Mixing up motives
Analysts ponder Dolan's bid for Adelphia
By JOHN DEMPSEY, PAMELA MCCLINTOCK @ Variety.com
NEW YORK -- It requires a Machiavellian analysis of Chuck Dolan's motives to see it, but there could be a connection between Warner Bros. theatricals like "Million Dollar Baby," "Ocean's 12" and "Terminator 3" and Cablevision's reported run for Adelphia Communications.
The last-minute offer must be giving acid reflux to Time Warner Cable, which has engineered a joint bid for Adelphia with Comcast.
But instead of truly being interested in Adelphia, Cablevision could easily be trying to use the bid to extract carriage deals with TW Cable and Comcast.
TW Cable sister company Warner Bros. Domestic Cable has been negotiating for months with Dolan's AMC to sell a package of dozens of recent WB theatricals. But hovering over the movie deal are two contentious issues over which the two sides are locked in conflict:
* TW Cable and AMC are battling in the courts over TW's contention that AMC has breached its contract by changing its programming from an emphasis on golden-oldie theatricals to newer pics. TW is threatening to pull AMC from cable systems representing 13 million or so subscribers.
* Dolan's regional sports networks MSG and Fox Sports New York are missing from the homes of 2.4 million TW subscribers in the New York area, depriving Cablevision of ad revenue and cable license fees and starving Time Warner customers of New York Mets games. Dolan and TW can't agree on a license fee.
Veteran Wall Streeter Richard Greenfield, an analyst with Fulcrum Global Media, said Wednesday that Dolan's "ulterior motives" for going after Adelphia could be to resolve the dispute over MSG and Fox Sports New York.
In exchange for Dolan's dropping out of the Adelphia auction, TW Cable would buy the sports regionals for a dollar figure close to what Dolan wants.
Other sources say a new TW Cable contract for MSG and FSNY would also benefit Dolan by helping to unlock the negotiations for the Warner Bros. movies and funnel them to AMC for a strapping license fee (upward of $100 million), a deal that would propel both sides to settle the lawsuit over AMC pushing aside the older movies.
Greenfield said that Dolan may also be trying to stop TW from paying big bucks for Adelphia so Time Warner redirects its attention to the purchase of Cablevision. The 3 million New York-based subscribers of Cablevision are much more desirable to TW because they blend in perfectly with Time Warner's 2.4 million located in the same area. Adelphia's customers are much more scattered.
Dolan could use the money from selling Cablevision to fund his money-losing Voom satellite-programming service, which has sparked a furious boardroom battle with his son, Cablevision CEO James Dolan. But Voom could catapult its subscriber base of 46,000 by more than tenfold if, by ending his bid for Adelphia, Dolan could get TW and Comcast to carry the service on their digital high-definition platforms.
Another of Dolan's ulterior motives, according to Greenfield, is inducing Comcast to buy Fox Sports NE, Fox Sports Bay Area and Fox Sports Chicago -- all of which Cablevision has a stake in -- "for a high price." The deal would make sense for Comcast because it owns lots of cable systems in the areas where these three regional networks reside.
Cablevision continued to decline comment Wednesday and wouldn't confirm its widely reported $16.5 billion cash bid for Adelphia. The apparent offer all but confounded Greenfield and other analysts.
The joint bid submitted by TW Cable and Comcast is valued at roughly $17.6 billion in cash and stock. By some estimates, the offer includes only $12 billion in cash.
Sanford C. Bernstein senior analyst Craig Moffett said Wednesday that Cablevision's stand-alone bid for Adelphia failed to illuminate the most basic question of all -- why?
Cablevision would bring none of the geographic synergies that a TW Cable/Comcast deal would bring in terms of providing Adelphia shareholders with long-term value.
"Moreover, the Cablevision/Adelphia entity would still only be a midsized cable operator -- too small to bet on transformational synergies from programming cost-leverage," Moffett wrote in a note.
"We remain skeptical about the strategic value in a Cablevision bid for Adelphia, and of its eventual prospects for success," Moffett said.
Cablevision's 3 million customers, although in the New York City area, are in areas encircling Gotham. Time Warner services New York City itself. Adelphia has roughly 5.6 million customers in markets across the country and serves a large chunk of the L.A. market, which TW Cable wants.
Comcast, with more than 21 million customers, and TW Cable, with 10.9 customers, are the country's largest cable outfits.
Moffett and other analysts noted that Cablevision would assume a massive debt load if its $16.5 billion bid was victorious. He said Cablevision could always alleviate some of this burden by selling off assets, such as the Rainbow networks.
There had been hints that Cablevision would team up with private equity firms Kohlberg Kravis Roberts & Co. and Providence Equity Partners, which have already submitted a $15 billion bid for Adelphia.
For now, however, it appears Cablevision will go it alone. Kohlberg and Providence are unlikely to be willing to team up with Cablevision unless the Dolan family is willing to relinquish some board control.
Cablevision shareholders didn't seem all that jazzed over the reported Adelphia bid. Shares fell 98¢ to close at $26.85 in trading Wednesday, a 3.52% decline.
