Big in Long Island: Cablevision buys Newsday for $650 million
A paid daily circulation of 388,000. A free daily circulation of 335,000. More than 3 million monthly web site visitors. 17 visitor reference, lifestyle and economic development publications. 181 penny saver editions. 97% of all this can be yours for $630 million.
Actually, it can’t anymore, because Cablevision has already bought Newsday in a $650 million zero-equity deal financed by Bank of America (money down is so last millennium). The seller, Tribune Company, will retain 3% stake of the newspaper valued at $20 million.
Cablevision is a so-called triple-play service provider that offers subscribers bundled cable television, telephone service, and Internet access. It has three million subscribers, mostly in the New York area. The company has a particularly strong position on its native Long Island. Cablevision also owns Madison Square Garden, the New York Rangers, and the New York Knickerbockers, along with various media properties like IFC and AMC.
Cablevisions’s main owners - the Dolans - recently abandoned a stalled effort to take the company private. The company has a long history of rather pricey acquisitions. In 1988 it shelled out $550 million to purchase Viacom Inc.’s cable systems on Long Island and suburban Cleveland. One of Cablevision’s main competitors at that time was Times Mirror, which then owned Newsday (tribune acquired the newspaper as part of a merger in 2000). Earlier this month Cablevision agreed to acquire Sundance Channel for $496 million, almost one hundred million dollars more than the channel’s owners reportedly had expected to pull in.
According to a 10-K filing 78% of Tribune Co.’s publishing revenue came from advertising and 14% from subscriptions and sales. Those numbers are for all of the the company’s newspapers, not Newsday specifically (some of Tribune’s other newspapers are Los Angeles Times, Chicago Tribune, South Florida Sun-Sentinel, and Hartford Courant).
According to the Wall Street Journal, one media analysts estimates that Cablevision could increase Newsday’s circulation by 100,000. That would mean some $25-30 million in subscription and sales revenue, plus a multiple in extra advertising revenue. So maybe $100-$120 million in extra revenue? Newsday’s revenue fell 13%, to $498 million, from 2005 to 2007, while circulation dropped by 10%. Cablevision needs to boost circulation by 44,000 just to bring it back to 2005 levels.
Here’s an odd reaction to Cablevision’s purchase of Newsday:
“Being owned by an Internet service provider company opens up a range of options for a newspaper to generate revenue from people accessing the Internet,” said Tom Rosenstiel, director of the Project for Excellence in Journalism, a think tank in Washington. “Revenue from the Internet service can go to underwrite the content.”
So, in Mr. Rosenstiel opinion, Cablesvision’s owner borrowed $650 million to provide Newsday’s news room with a revenue stream from cable subscribers. OK.
Finally, here’s a prescient quote from tribune’s 10-K mentioned previously in this post:
[C]ompetition for certain types of acquisitions is significant, particularly in the Interactive space. Even if successfully negotiated, closed and integrated, certain acquisitions or investments may prove not to advance our business strategy and may fall short of expected return on investment targets.
Selling in the dead-tree market space is a much better business proposition. Well done, Tribune, and good luck, Cablevision.
