Cablevision Batting First Quadruple-Play

| About: Cablevision Systems (CVC)

I've long compared the cable and phone companies, on the one hand, to the newspaper companies, on the other.

Newspaper companies saw their business being upended by the internet, made small bets and have lost out on the big ad growth the web has generated.

Telephone companies -- the successors of monopoly Ma Bell -- first consolidated and then saw that the old vanilla phone service was disappearing, well, almost as fast as newsprint-based news. They moved into internet service provision and then into more lucrative broadband, acing out the many small companies that had at first parted the waters (some of which, including Infinet, were owned by newspaper companies). They invested heavily (and often clumsily) in mobile and have figured out how to wring many new dollars from all of us.

Cable companies saw that they were reaching a saturation point in their own penetration, and then felt the hot breath of the formerly telephone companies moving to offer .... cable TV. So they've gone after both internet service providing and local voice, understanding that boomers still want the comfort of the old landlines.

Triple Play, once a novelty, has become the standard. Cable + Internet + Telephone.

Now Cablevision's (NYSE:CVC) stuck out its neck, $650 million worth, to swing for fences.

Cable + Internet + Telephone + Newspaper. A combo that could give Cablevision an edge against Verizon (NYSE:VZ), its biggest competitor.

A home run?

My betting is that it's one of the best labs for everyone in the news industry to watch.

What stands in the way of a big Cablevision win? In a couple of words: strategy and execution.

In strategy, Cablevision must move beyond the hazy notion of Long Island Convergence (some say the Dolans may have had a bit too much Long Island Tea in offering $70 million more than their competition for Newsday) to a true strategy.

That strategy, in a nutshell:

  • Create a new ad vision of how Cablevision/Newsday can serve local advertisers, from its Long Island home base to metro New York to southern Connecticut to northern Jersey. Providing advertisers reach to mass and targeted niche audiences, through cable, newspaper and internet is what must be done.
  • Create a new content vision for how Cablevision/Newsday can serve local news readers, sports lovers, business observers and entertainment seekers. The company will have a newsgathering/production force of more than 500. The goal has got to be to get out of text/TV/audio silos, creating text and multimedia content, distributing that content to become dominant in its key geographic areas
  • Connecting the ad and content engines to the wider web distribution world. The new independent-of-Tribune Newsday may well move out of its Tribune partnerships (nothing in release one way or another on CareerBuilder, Classified Ventures, QuadrantONE, etc.) and look at joining the Yahoo (NASDAQ:YHOO) News consortium, among others. The Daily News is in it, but has no market exclusivity.

The execution? Tougher than the strategy. It should be streamlining as many of the cost centers of both companies as possible, but doing that in a way that builds the company for success, rather than crippling it.

Yes, ad staffs and selling propositions can converge and yes, scribes and TV producers are really members of the same species. But the human dimension here is what's tough. Habit, tradition and skill set are all obstacles. As I wrote last week, someone is going to surmount them; Cablevision's just one of the newest and potentially most interesting to try.

For Rupert-watchers (NASDAQ:NWS), the sale is something of an enigma. Why did it go this way less than a week after his public boast that he'd win the prize? Questions to be answered:

  • Did Tribune's latest double-digit declines convince him that it really wasn't a prize at all, that the the Post's $50 million loss really wouldn't turn to profit, given both a bigger Newsday pricetag and the detiorating newspaper ad market?
  • Is News Corp thinking that further investment in newspapers just won't pencil out?
  • Back to the overpay question. Did Rupert overpay for Dow Jones and did the Dolans overpay for Newsday?

Both are long-term investments, and you can't make judgments based on today's pressures and short-term trends. This is all about real convergence and its value.