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A FAMILY FEUD'S FALLOUT



BY HARRY BERKOWITZ
STAFF WRITER

January 25, 2005

Last Wednesday, Cablevision chief executive James Dolan hopped the corporate jet to Denver to help clinch a deal that would mean the demise of the company's failed nationwide satellite TV venture.

The same day, his billionaire dad, Cablevision chairman Charles Dolan, sent an internal memo to employees of Voom saying it had to survive, even if that meant he would personally try to buy the costly venture from Cablevision.

The stunning boardroom victory of the son, who had long been seen on Wall Street as an unworthy successor, over the visionary father who founded the company has been heralded by Wall Street analysts as foreshadowing a transformation of Cablevision Systems Corp.

Even though Charles Dolan directly controls 41 percent of the voting shares, a narrow majority of the board rejected his wishes, saying the company would no longer pursue a venture that was chalking up huge losses and attracting few subscribers.

The analysts predicted Cablevision, the biggest cable operator in the New York metropolitan area, which also controls Madison Square Garden, the Knicks and Rangers, and Radio City Music Hall, as well as cable channels like AMC, may even be sold to Time Warner for as much as $13.5 billion for its cable business alone, partly as a result of the family feud.

But even if it is not, major questions have emerged on the future role of Charles Dolan, who had planned to become chairman of a Voom spinoff company and leave Cablevision's board.

Will friction persist between Charles, 78, and James Dolan, 49, who had been slated to take over as chairman if his father left? Will Charles, who through the Dolan family controls 75 percent of the voting shares, seek to oust some of the board members? Or will Charles finally make way for James to move out of his father's shadow?

For years, media moguls and Wall Street analysts said only Charles Dolan stood in the way of a sale of Cablevision.

Now that impediment may be removed, analysts said, especially since Charles Dolan's focus has shifted away from cable TV.

As James Dolan cemented the deal to sell Voom's sole satellite to competitor EchoStar Communications for $200 million, its stock price zoomed, gaining 18.5 percent for the week, as investors gained confidence Cablevision will be less likely to go off on costly tangents that depress the stock.

"There is a far greater likelihood with Chuck Dolan having been overruled by the board that someone could make a bid for Cablevision and that he would be receptive to such an offer, given that he is far less focused on the cable business than ever before," said analyst Richard Greenfield of Fulcrum Global Partners.



Channels likely to be sold

Even if a sale of the whole company is not imminent, chances have improved that the cable channels it owns, especially AMC, will be sold, analysts said. AMC alone is worth $2.6 billion, and packaged with IFC and WE: Women's Entertainment, the total price could reach $3.9 billion, according to analyst Jessica Reif Cohen of Merrill Lynch.

Sumner Redstone, chairman of MTV parent Viacom, which has considered buying AMC in the past, said recently he is eager to buy cable channels and expects some to be offered.

"In light of Comcast's plan to launch a competing classic movies channel with MGM, Cablevision would be shedding AMC at a time when risks around the network are mounting," said analyst Craig Moffett of Sanford C. Bernstein & Co.

The shift in Wall Street's view of Cablevision is remarkable, given that Charles Dolan had been considered the guiding force. James Dolan had been written off by some analysts as a lightweight prone to expensive misadventures such as The Wiz electronics chain, to mismanaging the Cablevision-owned New York Knicks and Rangers and to battling Mayor Michael Bloomberg over a planned Jets stadium in Manhattan.

During the prolonged family feud over Voom, a venture that Reif Cohen said cost Cablevision $1.4 billion in investments, the son has emerged as a born-again pragmatist and shareholder advocate, promising that Cablevision's profits would no longer be threatened by risky ventures or uncontrolled spending.



Deal lifts spirits

It is not even that the EchoStar deal was seen as a coup for Cablevision, given the price.

"It's slightly more than EchoStar wanted to pay, but it's still a bargain-basement price," said Satellite Business News editor Bob Scherman.

But the deal has lifted the spirits of investors and analysts, who had long complained that the Dolan family was too much of a wild card.

Greenfield said that if sold, the cable company could be worth up to $4,500 for each of its 3 million subscribers, or a total of $13.5 billion.

A Cablevision spokesman declined to comment.

Douglas Shapiro, an analyst at Banc of America Securities, told investors that Charles Dolan appears "more interested in developing new businesses than running a mature cable company," adding that it raises "the question whether he still feels compelled to own it."

Copyright © 2005, Newsday, Inc.