Time Warner falls as Disney's cable warning spooks sector

Wed Aug 5, 2015 1:49pm EDT
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By Sagarika Jaisinghani and Arathy S Nair

(Reuters) - Time Warner Inc's shares fell as much as 9 percent after Walt Disney Co alarmed investors with a dour outlook for its cable business, suggesting that more people were switching to video-streaming from paid TV than previously expected.

Disney's comments overshadowed Time Warner's strong quarterly results, which were boosted by a deal with video-streaming service Hulu and the release of "Batman: Arkham Knight" and "Mortal Kombat X" videogames.

"On any other day, this report would likely be warmly received and a positive driver for the stock," Sanford C. Bernstein analyst Todd Juenger wrote in a note.

"But today is not just any day. Today is the day after Disney spooked the sector with their comments that cord-cutting is worse than they thought."

Disney cut its profit forecast for its cable networks unit on Tuesday, citing a decline in subscribers. The company's shares fell about 10 percent on Wednesday.

Time Warner and Disney are remodeling their businesses to grab a larger share of the video-streaming market as consumers increasingly take to watching television shows online, a trend dubbed as "cord cutting".

In April, Time Warner's Turner division, owner of channels such as CNN and TNT, granted exclusive subscription video-on-demand rights for its programs from Cartoon Network and Adult Swim to Hulu.

Time Warner also launched its own standalone streaming service, HBO Now, in the same month.   Continued...

The Time Warner Cable Headquarters at Columbus Circle in the Manhattan borough of New York City, May 26, 2015. REUTERS/Mike Segar