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NBC eyes Cablevision’s Bravo

Peacock could buy remainder of cabler for est. $1 bil

NEW YORK — NBC looks to have the inside track to acquire Cablevision’s prized cable network Bravo in a deal worth $1 billion.

The Peacock already owns 6% of Cablevision and 17% of Rainbow Media Holdings, the unit that controls channels Bravo, AMC, WE and IFC. NBC may be prepared to part with over $1 billion in shares for the basic cable net. Speculative valuations range from $1.3 billion-$1.8 billion, which may be a better deal than Cablevision could get if it attempted to sell the whole Rainbow package.The Peacock would have much to gain from Bravo, which has considerable potential for audience growth. The only cable nets NBC owns are the news-and-information webs MSNBC and CNBC.

A network like Bravo would give NBC an outlet for rerunning entertainment shows that it owns, programming that could draw new viewers to Bravo.

Bravo would also be a more appropriate outlet for the hundreds of hours of Olympics cablecasts that NBC has made available in the past to MSNBC and CNBC.

Analysts skeptical

Analysts, however, are understandably skeptical about the prospects of a quick sale — or even any sale at all.

The Dolans have been down the aisle before on various properties and often leave their partner at the altar. There also could be major tax implications if Cablevision were to sell any of the Rainbow assets.

Moreover, Cablevision may simply be trying to extract premium valuations out of would-be buyers with which to woo potential lenders.

Despite these caveats, signs are increasingly pointing to an NBC sale.

MGM, which owns a 20% stake in the four channels, does not have blocking rights, and it is not likely to have the resources to buy any Rainbow properties.

Bravo is forecast to generate a healthy $100 million in license fees from cable ops for 2002. In addition, it will pocket $62 million in ad revenue during 2002, according to Kagan World Media.

The Nielsen ratings of the network are a mixed bag. Bravo’s primetime rating in cable homes dropped from 0.4 in summer 2001 to 0.3 in summer 2002, a 25% falloff.

Ads fetch top bucks

But, on the plus side, Bravo’s audience is skewed toward educated, upper-income viewers, allowing the network to fetch a premium for its ad spots.

Bravo is also one of the 10 fastest-growing cable networks, adding 9.2 million subs in the last year to push its total to 68.2 million households. (Still, the Rainbow network that shines the brightest is AMC, which reaches 83.8 million homes.)

Whatever happens with Bravo, Cablevision still has a long way to go before it solidifies investor confidence.

Jaded investors have long since stopped holding their breath for a rich cash sale, despite widespread belief that the company needs to be reorganized.

With the Dolan family controlling the board and the majority of voting shares, it’s difficult for investors to push for change.

“Chuck’s doing what’s right for the family — screw the shareholders,” griped one frustrated fund manager, who is dubious about Dolan’s ever selling an asset (it would be a first in his career). “This family could go down with the company.”

Courting anxious investors

With a sagging share price and pending $900 million funding gap through 2004, Cablevision and the Dolan family have been at pains to convince anxious investors that they can steady the financial ship and chart a plausible strategic path forward.

Company has evidently been quietly shopping the prime Rainbow nets (both the whole and its respective parts) and even hinted last week that it would consider a sale of its flagship 3-million-subscriber cable network.

Its Clearview Cinema chain is already on the block, and the company is in the process of cutting 7% of its staff and closing down large chunks of its the Wiz retail chain.

So far, none of these efforts has placated investors.

Charles Dolan has said he wants to keep Rainbow, but observers (perhaps hopefully) dismiss this as pure posturing.

“We’ll believe it when we see it,” said one analyst tracking Cablevision’s efforts to bridge its financial gap, estimated at $600 million for 2003 and $300 million in 2004.

Proposed spending cuts will solve part of the problem, but only a significant asset sale will likely satisfy investors.

(John Dempsey in New York contributed to this story.)

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