Report: Time Warner Considers Getting Rid Of The Cable

Predictions

from the cutting-the-wire dept

The Wall Street Journal is reporting that Time Warner is looking for ways to reduce its exposure to cable TV. Management is said to be concerned that cable won’t always be as lucrative as it is now, particularly as the internet grows as a reliable option for watching video. The company has already spun off its Time Warner Cable unit into a separate company, but it retains a sizable stake in it. The company is unlikely to exit the line entirely, as it remains a steady cash cow. In fact, from a revenue perspective, it’s the company’s largest line of business. But there’s pressure on the firm to invest more heavily into the internet, which represents the company’s best hope for future growth. One problem, however, is that by reducing its cable business, it becomes more dependent on its slow-growing content business, such as films and publishing. These remain quite big as well, and could easily prove to be a drag on the company’s internet operations. Another worry is that even if the company does invest heavily on the internet, there’s no guarantee that it will be prove profitable. Obviously, the company hopes that it can buy or build the next MySpace, but that’s a long shot proposition. What’s funny about this report is that it comes at the same time that Comcast, a competing cable operator, is raving about its operations, claiming that the cable business is “on fire”. Part of it may be that Comcast doesn’t have Time Warner’s breadth, so it has no choice but to be bullish about cable. It could also be that Time Warner is looking further into the future than Comcast, recognizing that today’s good times may not last forever. Then again, the last major move that Time Warner made to bolster its internet business came to be regarded as the most disastrous merger of all time.