Julia Boorstin covered an interesting topic over at CNBC.com the other day. The Supreme Court, by electing not to review a case involving Cablevision (NYSE: CVC), essentially said that cable companies such as Comcast (NASDAQ: CMCSA) and Time Warner Cable (NYSE: TWC) can pursue digital video recorder (DVR) storage on cable-system servers. By doing this, a perceived barrier to entry for subscribing to DVR has been eliminated: you don't have to deal with a clunky box. Cable should theoretically see an increase in customers who adopt DVR technology if remote storage is exploited.

Well, as Boorstin rightly points out, CBS (NYSE: CBS), Disney's (NYSE: DIS) ABC, General Electric's (NYSE: GE) NBC, and News Corp.'s (NASDAQ: NWS) Fox do need to worry. These DVR technologies basically translate to a drop in the economic value of advertising. Let's face it: who watches commercials when they don't have to?

Time Warner Cable (NYSE: TWC - option chain) stock is falling today after company CEO Glenn Britt said at an investor conference that the company is seeing a continued slowdown in subscriber growth. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on TWC.

This morning, TWC opened at $30.98. So far today the stock has hit a low of $29.96 and a high of $31.26. As of 12:05, TWC is trading at $30.09, down $1.64 (-5.2%). The chart for TWC looks bullish and S&P gives TWC its highest 5 STARS (out of 5) strong buy ranking.

Right now, over at Hulu.com -- a joint project of News Corp. (NYSE: NWS) and General Electric Company's (NYSE: GE) NBC Universal, viewers can check out recent editions of, for example, The Daily Show or Man Caves, among many other programs normally viewed on cable networks such as Comedy Central or the DIY Network. Viewers need a computer and a high-speed Internet connection to catch these programs, but they don't need a cable subscription (or even a television!).

Thanks to Jason Voorhees and Jennifer Aniston, Time Warner (NYSE: TWX) had a very successful weekend at the box office, as Steven Mallas pointed out earlier. It was a different story, however, for Time Warner Cable (NYSE: TWC), which quickly saw a nice offer unravel into a customer-service nightmare.

For Valentine's weekend, the company had offered its Southern California customers a so-called "1 Cent Love N' Movies Deal," featuring 40 movies on demand for a penny each. Titles included romantic favorites such as Eternal Sunshine of the Spotless Mind, Sixteen Candles, and Love Actually, along with some newer titles including Burn After Reading.

So what's the problem? According to the OC register, the promotion "attracted three times more viewers than the company anticipated," leading to movies that were unable to be watched. Angered customers can call customer service and receive a coupon good for one one-penny movie. But, as the register points out, the coupon will only be sent to those proactive enough to call in.

Additionally, this fiasco puts the promotion into the news, likely prompting Midwesterners and East-Coasters to wonder why they, too, weren't deemed worthy of such "special" treatment?

Beth Gaston Moon works for WeSeed.com. The above comments are not intended as trading or investment advice.

Time Warner (NYSE: TWX) will be announcing earnings for its fourth quarter tomorrow before the market opens. Analysts expect to see the company show earnings of $0.27 per share, which would be slightly lower than the $0.29 a share that the company posted for the same period last year.

Last month the company issued a profit warning, and predicted an operating loss for Q4 and full year 2008. The company stated that it expects to have roughly a $25 billion write down on its cable, publishing and AOL assets. Of this $25 billion, $15 billion is related to its spin off of Time Warner Cable (NYSE: TWC) and the remaining $10 billion will be associated with its publishing and AOL division.

The Associated Press reports that BloggingStocks' parent, Time Warner (NYSE: TWX), beat Wall Street expectations by a penny a share. But its profit was still down -- 26% thanks to declining subscriber fees at AOL and lower advertising revenues at magazines like Time and Sports Illustrated.

But after adjusting for one-time gains, Wall Street was expecting Time Warner to make 23 cents a share and it actually earned a penny more. In addition, revenues rose 5% to $11.6 billion, 1.2% more than expected.

The bad news is that AOL's subscription revenue fell 29% which drove a 36% decline in operating income. As I posted, the 2006 change in strategy to emphasize advertising over subscriptions has not been able to make up for $2 billion in lost revenue. Advertising revenue rose a mere 2% to $530 million -- not enough to make up the difference.

What does the future hold? Time Warner is selling the 84% of its cable operations that it still owns to shareholders later in 2008. Cable's revenues grew 7% on "increases in cable, Internet phone and video-on-demand fees." And it is trying to sell the dial-up portion of AOL to Earthlink (NASDAQ: ELNK).

