Cablevision's Voom Faces Deepening Gloom

[Bruce]

Cablevision's Voom Faces Deepening Gloom
By George Mannes
Senior Writer
11/30/2004 7:02 AM EST

Cablevision (CVC:NYSE - news - research) executives still can't persuade outsiders that Voom is anything but doomed.

The Long Island, N.Y.-based cable operator has sunk hundreds of millions of dollars to launch Voom, a new home satellite service focusing on high-definition television. Given the promising commercial prospects for HDTV -- demand that's evident in growing sales of large-screen HDTV sets, and in efforts by cable operators such as Comcast (CMCSA:Nasdaq - news - research) to boost HDTV programming -- Cablevision's strategy makes sense, in theory.

But with each milestone that Cablevision announces in its development of Voom, there's a chorus, among analysts and other satellite-TV watchers, that each step forward is a step back for Cablevision and Rainbow Media Enterprises. That's the Cablevision subsidiary that will operate the satellite subsidiary once its expected spinoff from Cablevision takes place.

Try as hard as they can, outsiders are having a tough time imagining that Voom has a chance for success, given the availability of HDTV programming elsewhere and the huge head start enjoyed by the dominant U.S. satellite TV services, DirecTV (DTV:NYSE - news - research) and EchoStar (DISH:Nasdaq - news - research).

"There is not a single person in the satellite television business who can figure out what in heaven's name they are doing," says Bob Scherman, editor and publisher of the industry trade publication Satellite Business News.

Cablevision's shares fell 36 cents Monday to close at $21.40.

Asked whether there is some clever, contrarian strategy at work or a hidden payoff within Voom that critics may have overlooked, Scherman replies, "I get asked this 10 times a week. People are at the point where they're dumbfounded. And as much as people like [Cablevision founder] Chuck Dolan, they simply cannot figure out how someone with this experience and knowledge can be wasting so much money on a business plan which has less than zero chance of succeeding."

Prompting the latest round of head-shaking was Cablevision's announcement last week that it had signed a contract with Lockheed Martin (LMT:NYSE - news - research) under which the aerospace company would construct five new satellites for Voom for a price of $740 million.

About the only bright spots that analysts saw in that announcement was that the contract -- which Cablevision says will require $48 million of payments in the first year -- won't require huge upfront costs for Voom, and is cancelable by the satellite operator, subject to a termination fee.

While the downside to Cablevision itself may be limited, given Rainbow's expected spinoff, news like this continues to weigh on Wall Street's valuation of the combined Cablevision/Rainbow.

The Lockheed Martin announcement prompted Lehman Brothers analyst Vijay Jayant to cut his price target on Cablevision on Monday from $24 to $23. "Given the limited opportunity for Rainbow DBS," writes Jayant in his research report, "executing on the contract to construct five ... satellites will destroy equity value."

In the best-case scenario, writes Jayant, no new satellites are built but a $100 million termination fee is incurred. In that case, RME -- which also includes the national programming services American Movie Classics, the Independent Film Channel and WE: Women's Entertainment -- is worth $1 per Cablevision share.

In the worst case, Jayant calculates that all five satellites are built, requiring $1.2 billion in additional funding -- a number covering not only construction but also launch and insurance costs. "A decision by Voom to think about constructing five ... satellites makes the bear case outlook on Rainbow Media take a higher probability," writes Jayant. (The analyst has an equal-weight rating on Cablevision; Lehman hasn't done recent banking for the company.)

Under one theory, Cablevision could be investing in Voom in order to sell it to DirecTV or EchoStar -- EchoStar being more likely, since DirecTV recently announced plans to launch satellites that would increase its own capacity for transmission of HDTV programming.

But Scherman, for one, says EchoStar CEO Charlie Ergen is unlikely to pay what Cablevision CEO James Dolan would want to recover costs on Voom. "The notion that Jimmy Dolan is going to outnegotiate Charlie Ergen is something laughable," Scherman says.


http://www.thestreet.com/_googlen/t...453.html?cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA

 

[David Dietzel]

I used to have a securities license and I can tell you that more often than not these so-called financial analysts miss the mark totally on their analysis.

