Cable Operators

The Dolan Family Feud

3/20/2005 7:00 PM Eastern

By March 31, shareholders and voyeurs alike will have a clearer understanding of one of the most dysfunctional dramas in corporate governance — the one that’s been playing out at Cablevision Systems Corp.

That’s the deadline for Cablevision chairman Chuck Dolan to come up with the scratch to buy the remaining assets of Rainbow DBS, better known as the HDTV direct-broadcast satellite service Voom. In a stunning flare-up at Cablevision, weeks earlier, the board voted to shut Voom down.

Chuck reacted quickly and fiercely, removing three directors who voted against him and replacing them with outsiders: Liberty Media Corp. chairman John Malone; former Century Communications Inc. CEO Leonard Tow and former ITT Corp. chairman Rand Araskog. He also appointed his son-in-law to replaced a deceased board member.

Shortly after his appointment to the board, Liberty’s Malone said he wouldn’t personally invest in Voom. Nonetheless, the newly minted board gave Chuck an extension — until March 31 — to raise the money.

The Street is befuddled by the histrionics at Cablevision. Fulcrum Global Partners media analyst Rich Greenfield said he doesn’t understand why Chuck’s son Jim, who also sits on the board, simply just didn’t give his own father some grace time to raise the funds.

We would guess that the lack of a grace period prompted Chuck to take the drastic measures he took in restructuring the board and drawing a line in the sand.

Greenfield’s take is that Chuck will part with some Cablevision stock to pay for keeping Voom alive. He also thinks that the only way Chuck can keep Voom is to eventually sell off Cablevision.

Clearly, there are two eager bidders out there: Time Warner Cable and Comcast Corp. Both of those MSOs have footprints that surround Cablevision’s territory, and both want to build scale. But at what price?

The senior Dolan has entered into countless discussions and negotiations with would-be suitors over the years. But nothing ever materialized because Chuck would always raise the bar.

That was then, though, and this is now — and recent trends in industry consolidation suggest this might just be the right time for Chuck to sell. But Greenfield says there are other options.

Chuck could decide to take the MSO private, like Cox Communications Inc. or Insight Communications Co. Greenfield thinks that Chuck is probably looking at that as a possibility.

There’s another important date for Cablevision coming up: Its board will reconvene in May to discuss all of the above and more. Wouldn’t you love to be a fly on the wall at that showdown?

In the meantime, take a look at my interview with Greenfield at multichannel.com. You’ll get a real sense about what the Street thinks of Cablevision’s recent antics.

September