Cablevision Makes an Old-Fashioned Mistake

Its telecommunications services -- digital video, high-speed data,
and telephone -- did well in the quarter, as did its cable-operator
brethren Comcast (Nasdaq: CMCSA) and Time Warner Cable
(NYSE: TWC). In fact, Cablevision has added more than half a million
revenue-generating units -- one customer buying one service -- since
last year.

Cable net revenues grew nearly 5% during the quarter amid a sloppy
economy, and customer counts for high-speed data and telephone usage
rose both sequentially and year over year. Moreover, Cablevision's
Rainbow unit, which includes a host of popular networks, saw a big 40%
jump in its operating income.

There's just one catch…
Last July's purchase of Long Island's daily newspaper Newsday remains a thorn in Cablevision's side. After the company had to write off $400 million of its $650 million purchase price last quarter, the Newsday unit checked in this quarter with a $7.2 million operating loss.

That shouldn't come as a big shock to anyone. Even Warren Buffett, whose Berkshire Hathaway (NYSE: BRK-A) has owned shares of Washington Post
(NYSE: WPO) for decades, isn't excited about the prospects for
newspapers. Earlier this month, Buffett said: "For most newspapers in
the United States, we would not buy them at any price. They have the
possibility of going to just unending losses."

That's certainly been the case with Tribune Company, which was
privatized not long ago and is already in bankruptcy. The opening
months of Cablevision's experience with newspapers seem to be going
equally poorly.

At the same time, Cablevision apparently is considering a spinoff of
its Madison Square Garden complex, which includes the famous sports and
entertainment complex in the middle of Manhattan, along with Radio City
Music Hall and a couple of theaters.

Beyond all this, and like its peers, Cablevision faces tough ongoing
competition from the offerings of telecomm companies such as Verizon (NYSE: VZ) and AT&T
(NYSE: T). While I remain confident Cablevision can handle that
challenge, it doesn't need the distraction of a struggling newspaper
operation right now.

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