Yesterday, Time Warner Cable Inc. (TWC - Analyst Report), the second largest cable MSO (multi-service operator) in the U.S., announced that the company has renewed its distribution agreement with Discovery Communications Inc. (DISCA - Analyst Report). Per the agreement, subscribers of Time Warner Cable will be able to watch the entire network of Discovery Channels without interruption.
The multi-platform agreement will let subscribers watch live as well as video-on-demand Discovery programs. In the future, Time Warner Cable intends to negotiate with Discovery to offer its network to the TVEverywhere subscribers with an authenticated log-in facility. As a result, viewers will be able to watch Discovery contents even when they are out of home.
For Discovery, this deal will help the company to increase its U.S. Distribution revenues. On the other hand, we believe renewal of Discovery network is a huge relief for Time Warner Cable. In Aug 2013, the company faced a month long blackout of CBS network over programming contract renewal disputes with CBS Corp. (CBS - Analyst Report). In the third quarter of 2013, Time Warner Cable lost a whopping 306,000 residential pay-TV subscribers primarily due to CBS network blackout.
Comcast Corp. (CMCSA - Analyst Report), the largest cable MSO in the U.S., also lost 129,000 video subscribers in the same quarter. In a recently published report, Leichtman Research Group stated that the top nine U.S. cable TV operators had a net loss of 600,643 pay-TV customers in the said quarter. This was cable TV industry’s biggest net loss after the third quarter of 2010. Both Time Warner Cable and Discovery currently have a Zacks Rank #3 (Hold).