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Time Warner Cable (TWC - Analyst Report), the second largest cable multi-service operator (‘MSO’) in the U.S. has collaborated with Roku Inc. to offer TWC TV through Roku streaming devices in the US. Time Warner Cable, for the first time is allowing its TV application for streaming on a consumer device connected to a television.   

The agreement between the two companies will allow Time Warner’s subscribers to stream TWC TV services via Roku boxes, which will feature up to 300 live television channels. Time Warner Cable’s video service customers, who already own Roku boxes don’t have to pay any additional fees for the service.

Additionally, the deal will allow Time Warner Cable’s customers to access live TV and Internet-based video from streaming sites such as Netflix Inc. (NFLX - Analyst Report) and Google Inc.’s YouTube using the same set top box.

Online video streaming service providers like Netflix Inc., YouTube, Inc. (AMZN - Analyst Report), etc. have become sources of potential threat to the traditional cable TV operators as they offer an extremely cheaper source of TV programming.

The demand for streaming service over-the-top (‘OTT’) set top box market has been growing for quiet some time and has been mostly dominated by Apple Inc.’s (AAPL - Analyst Report) Apple TV and Roku. The space is expected to get more competitive as Google TV and Intel Corporation (INTC - Analyst Report) are expected to enter the OTT set top box market. 

Saratoga, California-based Roku develops and supplies set top boxes, when adhered to the monitor provides clear access to more than 700 channels including online streaming companies like Netflix and Hulu.

We view this agreement as a win-win for both the companies.  This is going to be a milestone deal for Roku as it is expected to increase the sales of its set top device, Roku player.

Simultaneously it will allow Time Warner to popularize its TV application and capture the gaining popularity of streaming services. Time Warner Cable recently launched a video streaming application for Apple’s iPad, iPhone and iPod touch customers.

We believe that availability of such services on an open platform will allow Time Warner Cable to provide both traditional cable and streaming service under the same platform thereby reducing customer churn.

We maintain our long-term Neutral recommendation on Time Warner Cable. Currently, it holds a short-term Zacks #3 Rank (Hold).

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