Why Time Warner Cable Can’t Cave to CBS’s Demands
The stock charts and the company’s earnings certainly don’t back up the story. Time Warner Cable’s very impressive five-year chart shows the stock has risen more than four-fold since the spring of 2009. So far this year, it is basically matching the S&P 500.
So what’s the problem? In a nutshell, Americans are cutting their cords. They’ve been cutting the cords on home-based telephones for years and switching to mobile phones. And just now they are starting to cut the cord on cable service to the home. Combined, these trends are overturning the business model of cable companies. In time, they also will upset their balance sheets. Time Warner Cable is finding that its core business is under assault.
For the last many years, cable companies have proved that distribution can be king. Those fat pipes they built to deliver television reception to American homes, it turned out, could also deliver premium television channels, on-demand events and content, as well as high-speed Internet service and telephone service. To the modern family, these services are utilities no less important than electricity or water. And people with means are willing to pay up for premium products. So Time Warner Cable, and many of its colleagues in the information distribution business, had the best of both worlds.