Cablevision Enlarges News Push with Newsday Buy

Cablevision Systems Reaches $650M with Tribune to Buy 97% Stake in Long Island Daily Newspaper

By Robert Marich -- Broadcasting & Cable, 5/12/2008 2:26:00 PM

MSO Cablevision Systems doubled up its news footprint on Long Island in suburban New York by firming a $650 million definitive agreement Monday to buy a 97% stake in local daily newspaper Newsday.

The suburban newspaper overlaps Cablevision systems in Long Island and will provide editorial resources that can help the MSO’s News 12 news channels.

In the buy, Cablevision -- the nation’s fifth-largest MSO -- will acquire the stake in Newsday Media Group for $632 million from Tribune, which will retain a 3% stake. Tribune -- which is selling assets to pay down debt associated with its $8.2 billion sale in December -- will also receive $18 million at closing as prepaid rent from leases of property used in the Newsday business, bringing the value to $650 million. The deal is expected to be structured as a joint venture for tax reasons.

For the six months ended in March, Newsday suffered a 4.7% decline in circulation, according to the Audit Bureau of Circulations, and it is one of the poorer-performing properties in the battered newspaper business. Newsday's daily circulation is 388,000 and its Sunday circulation is 452,000.

Cablevision outbid News Corp., which offered $580 million and thought it had the inside track, and a separate offer from New York Daily News owner Mortimer Zuckerman. News Corp. backed out at suggestion of a bidding war. The company, led by Rupert Murdoch, owns daily newspaper the New York Post.

News Corp., which owns the Fox and MyNetworkTV broadcast-TV stations in New York, has a waiver to also own the Post in the same metro area, prompting speculation that it might face regulatory hurdles buying Newsday.

Cablevision, which dominates Long Island with cable systems, faces no media-concentration hurdles because cable systems are not covered by cross-ownership rules.

Cablevision, led by the Charles Dolan family, has a rocky history diversifying outside cable systems and cable-TV networks. It previously bought a local consumer-electronics chain and movie-theater chain in the New York area with the strategy of becoming vertically integrated in entertainment media, although those diversifications proved to be busts.

Cablevision also owns arena and sports-team operation Madison Square Garden, and its struggling National Basketball Association New York Knicks team has been a constant corporate distraction.

It’s not clear how binding Monday’s deal is and if Cablevision might seek a lower price in the event that Newsday’s financial condition continues to deteriorate. If the deal does go through, it’s logical to assume that Cablevision will seek a tie-up with another New York newspaper to share back-office and printing.

In a statement, Cablevision chairman Charles Dolan said: “Newsday is one of the great names in the history of American journalism and it is both an honor and privilege to return Newsday back to Long Island-based ownership after nearly 40 years. We admire Newsday’s strong editorial voice and reputation for quality, as well as its leadership in print and online journalism. We are committed to maintaining Newsday’s journalistic integrity and important position in the marketplace.”

The Dolans are a prominent business family in Long Island, where Cablevision is headquartered, and the trend in the flagging newspaper business is for local white knights to buy struggling properties. However, the track record of local ownership has been poor as, for example, the buyer of the daily Santa Barbara, Calif., newspaper quickly became embroiled in a bitter labor dispute.

Tribune chairman Sam Zell is one of the newer local white knights via the buy in December of Tribune, which has owns newspaper and broadcast properties in Chicago.

Under Tribune ownership, Newsday’s Spanish-language edition was involved in a scandal stemming from inflating circulation from 2000-04 that resulted in a criminal investigation. Tribune agreed to pay a $15 million fine and set aside $90 million to reimburse advertisers.

The newspaper made inroads in Manhattan with a city edition, but that folded in 1995.