Analysts ponder Dolan's bid for Adelphia
By JOHN DEMPSEY, PAMELA MCCLINTOCK @ Variety.com
NEW YORK -- It requires a Machiavellian analysis of Chuck Dolan's motives to see it, but there could be a connection between Warner Bros. theatricals like "Million Dollar Baby," "Ocean's 12" and "Terminator 3" and Cablevision's reported run for Adelphia Communications.
The last-minute offer must be giving acid reflux to Time Warner Cable, which has engineered a joint bid for Adelphia with Comcast.
But instead of truly being interested in Adelphia, Cablevision could easily be trying to use the bid to extract carriage deals with TW Cable and Comcast.
TW Cable sister company Warner Bros. Domestic Cable has been negotiating for months with Dolan's AMC to sell a package of dozens of recent WB theatricals. But hovering over the movie deal are two contentious issues over which the two sides are locked in conflict:
* TW Cable and AMC are battling in the courts over TW's contention that AMC has breached its contract by changing its programming from an emphasis on golden-oldie theatricals to newer pics. TW is threatening to pull AMC from cable systems representing 13 million or so subscribers.
* Dolan's regional sports networks MSG and Fox Sports New York are missing from the homes of 2.4 million TW subscribers in the New York area, depriving Cablevision of ad revenue and cable license fees and starving Time Warner customers of New York Mets games. Dolan and TW can't agree on a license fee.
Veteran Wall Streeter Richard Greenfield, an analyst with Fulcrum Global Media, said Wednesday that Dolan's "ulterior motives" for going after Adelphia could be to resolve the dispute over MSG and Fox Sports New York.
In exchange for Dolan's dropping out of the Adelphia auction, TW Cable would buy the sports regionals for a dollar figure close to what Dolan wants.
Other sources say a new TW Cable contract for MSG and FSNY would also benefit Dolan by helping to unlock the negotiations for the Warner Bros. movies and funnel them to AMC for a strapping license fee (upward of $100 million), a deal that would propel both sides to settle the lawsuit over AMC pushing aside the older movies.
Greenfield said that Dolan may also be trying to stop TW from paying big bucks for Adelphia so Time Warner redirects its attention to the purchase of Cablevision. The 3 million New York-based subscribers of Cablevision are much more desirable to TW because they blend in perfectly with Time Warner's 2.4 million located in the same area. Adelphia's customers are much more scattered.
Dolan could use the money from selling Cablevision to fund his money-losing Voom satellite-programming service, which has sparked a furious boardroom battle with his son, Cablevision CEO James Dolan. But Voom could catapult its subscriber base of 46,000 by more than tenfold if, by ending his bid for Adelphia, Dolan could get TW and Comcast to carry the service on their digital high-definition platforms.
Another of Dolan's ulterior motives, according to Greenfield, is inducing Comcast to buy Fox Sports NE, Fox Sports Bay Area and Fox Sports Chicago -- all of which Cablevision has a stake in -- "for a high price." The deal would make sense for Comcast because it owns lots of cable systems in the areas where these three regional networks reside.
Cablevision continued to decline comment Wednesday and wouldn't confirm its widely reported $16.5 billion cash bid for Adelphia. The apparent offer all but confounded Greenfield and other analysts.
The joint bid submitted by TW Cable and Comcast is valued at roughly $17.6 billion in cash and stock. By some estimates, the offer includes only $12 billion in cash.
Sanford C. Bernstein senior analyst Craig Moffett said Wednesday that Cablevision's stand-alone bid for Adelphia failed to illuminate the most basic question of all -- why?
Cablevision would bring none of the geographic synergies that a TW Cable/Comcast deal would bring in terms of providing Adelphia shareholders with long-term value.
"Moreover, the Cablevision/Adelphia entity would still only be a midsized cable operator -- too small to bet on transformational synergies from programming cost-leverage," Moffett wrote in a note.
"We remain skeptical about the strategic value in a Cablevision bid for Adelphia, and of its eventual prospects for success," Moffett said.
Cablevision's 3 million customers, although in the New York City area, are in areas encircling Gotham. Time Warner services New York City itself. Adelphia has roughly 5.6 million customers in markets across the country and serves a large chunk of the L.A. market, which TW Cable wants.
Comcast, with more than 21 million customers, and TW Cable, with 10.9 customers, are the country's largest cable outfits.
Moffett and other analysts noted that Cablevision would assume a massive debt load if its $16.5 billion bid was victorious. He said Cablevision could always alleviate some of this burden by selling off assets, such as the Rainbow networks.
There had been hints that Cablevision would team up with private equity firms Kohlberg Kravis Roberts & Co. and Providence Equity Partners, which have already submitted a $15 billion bid for Adelphia.
For now, however, it appears Cablevision will go it alone. Kohlberg and Providence are unlikely to be willing to team up with Cablevision unless the Dolan family is willing to relinquish some board control.
Cablevision shareholders didn't seem all that jazzed over the reported Adelphia bid. Shares fell 98¢ to close at $26.85 in trading Wednesday, a 3.52% decline.
