Cablevision, Bloomberg Moves Show New Media Energy
Important Details: It’s no time for timid moves in the fast-changing world of media, as two recent announcements prove. The two unrelated actions, one with global aims while the other has a local focus, show that some see opportunities while others have focused on retrenchment:
- Cablevision, the New York-based cable company that serves 3.1 million customers in New York, New Jersey and Connecticut, outbid two experienced newspaper publishers to win the Tribune Company auction for New York-based Newsday. Newsday is the eighth-largest US newspaper, with daily circulation of about 380,000 copies. Cablevision brushed aside the two competitors — Rupert Murdoch’s News Corp and Mort Zuckerman’s Daily News (which are bitter rivals themselves) — by offering up a $70 million premium over their $580 million bids. In the deal, which the parties hope to close within four months, Cablevision will pay $632 million in cash for 97% of the company. Tribune will retain 3% of the company, helping the now ESOP (employee-owned status)-based company avoid taxes, and get an additional $18 million in prepaid rent for the Newsday’s office real estate, which Tribune will retain.
- Bloomberg, the fastest growing company in Outsell’s Credit and Finance sector, announced that news industry veteran Norman Pearlstine will take on a new role for the company, that of “chief content officer.” Bloomberg’s announcement laid out the role: “Pearlstine will partner with Bloomberg News Founder and Editor-in-Chief Matthew Winkler to seek growth opportunities for its television, radio, magazine and online products and to make the most of the existing Bloomberg News operations.” Pearlstine’s career includes stints as editor-in-chief of Time Inc. magazines and 23 years of service at Dow Jones, where he last served as managing editor, the top newsroom role. For the last two years he has advised private equity company, The Carlyle Group, on media investments.
Implications: Outsell believes that both announcments, made on the same day, show that while some reel in the face of media advertising downturn, opportunities are being grasped by companies that see untapped potential — and have the resources to make it work.
For Cablevision, the deal is a big gamble, decried by financial analysts who see little short-term prospect of the deal paying off. They are probably right. The deal gambles on the longer-term payoff of synergy, turning the Cablevision Triple Play into an attempted Home Run, in baseball parlance. That means adding newspapers/news websites to the triple play recently adopted by Cablevision and other major cable and telco players of bundling cable TV, broadband internet service and phone service for customers. The idea is based on the notion that modern convergence may really happen as we approach the second decade of this century, the promise of a multimedia, converged future. That promise: one company is able to create high-quality content — text, audio and video, appropriate to the subject matter — and then deliver it through any platform the customer wants.
Cablevision’s play is distinctly local — owning the prosperous suburban base of Long Island, which has been home to both Cablevision and Newsday — and carrying the concept to adjacent areas in which Cablevision has some strength, including southern Connecticut, northern New Jersey, and some parts of New York City. Though Outsell believes the idea is right and the timing is close, success will only be found if the company can muster the strategic vision and tactical strength to make the parts work together. That’s a task of great thinking, great technology and great staff-building, one that companies trying to piece together similar synergies have consistently underestimated.
Bloomberg’s play is global, and that’s one of the roles that Pearlstine can play. Bloomberg has long been a powerful competitor in the financial services space, selling financial data and quick-response journalism to corporate buyers through its eponymously named terminals. In a sense, the terminal-based business is a legacy play, but one which supplies great profits and cash flow. Now, under Pearlstine, Outsell expects that the company will focus on three newer areas:
- Consumer markets: Pearlstine knows audience and niche audience building. Bloomberg, the home of one of the first multimedia newsrooms, has underachieving TV, radio and magazine operations. He can build on that foundation.
- Advertising: The internet ad sector is still growing at about 20% annually. Expect Bloomberg to earn an increasing percentage of its revenues through ads.
- Global: Currently, Bloomberg earns 47% of its revenues in the US, with 38% in EMEA and only 10% in Asia Pacific. Look for the company to rank up activities globally, especially in Asia, as business news and financial services embrace the potential of truly global marketplaces.