Why The Dolans Want Newsday: A Theory

few on Wall Street wanted the Dolan family to win. But could it be that Cablevision’s (CVC) acquisition of Newsday from Tribune Co. for $650 million isn’t so wacky, after all?

Consider: Cablevision already extracts $129.56 a month from an average household to which it provides cable TV, and often cable modem, as well as phone service. Even in the affluent suburbs of New York City, where Cablevision operates, that’s a lot.

To keep raising that number, Cablevision has to keep adding services. That’s why last week it announced it was going to build a local Wi-Fi network at a cost of $100 per household.

Say Cablevision adds Newsday to the mix, which it most certainly will. If Newsday is like most dailies, subscription revenue is a small part of its overall business; the vast majority of revenue comes from advertising. Cablevision could then cut the price of Newsday for those who buy other Cablevision services in a bundle.

In turn, Cablevision could put Newsday’s local ad sales force to work not just selling the paper but Cablevision’s online properties, as well as the company’s TV properties like MSG and the ailing Madison Square Garden — probably better than anyone the Dolans already have.

If this is the plan, and the Dolans can defend it, it would help if they actually communicated with investors instead of stonewalling on investor calls. So far, Wall Street is treating the deal with something between ambivalence and disgust; shares are down nearly 3% in Monday trading.

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