Cablevision's top duo see the struggling unit differently; issue is before board as investors keep watch
BY HARRY BERKOWITZ
STAFF WRITER
January 19, 2005
Charles and James Dolan, the father and son who control Cablevision Systems Corp., yesterday had an unprecedented showdown about whether to abandon their ailing Voom satellite TV venture.
Charles Dolan, the Cablevision chairman and founder, wants to keep the nationwide satellite service, launched in October 2003, alive even though it is losing hundreds of millions of dollars and attracting few subscribers.
James Dolan, chief executive of the metropolitan area's biggest cable TV service, who has promised investors that Cablevision would stop going off on costly tangents as it has repeatedly in the past, wants to end the all-but-failed experiment. That means dropping Voom and possibly selling its sole satellite.
The Cablevision board of directors was taking up the issue yesterday afternoon in the face of complaints from analysts and investors that Voom, which had only 26,000 customers as of Sept. 30, threatens to drain more company profits and hold down the stock price.
The meeting reportedly ended last night with the board leaning against continuing the venture.
"It would be very difficult for the independent directors to approve additional spending for Voom," said Craig Moffett, an analyst for investment firm Sanford C. Bernstein & Co. "At the same time, it would take something close to a boardroom coup for Chuck Dolan to force out the independent directors in order to renew investment in Voom."
Investors are eager for a resolution to the impasse.
"Despite public sentiment, the company still does not appear to have decided the ultimate outcome, with the board seemingly divided, though tilted slightly in favor of selling or shutting it down," UBS investment analyst Aryeh Bourkoff told investors before the board meeting, adding that "dissension could lead to a public battle."
Last year, Cablevision planned to spin off Voom, along with cable channels including AMC and IFC, as a separate company, ending the drain on Cablevision profits.
But after again delaying the spinoff, Cablevision suspended the plan last month, saying it would seek "strategic alternatives" for Voom, which analysts took to mean a sale or shutdown.
But for Charles Dolan, 78, Voom could be the last hurrah in an illustrious and visionary career that included founding HBO and that often ignored naysayers who later proved to be too pessimistic. He planned to leave Cablevision to become chairman of the spinoff company, with another son, Thomas, becoming its chief executive and James, 49, taking over as Cablevision chairman.
Even after the regulatory filing canceling the spinoff, Charles and Thomas sent a memo to employees saying Voom "continues to function on a normal daily basis" and predicting nothing less than a "very bright future," according to Satellite Business News.
But Voom, which posted a loss of $75 million in the third quarter and burned through an estimated $477 million last year, according to Merrill Lynch analyst Jessica Reif Cohen, has run into many technical, marketing, installation and pricing problems.
A key outlet for distribution, the Crutchfield catalog and Web site, has stopped offering the service because Cablevision is setting up a new installer network after problems with the old one, said Dan Hodgson, a Crutchfield executive.
Cablevision stock, which had jumped more than $3 in one day after last month's regulatory filing, yesterday fell 38 cents a share, or 1.6 percent, to $23.97.
Father vs. son
How the heads of the Cablevision empire stack up against each other.
Charles Dolan
Age: 78
Job: Chairman of Cablevision
EARNINGS: $1.6 million salary for 2003; $4.8 million bonus
Voting Shares: 75% stake controlled by family, including 41% by Dolan
Resume: Chairman, director since 1985
Chief executive, 1985-95
Founded and acted as general partner of company's predecessor, 1973-85
Established Manhattan Cable Television, 1961, and HBO, 1971
Battles: Acquired Knicks, Rangers
Failed to acquire Yankees, Jets
James Dolan
Age: 49
Job: President and chief executive of Cablevision; chairman of Madison Square Garden
EARNINGS: $1.6 million salary for 2003; $2.8 million bonus
Voting Shares: 2.5% stake
RESUME: Director of Cablevision since 1991
President since 1998
Chief executive since 1995
Chairman of Madison Square Garden since 1999
Chief executive of Rainbow Media Holdings, a subsidiary, 1992-95
Vice president of the company, 1987-92
Battles: Fighting with Mayor Michael Bloomberg to block West Side stadium for Jets
bow Anyway, I'm going to enjoy all 39 HD channels and not worry about things beyond my control.
