Wall Street Journal: More VOOM details

fredfa

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Jan 12, 2004
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Family Divide

More details on the Dolans “feud” – and what it may mean for the future
By PETER GRANT Staff Reporter of THE WALL STREET JOURNAL
January 24, 2005; Page A1
For years, James Dolan, the chief executive of Cablevision Systems Corp., worked in the shadow of his father, Charles Dolan, who built the cable and entertainment empire after wiring New York City with cable lines in 1964. But in a dramatic boardroom showdown last week, James Dolan turned on his father, joining with other directors to pull the plug on his father's cherished dream -- a satellite-television business named Voom. On Thursday, two days after the vote, the company announced it was selling Voom's satellite and other assets to EchoStar Communications Corp.

…..While James Dolan was never enthusiastic about Voom, he was willing to give his father the benefit of the doubt, according to people familiar with the situation. One year ago, he joined the board in giving Voom the green light, partly on the basis of a Morgan Stanley analysis that concluded that the business was viable, according to people familiar with the situation. Then last month, Morgan Stanley reversed its analysis, partly because of Voom's poor performance in its first year of operation, these people said. At that point, James Dolan decided that he had to oppose his father on continuing the venture.

"It was a very difficult decision for Jim," says one person close to the board. "He showed a lot of fortitude."

What Charles Dolan does now could have major repercussions for the future of Cablevision, as well as the rest of the cable industry. Cablevision's jewel of a cable system, which has about three million subscribers in the New York City area, has long been considered a takeover target, particularly by Time Warner Inc., which owns adjoining systems. Charles Dolan, the company's single largest shareholder, has in the past made it clear that he's not a seller. But Mr. Dolan is so angry now that people close to him think he might consider selling the company….

Charles Dolan's fascination with using satellites, rather than cable systems, as a more efficient way to deliver television signals goes back to 1990 when Cablevision teamed up with NBC, News Corp. and Hughes Communications to launch a service called Sky Cable. That partnership fell apart, but Hughes went on to start DirecTV, which has grown into the country's largest satellite-TV operator, with more than 12 million subscribers.

Missing that opportunity, Charles Dolan led Cablevision to invest in other satellite ventures. His determination intensified as cable subscriptions flattened. The entrepreneur in him concluded that satellite -- not cable -- was the growth business.

Cablevision's satellite plan, however, ran into huge opposition from analysts and investors who believed that with DirecTV and EchoStar leading the market, there was little room for a third competitor. Members of Cablevision's board raised similar concerns, but were unwilling to oppose Charles Dolan, an entrepreneur with a record for proving the skeptics wrong.

James Dolan also was unsure about the satellite project as its costs mounted. The company signed a contract with Lockheed Martin Corp. to build an advanced satellite, with an estimated cost of more than $250 million to get it into orbit. But in board discussions James Dolan backed his father, trying to work as a mediator between Charles Dolan and board members with reservations….

Charles Dolan also chose a programming strategy on the cutting edge of television technology so Voom would provide more high-definition programming than other satellite or cable operators.

Investor worries increased. To ease them, Cablevision announced in 2003 that it would spin off Voom together with three of its top cable networks -- AMC, the Independent Film Channel and WE:Women's Entertainment -- worth an estimated $2.5 billion. The plan, largely crafted by James Dolan, was that the networks would throw off enough cash to finance Voom's operating deficits until it became profitable.

Investors applauded the plan because the spinoff would limit Cablevision's exposure to the risky venture. But the spinoff was delayed for months by a Securities and Exchange Commission investigation into alleged accounting irregularities in Cablevision's programming unit. While the improprieties turned out to be minor, James Dolan was very frustrated by the delay, which kept the cloud of Voom hanging over his company.

Cablevision had told investors the spinoff would be done by the end of the third quarter of 2004. But the company had to postpone it as company officials and board members began to mull Voom's disappointing results. Not only had the company signed up a mere 26,000 customers at the end of the third quarter, but more than 2 out of 10 customers purchasing the service were deciding to disconnect. Making matters worse, cable and satellite-TV operators were racing to add high-definition content, eroding Voom's advantage.

By December, it became clear to many directors that the spinoff wasn't going to work, especially after Morgan Stanley weighed in with its negative report. Lawyers also warned board members of personal liability if they didn't vote in the best interest of shareholders. In a Dec. 20 meeting, the board voted 9 to 4 to bag the spinoff plan and "pursue strategic alternatives," which was widely interpreted on Wall Street to mean Voom was going to be sold or shut down. James Dolan voted against his father.

But Charles Dolan wasn't ready to give up. If the board wasn't going to approve it, he considered changing the makeup of the board. Charles Dolan controls the majority of a special class of stock that the Dolan family owns that elects 75% of the directors. He began talking to people about possibly replacing three members of the board who voted against him, Sheila Mahony, a former Cablevision executive; William Bell, a former vice chairman of the company, and investment banker Steven Rattner, according to people familiar with the matter.

