The cable TV industry news has been full of gloom and doom over the loss of subscribers recently. Time Warner Cable (TWC) has found a way to boost its subscriber rolls quickly; the company is going to acquire Insight Communications which is a leading cable company in Indiana, Ohio, and Kentucky. In exchange for $3 billion in cash, TWC picks up nearly 700,000 video subscribers. It also gets about 550,oo0 broadband customers and almost 300,000 voice customers. The deal requires federal approval before it can be completed.
According to a company press release, TWC expects to save about $100 million a year “through programming expense savings and other cost reductions.” I interpret that as meaning that they expect to pay less for their content licenses than TWC and Insight combined do now, which means that the savings will come out of the pocket of the Hollywood content producers. And that’s only going to put added pressure on finding other sources of revenue for video entertainment content. I expect that this means that Netflix, Hulu, and other online streaming services will be paying even more for their content in the future. And under the heading of “other cost reductions,” I expect that we’ll see some people lose their jobs as the two companies will be able to be run more efficiently as one.
The bottom line is that this still won’t be enough to move TWC ahead of Comcast on the subscriber list, and that it will mean that we’re in for even tougher negotiations on issues of content licensing and rebroadcasting as the different parts of the industry continue to consolidate. Hold onto your hats — and wallets — as this ride could get even bumpier.