Yes, VOOM may go broke -- duh.

However, VOOM is doing EXACTLY what it needs to do to eventually be profitable -- developing a DVR, adding SD channels, updating existing software, improving customer service, enhancing the installation experience, expanding HD offerings (including negotiations for network HD channels), laying the groundwork to launch more satellites and spinning off from Cablevision.

Good grief -- lots of analysts were writing Amazon.com's obituary for years, even tho they were doing EXACTLY what they needed to do to eventually succeed. Now they are profitable and the premeire Internet retailer.

As far as the delayed VOOM DVR goes, that's typical. Dish Network repeatedly delayed the 921 and finally released an overpriced, non-leasable, bug-ridden piece of garbage. They kept updating the software until it finally worked halfway correctly last summer. Alot of people dumped Dish for Direct over the 921 fiasco. The new 942 replacement for the 921 is nowhere in sight. The lousy original 921 is why I never went with Dish for HD.

Once VOOM allowed leasing of the hardware, I jumped on board with them in November (this month) and bought a HD set, the Sony KDF60XS955.

If VOOM goes broke, I'm leasing so no biggie. I'll move to Dish or Direct or Charter or whatever. If VOOM survives on its own or as a subsidiary of Echostar, that's OK too.

VOOM's customer support has been great, the installation (tho delayed twice) actually went without a hitch and the PQ is superb.

VOOM's management is doing EXACTLY what needs to be done to make VOOM viable. Competition is what makes capitalism fly. We all benefit each month that VOOM continues to deliver content and announce their future plans.

 

[Sean Mota]

They are the same that doomed Time Warner Cable after the merger with AOL. They said that Time Warner should sell their cable business. This was about two years ago. Yesterday I read the article where Time Warner has positioned itself to be one of the best cable business. Again these are the same people that were telling their own investors that Enron was good and nothing was wrong with it until the bomb exploded in their faces.

Talk about a special interest groups lobbying for their own pockets

 

[1080iBeVuMin]

I agree with that. And add this: Never underestimate the ability of a proven genius.

Dolan made successes of so many of his other daring ventures. I don't know all the facts, so I cannot say that ALL of his ventures were successful. But if anybody can make VOOM fly, he can.

 

[ShadowEKU]

i wonder how much their subscriber base will grow with the new $1 install and $5 receiver promo going on. I am considering the switch but am waiting for them to get their billing strait and possibly the DVR

 

[Bruce]

I agree with that. And add this: Never underestimate the ability of a proven genius.

Dolan made successes of so many of his other daring ventures. I don't know all the facts, so I cannot say that ALL of his ventures were successful. But if anybody can make VOOM fly, he can.

Does anyone remember the Wiz,buying that was a great idea for Cablevision.

 

[vinnyv07]

I hope Im wrong...but without VOOm attracting a huge amount of subs, they are done. The only way to attract a huge amount of subs would be to get a DVR out and offer what ever programming is out there to satisfy anyone and everyone....at a lower price then the rest. Then they will survive. Voom ...Im rooting for ya.

 

[andrzej]

Sorry Bruce but those analysts are often clueless. And it makes me really laugh when supposedly serious analysis says that "a business plan which has less than zero chance of succeeding." They should get some math lessons. Of course, Voom may not survive but not because "the analysts" say so.

 

[Sean Mota]

Does anyone remember the Wiz,buying that was a great idea for Cablevision.

Agree. That was a bad investment and put them in the red for a while until they closed it. If I remember correctly the investors were also dooming Cablevision owns's cable business a few years ago since its infrastructure was not at the same level as TWC. Actually CVC was the last one to have their infrastructure for digital cable setup which also has brought Optimum online and telephone via IP. Not bad. How about the goods? Bravo which they sold to NBC. WE, AMC, IFC, and remember they are still bleeding from their cinema movie theaters which they have carried for a number of years while all the investors are also crying "WHY DON'T YOU SELL THE DARN THING".

 

[rtt2]

Remember Cablevision buying Northcoast PCS wireless licenses and doing nothing with them?
They started a small company then closed it and screwed thousands of subscribers.

