pricing model for cable subscriptions gets reworked, that is the future we are seeing.
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