There was an interesting read over at Slashdot.org today. In a story last night from the Associated Press, it looks like Time Warner Cable Inc. (NYSE: TWC) may be testing out a web metering service for its internet access.

The company is testing a service with new Time Warner Cable Internet subscribers in Beaumont, Texas where customers will have a monthly allowance for the amount of data with a $1.00 charge per gigabyte. The company had already warned back in January that it was going to test rates and test some metered and tiered internet access services, so this isn't likely to be a bomb dropping into the school yard.

Slower services of 768 kbps with a 5-gigabyte monthly allowance are going to run $29.95, while their fastest and larger service with fast downloads at up to 15 megabits per second and a 40-gigabyte cap will run $54.90 per month.

Time Warner (NYSE: TWX) declared a one-time dividend of $10.9 billion to its stockholders, payable just prior to separation of Time Warner Cable (NYSE: TWC); TWX will receive $9.25 billion of Time Warner Cable's dividend.

TWX overall option implied volatility of 29 is below its 26-week average of 32 according to Track Data, suggesting decreasing price risk.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

MAJOR PAPERS:

• The Wall Street Journal reported that an alliance of cable, Internet and chip titans will announce plans to invest $3.2B in a company that will deliver Web access for laptops and cellphones using WiMax. The venture, valued at over $12B, includes Sprint Nextel Corporation (NYSE: S) and Clearwire Corporation (NASDAQ: CLWR) and will be backed by Comcast Corporation (NASDAQ: CMCSA), Time Warner Cable Inc (NYSE: TWC), Intel Corporation (NASDAQ: INTC) and Google Inc (NASDAQ: GOOG).
• According to people familiar with the matter, Robert Verrone, one of the most zealous commercial real-estate lenders during the industry's boom, will leave Wachovia Corporation (NYSE: WB) within the next week, the Wall Street Journal reported.

WEB SITES:

• Bloomberg reported that the Department of Justice is probing whether UBS AG (NYSE: UBS) helped clients evade American taxes. In an e-mailed statement, the firm said one senior bank employee was "briefly detained" by authorities.
• Bloomberg also reported that Vallejo, California's city council voted to go into bankruptcy. Officials said that after talks with labor unions failed to win salary concessions from police and fire fighters, the city does not have enough money to pay its bills.
• According to a rumor, TechCrunch reported that the Yahoo Inc (NASDAQ: YHOO) board of directors yesterday authorized Yahoo chairman Roy Bostock, rather than CEO Jerry Yang, to call Microsoft Corporation (NASDAQ: MSFT) CEO Steve Ballmer about re-starting negotiations.

On Wednesday morning pre-market, we'll get to see earnings out of Time Warner Cable Inc. (NYSE: TWC). The estimates for the cable giant from First Call are $0.22 EPS on $4.15 billion in revenues. Next quarter estimates are $0.34 EPS on $4.31 billion in revenues. Estimates for fiscal Dec-2008 are $1.27 EPS on $17.25 billion in revenues.

Analysts have an average price target north of $34.00. In late January, UBS initiated to a neutral rating and in early February, Cowen & Co. initiated with a neutral rating as well.

After trading in the upper thirties and low forties early last summer, the stock has been consistently trading in the mid-twenties over the last six months. Time Warner Cable's 52-week trading range is $21.95 to $42.11.

Last Wednesday, Time Warner Cable was among one of four cable companies to pull out of a joint venture with Sprint Nextel (NYSE: S), called Pivot. Pivot was an attempt for telephone and cable companies to compete with multiple providers, such as AT&T Inc. (NYSE: T) uVerse and the service from Verizon Communications (NYSE: VZ). Verizon's strong earnings this morning were driven partially by its fiber-optic TV service. FiOS drove the revenue growth, with customer additions to reach a total of 1.2 million customers.

Comcast Corp. (NASDAQ: CMCSA) stock is falling on reports that the company is in talks with Time Warner Cable (NYSE: TWC) to fund a new wireless Internet program. CMCSA would invest up to $1 billion in the project, a nationwide network using WiMax technology that would be operated by Sprint Nextel (NYSE: S) and Clearwire Corp. (NASDAQ: CLWR). Judging by this morning's action, investors do not seem very enthusiastic about the plan. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on CMCSA.

After hitting a one-year high of $29.41 in July, the stock hit a one-year low of $16.11 in January. This morning, CMCSA opened at $20.07. So far today the stock has hit a low of $19.30 and a high of $20.14. As of 12:15, CMCSA is trading at $19.59, down 0.95 (-4.6%). The chart for CMCSA looks bullish and steady, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.

