Voom service splits Cablevision clan
NEW YORK — In one of the most dramatic family boardroom battles in U.S. corporate history, Cablevision chairman Chuck Dolan and son James, the company’s prexy-CEO, are heading for a showdown Monday.
The issue is whether to keep or kill the Voom satellite programming service. The date is the next meeting of the Cablevision board.
Chuck brings some added muscle to the meeting — four handpicked board members to replace others who have been less accommodating to Dolan senior’s vision for Voom. The new board members include Liberty Media chairman John Malone and the former prexy-CEO of Viacom, Frank Biondi.
Chuck Dolan was able to appoint the new board members this week through his control of Cablevision Class B stock, holders of which are entitled to elect their own board reps. Dolan also said earlier that he intends to exercise the right of Class B holders to elect 75% of the board at the next annual meeting.
Monday’s meeting will take place against the background of an investigation by the Securities and Exchange Commission over recent trading of the company’s shares.
The period under SEC scrutiny covers Cablevision’s agreement to sell Voom’s satellite to EchoStar for $200 million.
In conjunction with that contract, Cablevision agreed to allow Chuck and another of his sons, Tom, to enter into talks to buy the rest of Voom’s assets, including its extensive lineup of 21 channels of high-def movies, sports and docus.
Chuck Dolan is convinced that Voom could eventually become a thriving business — despite the fact that the service hemorrhaged $660 million last year and is roundly disparaged by the vast majority of Wall Street media analysts. Service reaches only about 46,000 subscribers, compared with DirecTV’s 14 million and EchoStar’s 11 million.
Cablevision slapped a deadline of this past Monday on the talks, and when Chuck failed to reach agreement with Cablevision or EchoStar, James Dolan and the board started to dismantle Voom. The Voom.com Web site says the service has “ceased taking customer orders and will shut down by the end of March.”
In defiance, Chuck and Tom and their allies created a new Web site, Voomllc.com, with an 866 phone number prominently displayed to serve existing customers and take new orders.
James and the board were not amused. This Web site is “likely to deceive new subscribers and the public into believing that Voom is still an authorized, going business,” said a Thursday letter to Chuck from an independent committee of the board organized by the Class A directors, signed by board member Victor Orison.
The letter says the board has cut off funding for Voom beyond last Monday and excoriates Chuck for taking actions that might “jeopardize our obligations to EchoStar.”
Chuck’s Voomllc.com site now features a new message: “This site is temporarily unavailable. Please check back at a later time.”
Pop’s still tops
But analysts say Chuck may still have the power to go against the wishes of Jim and the board. The elder Dolan personally owns 37% of the 67.2 million company shares, and Aryeh Bourkoff, an analyst with UBS, said Chuck “has shared voting power over additional trusts.”
Rich Greenfield, an analyst with Fulcrum Global Partners, said the new board members appointed by Chuck “are likely to be more receptive to Dolan’s Voom acquisition play, essentially allowing Chuck Dolan to personally buy Voom” from Cablevision.
One positive keeping Voom alive is that it “would allow Cablevision to avoid unspecified shutdown costs.”
But Voom could cost $1 billion over the next two years. Greenfield said the only way Dolan could cover such an expenditure would be to sell his cable systems, which reach 2.9 million subscribers in the New York City area, many of them in upscale suburbs.
Meanwhile, says Greenfield, the “family feud” between Chuck and Jim continues to “spiral out of control.”
Cablevision shares were pummeled by investors Thursday, dropping 5.26% to close at $28.65.