Time Warner Cable in Play?

Charter Communications Inc is weighing a bid for Time Warner Cable that could occur before the end of 2013, Reuters reports. That move would have been entirely improbable a decade ago, when Time Warner Cable still was considered among the best-managed cable TV companies and Charter was debt-burdened and unprofitable.

Beyond the immediate performance issues, some believe structural changes lie ahead for the cable TV business, which might well be eclipsed or transformed by streaming delivery.

“Ultimately over the long term I think that the whole video product is eventually going to go to the Internet,” Cablevision Systems Corp. CEO James Dolan has said.

That doesn't mean cable TV companies will get out of the access business. Quite to the contrary, the revenue driver will shift to providing Internet access. 

But the economics of the subscription video business could well change. And though the conventional wisdom among consumers is that prices will drop, that might not happen. In principle, the costs of building and operating an access network are included in current costs of video service. 

But many other costs, including sales, marketing and fulfillment, would remain, if it altered form. If the costs of the network are mostly shifted to the voice and data services, cable operators would, in principle, have some room to alter pricing. But content acquisition costs would still be an issue.

It is not clear that content suppliers would willingly cut prices for their product, simply because the delivery method changed. Some might argue that content owners would prefer to deliver content direct to end users, but others would argue the content companies simply are not well set up to do so, as their current revenue models are "business to business," not "business to consumer."

That still suggests a vital role for distributors. Perhaps the bigger issues are whether current bundling methods would change, or at least be made available. Some might argue that the bigger innovation is not over the top delivery, but unbundled delivery (ability to buy a single TV episode or a TV series or a single channel on a subscription basis).

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