Also remember Cablevision buying Clearview Cinemas?
Quite possibly the biggest POS properties ever. They couldn't even sell them when they put them up for sale for over a year. They still own those delapitated buildings incurring a loss.

Don't even start me on what Cablevision has done to single handely destroy the
Knicks and Rangers.


There are a long list of CV failures over the years. Their successes were long ago.

 

[Bruce]

Sorry Bruce but those analysts are often clueless. And it makes me really laugh when supposedly serious analysis says that "a business plan which has less than zero chance of succeeding." They should get some math lessons. Of course, Voom may not survive but not because "the analysts" say so.

Don't say sorry to me,I did not write it,only posted it.
I hope Voom works,if they get the DVR going and add my RSN,I'm there(as long as I get a different installer then last time.)

 

[Bruce]

Remember Cablevision buying Northcoast PCS wireless licenses and doing nothing with them?
They started a small company then closed it and screwed thousands of subscribers.

Also remember Cablevision buying Clearview Cinemas?
Quite possibly the biggest POS properties ever. They couldn't even sell them when they put them up for sale for over a year. They still own those delapitated buildings incurring a loss.

Don't even start me on what Cablevision has done to single handely destroy the
Knicks and Rangers.


There are a long list of CV failures over the years. Their successes were long ago.

I like to know what they will do with the MVDSS spectrum they are sitting on(E* also)there is so much they can do with it.

 

[BobMurdoch]

Remember Cablevision buying Northcoast PCS wireless licenses and doing nothing with them?
They started a small company then closed it and screwed thousands of subscribers.

Also remember Cablevision buying Clearview Cinemas?
Quite possibly the biggest POS properties ever. They couldn't even sell them when they put them up for sale for over a year. They still own those delapitated buildings incurring a loss.

Don't even start me on what Cablevision has done to single handely destroy the
Knicks and Rangers.


There are a long list of CV failures over the years. Their successes were long ago.

Don't forget the BRILLIANT decision to buy Nobody Beats the Wiz Electronics stores. Unfortunately, everyone DID beat the Wiz and they closed all of their doors over the last year or so......

Cablevision has been a black hole for bad investments. V* is just the biggest. And all of their subscribers pay the tab (including me who has them for internet access)

 

[kemguy]

i wonder how much their subscriber base will grow with the new $1 install and $5 receiver promo going on. I am considering the switch but am waiting for them to get their billing strait and possibly the DVR

As the Yahoo Voom Group moderator I can tell you that the number of people subscribing to the yahoo group has exploded over the last 30 days. I used to approve maybe 1 a day.. sometimes 1 every couple days. In the last 30 days, I've been approving 3 - 6 a day!

Food for thought..

 

[vurbano]

ANother hatchet job with a cute rhyming title.

 

[KyInstaller]

No Voom rush here.........

i wonder how much their subscriber base will grow with the new $1 install and $5 receiver promo going on. I am considering the switch but am waiting for them to get their billing strait and possibly the DVR

We do the Vooms here in SE KY and as of today have NOT seen any kind of increase in installs for Voom yet. De-installs are more the norm for now. I have Dish now but will probley go to Voom for My main programming, keep the Dish for locals & second TV, the limited channels prohibit Direct or Dish for HDTV for now.

 

[wase4711]

Good grief -- lots of analysts were writing Amazon.com's obituary for years, even tho they were doing EXACTLY what they needed to do to eventually succeed. Now they are profitable and the premeire Internet retailer.

Let us not forget the obituaries for Apple/Mac, while we are talking about blunders these so call "analysts" have talked about for years....

 

[voomvoom]

Strangely enough, I'm old enough to remember everyone, including myself, telling Christopher Columbo he was crazy, the world is "flat" you idiot.....

 

[VMI]

The subject of VOOM's subscriber activity with this new offer is a question on some folks mind. I can only speak for Florida, but VOOM's sales have soared in the past few weeks. If the momentum keeps up and they continue to improve channel lineup they can right this ship. Oh yeah, DVR required.