Rainbow Media Assets on Table

Feb 28, 2005  •  Post A Comment

Cablevision Systems CEO James Dolan acknowledged last week that selling Rainbow Media’s national cable channels is an option being explored by the cable company since it dumped its failed satellite business. But he stressed that the company has no plans to sell the channels now.

Following the announcement late last year that it was shelving its planned spinoff of its satellite operation, Cablevision said it was exploring strategic options for the Rainbow channels, which include AMC, WE: Women’s Entertainment and the Independent Film Channel.

“We have no plans to sell the Rainbow networks [at this time],” Mr. Dolan told analysts during last week’s conference call to discuss 2004 financial results. He added that as the company explores its options for the channels, selling them is a possibility.

Talk of a possible sale of the networks comes as Cablevision moves ahead with the sale of its satellite business. The company agreed to sell its lone satellite to EchoStar Communications, and has entered into a definitive agreement to sell the satellite operations’ customer relationships and channels to a company controlled by Cablevision Chairman Charles Dolan.

The satellite unit, which has been a major cash drain for Cablevision, pushed the company deeper into the red in the fourth quarter, more than offsetting strong performance by the core cable operations.

Cablevision reported a widened fourth-quarter loss of $305.8 million, versus a year-earlier loss of $197.3 million, thanks to a $354.9 million impairment charge related to the satellite business. Revenue rose 11 percent to $1.4 billion, largely due to growth at the company’s core cable operations and the Rainbow networks.

For the year, Cablevision reported red ink of $676.1 million, compared with a loss of $297.2 million a year ago, on an 18 percent increase in revenue to $4.9 billion.

Partnership Shuffled

Separately, Cablevision and News Corp. last week restructured their ownership of their jointly owned sports and entertainment assets, with Cablevision taking control of the New York-based properties held in the partnership.

In the move, structured as a generally tax-free exchange of assets, Cablevision will take full control of Madison Square Garden and its properties, including the arena and the theater at Madison Square Garden, the New York Knicks, Rangers and Liberty sports teams, Radio City Music Hall, MSG Network and Fox Sports Net New York. Cablevision will also own 100 percent of Fox Sports Net Chicago and 50 percent of Fox Sports Net New England.

News Corp. will own 100 percent of Fox Sports Net, in addition to Fox Sports Net Ohio, Fox Sports Net Florida and National Advertising Partners. It also will assume management control of those assets.

Before Tuesday’s announcement, the properties involved in the transaction were owned 60 percent by Cablevision and 40 percent by News Corp. A 60/40 ownership split will remain in effect for Fox Sports Net Bay Area, with Cablevision continuing to manage that property.

With Madison Square Garden and the New York-based sports teams completely under Cablevision’s control, Wall Street is once again buzzing with speculation that the company might be preparing to sell its core cable assets.

The theory gained momentum earlier this year following a rift between James Dolan and his father, Charles Dolan, over whether the company should continue to fund the satellite venture. Charles Dolan sought to keep the funding going, but James Dolan convinced enough board members to kill the idea. That led the company to strike the deals with EchoStar and the company-as yet unnamed-created by Charles Dolan.