For a bearish hedged play on this stock, I would consider a July bear-call credit spread above the $22.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in 4 months as long as CMCSA is below $22.50 at July expiration. Comcast would have to rise by more than 15% before we would start to lose money.

Carl Icahn's ICAHN CAPITAL, LP has released its total holdings for the period ending December 31, 2007. What is most interesting is that, despite the many other positions, Mr. Icahn still has a sizable stake in both Time Warner stocks -- the parent company and the cable subsidiary.

As of December 31, 2007, Mr. Icahn lists the following positions:

• Time Warner Cable, Inc. (NYSE: TWC) 4,711,128 shares or roughly $130,027,000
• Time Warner Inc. (NYSE: TWX) 12,933,159 shares or roughly $213,526,000
• Full Holdings

This is much less than his prior investments in Time Warner Inc. and it is not a big enough stake to give him a great deal of influence behind the scenes at the company. But combined, these investments still represent some $333 million dollars. That's serious money.

As of 12:15 p.m. today, TWX is at $16.44, down 14 cents today and still battling back from a 52-week low of $14.64 reached on Jan. 23.

MOST NOTEWORTHY: The Cable and Satellite Pay TV industry and FPIC Insurance were today's noteworthy initiations:

• UBS assumed coverage of The DIRECTV Group Inc (NASDAQ: DTV) and Comcast Corporation (NASDAQ: CMCSA) with Buy ratings and Time Warner Cable Inc (NYSE: TWC), Cablevision Systems Corporation (NYSE: CVC) and DISH Network Corporation (NASDAQ: DISH) with Neutral ratings.
• Suntrust is positive on FPIC Insurance Group Inc's (NASDAQ: FPIC) valuation and book value growth. The firm initiated shares with a Buy rating and $50 target.

OTHER INITIATIONS:

• Morgan Stanley started Citadel Broadcasting Corporation (NYSE: CDL) with an Equal Weight rating.
• UBS initiated Accuray Incorporated (NASDAQ: ARAY) with a Neutral rating and $11.50 target.
• Credit Suisse reinstated Ternium SA (NYSE: TX) with a Buy rating.

MAJOR PAPERS:

• Battling Baidu.com Inc (NASDAQ: BIDU) in China with little success, Google Inc (NASDAQ: GOOG) is working with a Chinese company to offer free licensed music downloads, the Wall Street Journal reported. The new service is expected to be launched in several weeks.

OTHER PAPERS:

• BHP Billiton Limited (NYSE: BHP) raised its bid for mining company Rio Tinto Plc (NYSE: RTP) to more than GBP70B. Meanwhile, the UK Times reported that Rio's new Chinese shareholder was preparing a counter bid for Rio.
• The Washington Post reported that Time Warner Inc (NYSE: TWX) CEO Jeffrey Bewkes is expected to announce a plan today to sell or spin off Time Warner Cable Inc (NYSE: TWC). Bewkes also is likely to signal plans to break up AOL in the coming year.

WEB SITES:

• Berkshire Hathaway Inc's (NYSE: BRK.A) Warren Buffett told Fox Business that he has no plans to bail out Ambac Financial Group Inc (NYSE: ABK) and MBIA Inc (NYSE: MBI).

It's been a while since we've seen sharp gains on shares of cable companies. UBS is holding its Global Media Week and Communications Conference today in New York. Earlier today, Time Warner Cable (NYSE: TWC) surprised the markets today during a CNBC video interview when CEO Glenn Britt said that Time Warner wouldn't be in the bidding for more wireless spectrum in the FCC auction. The company had been a bidder before.

Comcast Inc. (NASDAQ: CMCSA) is also opting out of a wireless spectrum bidding. The truth is that both cable companies already have access to spectrum if needed, and there is still more spectrum available on existing infrastructure that can be used if needed.

One interesting development was when Glenn Britt described the demand for a cable company to need wireless as a quadruple play against the telecoms, who now offer video solutions that compete against cable. The old triple- play is still very under-penetrated on a nationwide basis.

Maybe it pays to be patient rather than spending a few hundred million here and a couple billion there. Sooner or later it adds up to real money. Google (NASDAQ: GOOG) has said it would be participating in the spectrum auction in January for the new, more powerful 700-MHz spectrum. If the Googlesaurs want to be rewarded similarly, maybe they'd determine it is cheaper and easier to partner for spectrum openly rather than the spend-spend-spend model.

Time Warner Cable shares are up nearly 4% to $27.05 today, and Comcast shares are up some 2.5% at $21.05. Google shares are down almost 1% at $687.15.