Tuesday, February 10, 2009

Cablevision chokes on Newsday

Cablevision’s investment in Newsday flamed out even faster than I expected when I wrote 10 months ago that the over-priced deal was unlikely to succeed.

But the company’s decision to declare as a loss up to 70% of the value of the newspaper might be good news for Rupert Murdoch, who declined to match the aggressive $650 million that Cablevision paid last year in a three-way bidding war for the property.

In addition to Cablevision and Murdoch, the third potential buyer in the auction skillfully staged by the strapped Tribune Co. was Mortimer Zuckerman, the owner of the struggling New York Daily News.

Murdoch, who might be motivated now to seize on the likely disenchantment of the folks at Cablevision to make a low-ball offer for the paper, was the odds-on favorite in 2008 to buy the Long Island tabloid. That’s because he could have reaped an estimated $100 million in annual savings by combining certain editorial, ad sales, production and circulation operations at Newsday with those of his perennially unprofitable New York Post.

Murdoch’s News Corp., which itself has been far from immune to the monumental misfortunes of the newspaper business, just had to write off something like half of the $5 billion it paid for the Wall Street Journal and other assorted Dow Jones assets. But the cost savings that could be realized by twinning Newsday and the Post could make a right-priced deal compelling.

Murdoch declined to stretch for Newsday last year when it became clear that Cablevision was intent on paying top dollar for the Long Island property. Insiders say Charles Dolan, the founder and patriarch of the family that controls the cable-and-entertainment powerhouse, long had coveted Newsday.

But the intervening months have not been kind to newspapers in general and to Newsday in particular. Now, the cable guys are stuck with running a faltering, over-priced acquisition in a collapsing economy.

Given the less than ideal way the Newsday initiative has worked out for Cablevision, an unsolicited overture from Murdoch for the paper might be well received. That’s assuming, of course, that the Dow Jones writeoff hasn’t soured Murdoch on newspapers.


Anonymous Anonymous said...

I doubt Murdoch will ever sour on newspapers -- he's a newspaper guy.

I don't understand what Cablevision expected when it bought Newsday. What was their plan? How were "cable guys" going to become "newspaper guys?" There are no municipally granted monopolies in the newspaper business.

3:45 AM  

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