Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Charter Communications, Inc. (CHTR), Time Warner Cable Inc (TWC), Comcast Corporation (CMCSA): Is This Market Only Big Enough for Two?

Page 1 of 2

In today’s television industry, satellite is the new kid on the block. Recent advances in satellite technology have made the service more reliable and affordable. But even still, the cable industry is booming. With 41.2 million subscribers, cable companies command 48% of the market.

Now Charter Communications, Inc. (NASDAQ:CHTR) CEO Tom Rutledge wants to merge with competing companies in an effort to be more competitive. He says that eventually the cable industry will boil down to two major players. So why not be proactive and take advantage of the situation?

Charter Communications, Inc.

I think consolidation is a good idea. Here’s why.

In a world of its own

Before cable companies like Charter Communications, Inc. (NASDAQ:CHTR) and Time Warner Cable Inc (NYSE:TWC) can think about competing with satellite providers, they must figure out how to compete within their own industry, mainly against Comcast Corporation (NASDAQ:CMCSA). With 21.9 million subscribers, Comcast nearly doubles the 12.1 million subscriber count of Time Warner.

To make matters worse for Time Warner Cable Inc (NYSE:TWC), the Wall Street Journal reported that Comcast Corporation (NASDAQ:CMCSA)’s Universal Studios is signing a deal with successful blockbuster producer Legendary Pictures. Legendary produced such franchises as The Dark Knight and The Hangover, as well as the recent Man of Steel. Although Legendary has largely shied away from TV, successful films are cash cows – the Dark Knight franchise grossed $1.2 billion at the box office alone – and I’m sure Comcast will find ways to put the extra cash to good use.

Consolidation would allow smaller cable companies to lower costs while affording better leverage over media firms that supply TV programming. If the second, third, and fourth place cable providers (Time Warner Cable Inc (NYSE:TWC), Cox, and Charter Communications, Inc. (NASDAQ:CHTR)) merged, they would form a company with just as many subscribers as Comcast Corporation (NASDAQ:CMCSA).  Note the 2012 year-end subscription numbers for the major cable and satellite providers.

Service Provider Technology Total Subscribers
Comcast Cable 21,995,000
DirecTV Satellite 20,080,000
DISH Network Satellite 14,056,000
Time Warner Cable Cable 12,030,000
Verizon IPTV 4,700,000
AT&T IPTV 4,500,000
Charter Cable 3,989,000
Cablevision Cable 3,197,000
Total 84,547,000

Satellite contenders

What about satellite competition? The major satellite companies have a total of 34.1 million subscribers, but growth is the key statistic here. From Q1 2011 to Q4 2012, satellite giants DIRECTV (NASDAQ:DTV) and DISH Network Corp. (NASDAQ:DISH) gained 861,000 subscribers and lost 77,000 subscribers respectively. Those numbers outpaced Time Warner Cable Inc (NYSE:TWC) and Charter Communications, Inc. (NASDAQ:CHTR), who lost 985,000 and 370,300 subscribers over the same period.

Put another way, DIRECTV (NASDAQ:DTV)’s subscriber count grew 4.5% and DISH Network Corp. (NASDAQ:DISH)’s fell .5%, but Time Warner Cable Inc (NYSE:TWC)’s drooped 7.6% and Charter Communications, Inc. (NASDAQ:CHTR)’s plummeted 8.5%.  Call me crazy, but it looks like customers are growing to like satellite.

Cable companies – especially Time Warner – are losing subscribers left and right, and I think they should come together to stop the bleeding. Even though Time Warner CEO Glenn Britt has so far showed little interest in a merger, Britt is stepping down later this year, opening the door to new possibilities.

I don’t think that cable companies can win back subscribers with TV. They need to capitalize on broadband Internet. Consolidation will put cable companies in position to capitalize on the recent streaming and online gaming trend. TV and online gaming both use large amounts of bandwidth, and satellite companies have difficulty providing enough bandwidth. Satellite may be great for TV, but it isn’t ideal for surfing the net. Cable providers are in a favorable position because bundling Internet and TV services is popular and easy.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!