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Lions sleeps alone

MGM merger talks with cablers stalls

NEW YORK — Metro-Goldwyn-Mayer’s search for a cable partner appears to have stalled after a breakdown in talks earlier this week between the Lion and Cablevision Systems, industry execs said Wednesday.

The halt follows the recent collapse of negotiations between MGM and Liberty Media’s Encore Media Group (Daily Variety, May 20). Discussions with Barry Diller’s USA Networks also did not go anywhere, and there are believed to be no other contenders for a cable deal right now. Neither MGM nor Cablevision would comment Wednesday.

MGM had been negotiating with all three companies over the past few weeks, hoping to strike a strategic alliance to give the Lion distribution outlets for its library. Aside from cable systems, Cablevision owns cable networks such as AMC and Bravo through its Rainbow Media programming subsidiary, while Encore owns pay movie channels Encore and Starz.

The Lion’s new CEO, Alex Yemenidjian confirmed April 27 the alliance could vary from a “very lucrative licensing deal” to a full merger, although cable execs have indicated the Lion was clearly looking to do more than just a licensing deal. The Lion needs to raise cash to improve its troubled financial situation.

Encore meeting again

Encore chairman John Sie said last week that his biz pulled out of talks because it was not interested in investing in a film production company, although there were suggestions late Wednesday those talks could resume shortly. Sie is believed to have scheduled a meeting with Yemenidjian for Friday, sources said. Encore declined comment.

Talks between MGM and USA quickly ran into problems over who would control the alliance.

Cablevision’s discussions focused on either an investment by the cabler’s Rainbow Media division in MGM or a merger of the Lion with Rainbow.

But the talks broke down over differences of valuation as MGM execs put a much higher value on the company’s 5,100-title film library than Cablevision, an industry source said.

It’s hardly surprising that valuation differences would cause the talks to come unstuck. MGM’s principal shareholder, Kirk Kerkorian, is underwater on his investment in MGM at the company’s stock price Wednesday, which closed down 62¢ to $15, whereas Kerkorian is likely looking for a valuation that gives him a big profit on his investment.

Yemenidjian said last month MGM could start its own cable channels from scratch if it can’t do a deal with cablers although that is easier said than done. Limited channel capacity on analog tiers means new channels are increasingly going only on digital tiers of most cable systems, which are available to only a tiny number of consumers right now.

Observers said the breakdown in talks between MGM and Cablevision may be a negotiating tactic and that negotiations could resume.

Rainbow coalition

Cablevision has long contemplated spinning off Rainbow as a separate company. It has also had talks with several major Hollywood studios in the past few years about an alliance with Rainbow, although those negotiations have gone nowhere.

But whether Cablevision is interested in resuming talks with the Lion is unclear, sources said. Cablevision execs have shifted their focus away from MGM and are now focusing on a bid for the NFL’s New York Jets, whose owner Leon Hess died earlier this month.

Because the NFL forbids corporations from owning teams, a bid for the Jets — said to be worth $500 million — would have to come directly from Cablevision chairman Charles Dolan.