How to Lose 60% in Less Than a Year, Without Bernie Madoff

Cablevision Taps Debt Market Again In another bid to bolster its balance sheet, Cablevision Systems Corp. returned to the junk-bond market Monday to raise an additional $500 million in debt….

Cablevision also said it expects to take an impairment charge of between $350 million and $450 million for its newspaper group. The group includes newspaper Newsday, which Cablevision acquired for $650 million last year… —The Wall Street Journal

Who in their right mind thought spending $650 million for Newsday—a marginal newspaper in a media-saturated market, being peddled by a desperate seller into a fatal newspaper down-cycle—was a good idea?

Nobody outside Cablevision that we know of—not even one of Wall Street’s Finest—thought for one minute Cablevision had a shot at even getting its money back, let alone making a reasonable rate of return.

But Cablevision does what the Dolans want to do, and so the poor non-Dolan Cablevision shareholders must now watch as their company absorbs a $350-to-$450 million write-off on last summer’s Newsday purchase, before the next year’s baseball season has even begun.

We here at NotMakingThisUp have some familiarity with Cablevision, aside from writing a here-we-go-again piece on the Newsday purchase last May (see “Hold the Presses: Rupert Outbid!” from May 11, 2008).

First, we’re a captive customer of Cablevision thanks to the non-efforts of our state’s wildly popular and entirely incompetent attorney general, who seems more comfortable going after brutally competitive but politically unpopular businesses like gasoline retailers—while leaving consumer-mauling monopolies like Cablevision to take care of themselves, at the expense of those who can least afford it.

Second, we’ve studied the economics of the business, as well as rapidly emerging—and free—alternatives, enough to believe that the cable monopolies have left themselves as vulnerable to the internet as the music companies were when Napster came along. Lest you think we’re making this up, ask the nearest teenager if they’ve ever heard of, and used, Hulu.com. You’ll be astonished what they’re watching.

For free.

So perhaps the Dolans really do now have shareholders’ interests at heart—at least that’s the refrain we hear every time “Jimmy” buys something stupid, or write down the value of something stupid he bought, or meets with Wall Street’s Finest, or fires another Knicks GM.

But even if the Dolans really do “get it”, they might have gotten “it” far too late to matter.

Jeff Matthews I Am Not Making This Up © 2008 NotMakingThisUp, LLC

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business in any way: such inquiries will not be responded to. This content is intended solely for the entertainment of the reader, and the author.