Cablevision Eyes Advertising in Mulling of Asset Spinoff

Why Telcos Should be Scared

Cable, media and entertainment giant Cablevision Systems Corp. (CVC) today confirmed that it’s considering spinning off one or more of its countless assets, claiming the consideration is to enhance value for shareholders.

As part of a strategic review, the company’s board of directors authorized the company to “explore the spin-off of one or more businesses and other potential strategies.” Its businesses include cable operations, regional TV sports networks, N.Y. sports teams, entertainment venues and content channels ─ including IFC, AMC and Sundance.

Cablevision faces intensifying competition from triple play providers such as Verizon Communications Inc. (VZ) in more of its territory, including the Big Apple. But the combination of content and cable networks pays off in terms of advertising ─ a market where telco TV providers aren’t yet significant players.

The value of Cablevision’s content assets could be staggering, consider that The Weather Channel and its website, Weather.com, sold a month ago for $3.5 billion to broadcasting giant NBC Universal Inc.

The cableco didn’t set a date for the competition of the strategic review. The core question to be answered is whether the media and entertainment company would spin off its best or worst performing assets, if it splits out anything at all?

Judging from its recent, headline-grabbing deal with Newsday, combined with industry expert perspective, the strategic review is all about advertising.

Cablevision has acquired 97 percent of Newsday Media Group through the formation of a new partnership with Tribune Company. For Cablevision, the completion of this transaction adds a complementary print and online media group with diverse, quality local content in the New York area.

“Cablevision and Newsday are immediately exploring ways to grow their advertising-based and subscription-based businesses,” officials said in a prepared statement. “Cablevision is expected to begin using its cable systems across the New York area to run Newsday advertisements that highlight the strength of the paper's news, content and advertising. Through its interactive advertising capabilities on both its cable systems and data networks, Cablevision will also begin marketing subscriptions for Newsday.”

Officials for both companies indicated that many collaborations and new initiatives are expected in the coming months as the Newsday partnership begins operating under the Cablevision umbrella.

“They’re looking at spinning off the content assets like AMC, IFC and Sundance, because the market for advertising on cable TV stations is so hot,” said Jeff Heynen, directing analyst for IPTV, Next Gen BSS/OSS and Infonetics Research, citing the recent sale of the Weather Channel properties to NBCU. “Advertisers have realized that they have to be in more places than just ABC, NBC and CBS with the long list of popular and more focused channels.”

The eventual goal, Heynen claims, is for cable operators to offer those spending for commercials “targeted and addressable advertising across all their properties.”

Why should telco TV providers care? “It’s the endgame in how they will have to compete with cable companies if they really choose to compete with them,” said Heynen.

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