July 30, 2008
All Eyes on Dolans As They Blend Newsday, Cablevision
By Mark Harrington, Newsday, Melville, N.Y.
Jul. 30--With the keys to the Cablevision empire in hand, the Dolan family has taken the $6.4-billion company on a ride full of ups, downs and wide turns -- never once losing grip of the core cable TV franchise.As the company completes its $650-million purchase of 97 percent of Newsday, all eyes are on father-and-son team Charles and James Dolan and chief operating officer Tom Rutledge as they create a vision for the old-media asset in a company as diverse as Cablevision.
"We believe this presents great opportunities for us to build our subscription-based businesses," Rutledge said in a statement yesterday. "This marriage of content and technology will also strengthen Newsday's role as the connecting point between readers and the events, businesses and neighbors around them."
Anyone who has observed the 35-year history of the region's largest cable TV network should not be surprised to see the Dolans pay a premium to own Long Island's only locally based daily -- despite Wall Street's early objections. (After posting strong results for fiscal 2007, Cablevision shares have wrestled with 52-week lows in recent weeks, trading at less than $20 after hitting highs last year above $36 a share.)
The company's past is full of unexpected purchases and product launches, many of which paid off despite a sometimes awkward fit. Some, like The Wiz electronics stores and the Voom satellite network, didn't last.
In many ways, a Cablevision timeline reads like a history of cable TV itself. With the cash cow of an aggressively cultivated network of cable franchises that started with 1,500 customers in 1973, chairman Charles Dolan and his team began the work of providing programming outside the basic channels available on broadcast TV. He launched Home Box Office, created SportsChannel New York (now MSG) and a forerunner of Court TV; and pioneered classic and independent movie channels such as Bravo, AMC and IFC. Cablevision recently acquired Robert Redford's Sundance independent film channel. News 12 Networks offered the first 24-hour local news channels on Long Island and throughout the tri-state region.
All have contributed a growing pool of subscription-based cash flow that has allowed Cablevision to dabble outside its core markets. Its initial 1994 $1-billion bet to buy Madison Square Garden and its teams has been regarded as largely a trophy purchase, though Cablevision now lays claim to one of the more valuable sports and entertainment franchises in the world.
The Dolans also have proved to be powerful foes. In 2005, James Dolan fiercely opposed Mayor Michael Bloomberg's plan to build the West Side Stadium for the Jets, which would compete with the Garden -- and ultimately defeated the mayor.
With the successes have come miscues and criticism. In addition to bad bets on The Wiz and on Clearview Cinemas, both of which posted huge losses for years, the Dolans, who control the company through ownership of all its class-B voting shares, have gambled on satellite TV, on splitting up the company, trying to take it private and spinning off the programming assets -- all to no avail.
Through it all, the company has nurtured the cable TV network, expanding it as far as Connecticut and New Jersey, and increasing its revenue-generating capacity through digital TV, Internet, telephone and, most recently, high-definition TV offerings.
But how will Newsday play on cable? If successful, the joining of two Long Island powerhouses could provide a model for the electronic media age, as Cablevision expands its reach into realms where content is front and center.
But skeptics abound, particularly given the disparate businesses and concerns about newspapers' declining readership. "Even if they are successful in improving Newsday's financial picture over the near term, I fear they will be saddled with a fundamentally declining asset," said Craig Moffett, who tracks Cablevision for Sanford C. Bernstein & Co.
Still, Wall Street, which initially scratched its collective head over the purchase, may yet see an upside, particularly if Cablevision can marshal resources to reverse Newsday's circulation and ad revenue declines.
"Obvious cost opportunities include combining some editorial functions with their News 12 business, and combining local ad sales groups for cable and newspaper advertising," Moffett said. "On the revenue side, there are cross-promotional opportunities for subscription sales, and package deals to be sold to advertisers across cable and print."
CABLEVISION SYSTEMS CORP.
One of Long Island's largest companies, with more than 14,000 employees, provides cable TV, communications and programming services throughout the tri-state area, producing annual revenue in excess of $6.4 billion.
CABLE AND COMMUNICATIONS
Comprises 70 percent of sales. $4.7 billion in 2007. It includes analog, digital and high-definition cable TV network available to 4.4 million customers in the metropolitan area. Holdings include high-speed Optimum Online Internet and Optimum Voice telephone services, as well as Optimum Lightpath high-speed fiber-optic service for businesses.
RAINBOW MEDIA HOLDINGS
The programming arm comprises 14 percent of revenue. $894.4 million in 2007. It includes the recently acquired Sundance Channel, WE TV, AMC, the Independent Film Channel, Rainbow Advertising Sales and Voom (high-definition TV) Networks. It also operates News 12 Networks and five local 24-hour traffic and weather channels.
THE MADISON SQUARE GARDEN GROUP
Makes up 15 percent of sales. $950 million in 2007. It includes the famed Manhattan sports and entertainment venue of the same name, and its flagship teams, the Knicks the Rangers. It also owns Radio City Music Hall and the Beacon Theatre and Clearview Cinemas, which operates more than 50 movie theaters and art houses in the tri-state area.
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Copyright (c) 2008, Newsday, Melville, N.Y.
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