Needham & Company maintains a 'Hold' on Time Warner (TWX); TV Everywhere Drives Upside for Content Companies

Needham & Company maintains a 'Hold' on Time Warner (NYSE: TWX).

Needham analyst says, "Revenue of the US television ecosystem in 2012 will total approximately $165B, made up of approximately $85B of subscription and license fees paid to cable, satellite and telephone companies plus approximately $80B of TV advertising, according to PWC. We estimate that the roll-out of TV Everywhere over the next 3-5 years could add approximately $12B of revenue annually to the US television ecosystem. These dollars dwarf any near-term revenue streams from digital platforms (Hulu, YouTube, etc). Additionally, these are low risk dollars as adding services to the TV bundle suggests additional revenue rather than economic cannibalization."

"We calculate the value creation from TV Everywhere as follows: 1) Content Owners. We calculate that TV Everywhere could add approximately $10B/year of advertising revenue (12% of total) to the largest public content companies. Time Warner and Disney (NYSE: DIS)(Hold) should be the biggest beneficiaries because they are the furthest ahead at rolling out TV Everywhere; 2) TV Distributors. In addition, TV Everywhere could add approximately $1.7B per year of revenue (an extra 2% annually) to the cable, satellite and telco distributors owing to incremental pricing power driven by new services. Comcast (Nasdaq: CMCSA)(NotRated) and Time Warner Cable (NYSE: TWC)(Buy) are key beneficiaries as they lead the industry in TV Everywhere adoption."

For an analyst ratings summary and ratings history on Time Warner click here. For more ratings news on Time Warner click here.

Shares of Time Warner closed at $37.73 yesterday.

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