But Mr. Dolan was talked out of that plan by his advisers, including lawyers at Debevoise & Plimpton, who warned that in this post-Enron age such a maneuver could cause an uproar, and even lead to delisting. Such a scenario could lead to default on bank covenants and even a possible bankruptcy filing, they warned.

By last week's meeting, all Charles Dolan could do was try to persuade the board to keep funding Voom, which had money only until the end of January. He argued that the board was being oversensitive to the post-Enron regulatory climate. But this time, the vote was close to unanimous against him.

Charles Dolan made one last attempt to save Voom by looking into buying it himself. But that didn't last long and the board quickly agreed to sell to EchoStar, which had been having on-and-off conversations with Cablevision for months.
 
Hey Freda

Hey Man sorry i stole your article i will give you credit next time very good article man i don't know if i should get Voom now i was going to get it in Feburary. :D
 
... the cloud of Voom hanging over his company.
An interesting line.
Not only had the company signed up a mere 26,000 customers at the end of the third quarter, but more than 2 out of 10 customers purchasing the service were deciding to disconnect.
That makes it sound like they didn't have enough subscribers to write 20 out of every 100 or 200 out of every thousand. I would have written it as one out of five myself. (It could have been written 6500 out of every 32500.)
Charles Dolan made one last attempt to save Voom by looking into buying it himself. But that didn't last long and the board quickly agreed to sell to EchoStar, which had been having on-and-off conversations with Cablevision for months.
Sort of. WSJ got it wrong by saying "Voom" was sold to Echostar. E* only bought V*'s only launched satellite, new 2nd uplink center, and 11 transponder licenses. Not Voom with all of it's debts and obligations. Cablevision gains $200mill to help patch their problems and can sell the remainder of their assets when they set the price.

We have been getting reports of Charlie Ergen visiting Voom for a while. I'm sure the availability of a willing buyer didn't help when it came to deciding if Cablevision wanted to continue to fund Voom.

JL
 
fredfa said:
Family Divide

More details on the Dolans “feud” – and what it may mean for the future
In a Dec. 20 meeting, the board voted 9 to 4 to bag the spinoff plan and "pursue strategic alternatives," which was widely interpreted on Wall Street to mean Voom was going to be sold or shut down..

Does anyone know the actually numbers that voted against chuck. i remember reading on here back in december after the meeting that is was a lot closer like 7 to 6
 
hbk409 said:
Does anyone know the actually numbers that voted against chuck. i remember reading on here back in december after the meeting that is was a lot closer like 7 to 6

yesterday's New York Post:

"Though Chuck Dolan pleaded with the board to keep the money-losing, high-definition satellite business, the board stood solidy on Jimmy's side, voting 10-3 in favor of selling, according to a source."
 
"By last week's meeting, all Charles Dolan could do was try to persuade the board to keep funding Voom, which had money only until the end of January." makes it appear that funding has been extended beyond the end of January but for a day or a year is the question.

Still watching HDTV under partly sunny Seattle skeis, Gill
 
Not to get too OT, but I still can't help wonder that if they had good installs and a solid set top box, then they would have succeeded.

It was a good idea, and the guy is to be given credit for coming up with it, but when you turn on the TV and you often can't get a PG or a signal, then the WAF and family acceptance hits the skids pretty quickly and Dad's idea gets kicked out of the house.
 
Walter L. said:
Guys,
Charles Dolan should sell his CVC stock (now that is high) and leave James on the street...

this is what i have been saying in various post of the past week that chuck will now sell cablevison just the cable company non of the channels(ifc,we,amc) to time warner. just wait
 
Walter L. said:
Guys,
Charles Dolan should sell his CVC stock (now that is high) and leave James on the street...

It is because of what James ( allow/push for the vote to kill Voom ) that the stock is higher now, if he allowed Voom to go ahead, Cablevision's stock prices could be in teens.
It's kind of a catch-22 situation.
 
Walter L. said:
Guys,
Charles Dolan should sell his CVC stock (now that is high) and leave James on the street...
That's what leads me to believe Sr. may walk away with Rainbow Media. The shareholders are happy since they will no longer be funding VOOM (just look at the share price) and so is Wall Street; they no longer have to worry about shareholder lawsuits.

If Sr. wants Rainbow Media assets (to include WE, AMC and IFC) all he has to do is announce that CableVision is on the blocks. I believe he has this right as a shareholder with a majority interest in the Company (41%). The board will most likely forfeit Rainbow Media assets in exchange for Sr. converting his voting shares to non-voting shares. Shareholders couldn't sue because the Board would be taking steps to ensure CableVisions continued existence...plus, the stock value would still be doing better than it was prior to the sale of RDBS assets to E*.

At this point, Rainbow 1 may be gone but Rainbow Media and VOOM would continue to operate and support customers until migrated over to SES Americom. After that, Rainbow Media could focus on selling programming, continuing to grow the VOOM subscriber base or a mix of both. The possibilities are endless.

Possible? Your guess is as good as mine! Just something to think about. Doh! Just remember I am supposed to relax & just enjoy VOOM while it lasts. :rolleyes:
 

From today's New York Post

Is this possible

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