Subscriber loss may slow
Since 2006, Time Warner Cable has experienced a loss of approximately 200,000 subscribers each year. The subscriber volume saw attenuation from 13.4 million to 12.1 million since that time; however, as the switch to digital platforms looks complete, the subscriber loss should slowdown in the long run.
I expect the company to incur subscriber loss this year, mainly due to the absence of augmented services and groundbreaking technology.Time Warner Cable Inc (NYSE:TWC) should, however, start reporting better numbers in the following years, as it closes the gap on its competitors by offering advanced technology and better services to customers.
Furthermore, efforts made, such as streaming apps on android devices to enable access of live programming and the production of a wide range of programs targeted at a larger audience, will enable it to narrow the gap. If Time Warner Cable is able to tighten the gap successfully, then it may be able to add 50,000 subscribers annually in the long run, which implies a stable market share of around 11%.
Market share still unlikely to grow
Time Warner Cable Inc (NYSE:TWC) has employed multiple strategies in order to spur subscriber growth and expand its market share in the pay-TV segment; however intense competition provided by the likes of DirecTV and Dish Network has resulted in continuous subscriber loss over the past five years. DirecTV has consistently grown its market share by offering exceptional customer service and highly differentiated programming such as NFL Sunday Ticket.
Likewise, Dish Network packaged broadband and voice services with pay-TV will provide the company a distinctive competitive edge over traditional cable-TV services. Furthermore, the unique DVR services enable users to tenuously access the paid programming.
The overall market is highly competitive and nearing saturation, therefore gaining market share from satellite services and other cable-TV networks will continue to be an extremely challenging task for Time Warner Cable Inc (NYSE:TWC).
Why a bearish outlook?
Observing the historical trends and the saturating pay-TV market, the outlook for Time Warner Cable is not highly optimistic. Nonetheless, if the company can slowdown the subscriber losses and gradually develop incrementally by adding new subscribers, there may be subsequent upside to its stock price. If Time Warner Cable can somehow push its market share above the 13% mark, then we may witness an even sharper upward rally by its stock.
The challenge provided by other players in the cable-TV space combined with Time Warner Cable Inc (NYSE:TWC) Cable’s inferior offerings will not allow it to sustain a market share above 11%. Going forward, it must add more than 250,000 subscribers annually in order to push its market share close to 13%, which in the given environment looks vastly improbable.
The article Growth in Pay-TV: Time Warner Cable’s Last Stand originally appeared on Fool.com and is written by Ashit Gulati.
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