The bundling practice was against the previous antitrust lawsuit brought by consumers on both pay-TV providers and cable networks. The cable industry won the dismissal of the suit in October 2009 in Los Angeles federal court, which claimed that cable channels are together trying to harm the customers. Both the companies were on the same side of that case, as defendants fighting in favor of bundles. According to Jeremy Zweig, a spokesman for Viacom, “Viacom will vigorously defend this transparent attempt by Cablevision to use the courts to renegotiate our existing two-month-old agreement.”
Valuation
Cable companies are cheaper than content providers:
| Ticker | Company | P/E | P/S | P/B | P/FCF | D/E | EPS Growth Next 5 Years |
| CVC | Cablevision Systems | 21.18 | 0.54 | NA | 28.99 | NA | 3.5% |
| DTV | DirecTV | 10.63 | 0.94 | NA | 12.29 | NA | 12.9% |
| DISH | Dish Network | 20.72 | 1.08 | 854.75 | 8.85 | 95.18 | 6.0% |
| TWC | Time Warner Cable | 12.96 | 1.23 | 3.65 | 15.25 | 3.67 | 11.7% |
| CMCSA | Comcast | 17.84 | 1.72 | 2.2 | 16.31 | 0.82 | 16.1% |
| TWX | Time Warner | 18.01 | 1.8 | 1.73 | 29 | 0.67 | 12.2% |
| NWSA | News Corp. | 17.67 | 2.02 | 2.47 | 25.2 | 0.58 | 15.2% |
| VIAB | Viacom | 14.23 | 2.25 | 4.18 | 18.81 | 1.17 | 13.6% |
| DIS | Disney | 18.24 | 2.38 | 2.47 | 42.74 | 0.43 | 11.2% |
Unfortunately, there aren’t compelling bargains here. Cablevision Systems and DirecTV have negative book values of equity, which is not a good sign for investors. Dish Network and Time Warner Cable have too much debt, as demonstrate by high debt-to-equity ratios. Comcast isn’t much cheaper than Time Warner or News Corp., which makes Time Warner and News Corp. more interesting since they are content providers. The Walt Disney Company (NYSE:DIS) is more expensive than these two names, and Viacom has more long term debt than equity financing.
Conclusion
Investors who seek media investments might want to consider News Corp. and Time Warner. They are reasonably priced. Unfortunately, cable stocks fail to offer attractive values.
The article Programming Contracts & Bundling Litigation: How Can You Benefit? originally appeared on Fool.com and is written by Bill Edson.
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