Why did Cablevision buy Newsday?
This week's big media news is the acquisition of Long Island-New York-area tabloid Newsday by cable TV company Cablevision. Cablevision bought the rag from the tottering Tribune Company, for over $620. In doing so, Cablevision outbid News Corp.'s Rupert Murdoch (Wall Street Journal, New York Post) and Mort Zuckerman (New York Daily News).
Newsday is the #10 US paper in circulation (through it was discovered to be fudging its numbers a few years ago) and the #1 suburban paper in the nation. The Tribune Company, which got Newsday when it bough the Los Angeles Times (Times-Mirror Company) in 2000. The Tribune company was later taken private by investor Sam Zell in 2007, who took on enormous debt. The sale of Newsday will remove a few pints from a $13 billion bucket of debt that Zell incurred in buying the Tribune Group - and more sell offs (including baseball's Chicago Cubs and their Wrigley Field, along with its share in the Food Network) are on the way.
Now the deal would make some sense for Murdoch and Zuckerman, as it would get rid of a tabloid competitor to their own NY tabloids, this increasing their market power, even if the just closed down the paper. They could also make use of the existing distribution, printing, and (to some extent) editorial resources, along with concentrated ad sales operations.
But for Cablevision, which also owns Madison Square Garden, the Knicks, and the Rangers, but is new to the newspaper biz, what's the motivation?
Here's the stated reason from CEO James Dolan "Adding Newsday Media Group's superb assets to Cablevision's portfolio presents a multitude of opportunities: to provide consumers with additional quality content on multiple platforms; expand advertising opportunities for both entities; and attract a larger audience than either company could on its own.." Can' you smell the synergy!
Some points:
Newsday happens to be located only 7 miles from Cablevision's headquarters. That should save a lot on travel costs for upper management.
Newsday circulation fell 13 percent from 2005 to 2007. Overall New York area newspaper ad revenue is predicted to drop by 25% by 2012, by one report. At the moment, classified house sale ads are plummeting especially fast.
The thought is that Cablevision and Newsday can combine ad sales teams, a pretty dubious synergy, especially given the fact that newspaper advertisers are much more likely to go to the Internet rather than cable TV ads.
Cablevision might be losing focus on its key cable business, where its telephone and Internet offerings are killing local phone rival Verizon. . A Bloomberg article (Cablevision to Buy Newsday After Outbidding Murdoch", 5/12/08) quotes one analyst as saying "All they seem intent on doing now is making acquisitions in non-core businesses." Fro example, Cablevision just bought cable channel Sundance Channel which shows independent films, for $496 million, .
The Dolan family, chairman Charles Dolan and son/CEO James, have tried several times to take the company private but have met with shareholder resistance. There some question whether this move is designed somehow to make that buyout easier.
Recent history is littered with a set of unfortunate takeovers of newspapers, including the Tribune deals, New York Times' buyout of the Boston Globe, the fate of the Minneapolis Star, and the floundering Philadelphia Inquirer among many others. All have involved faster than predicted declines in revenue and a vicious cycle of decreased quality, weaker editorial content, lowered circulation, and thinner papers.
9:09:26 PM 
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