BY PHYLLIS FURMAN
DAILY NEWS BUSINESS WRITER
Updated Monday, May 12th 2008, 11:34 PM
Newsday headquarters in Melville, Long Island
Placing a big bet on the future of the newspaper business, Cablevision announced a deal Monday to buy Long Island‘s Newsday for $650 million from Tribune.
The Long Island cable giant, controlled by the Dolan family, outbid two newspaper owners, New York Post parentNews Corp. and Daily News owner Mortimer B. Zuckerman, who had both offered $580 million for the paper.
“Newsday is one of the great names in the history of American journalism and it is both an honor and privilege to return Newsday back to Long Island-based ownership after nearly 40 years,” Cablevision Chairman Charles Dolansaid in a statement Monday. “We are committed to maintaining Newsday’s journalistic integrity and important position in the marketplace.”
By adding Newsday to its portfolio – which includes 3.1 million cable subscribers, several cable networks, as well asMadison Square Garden, the Knicks and the Rangers – Cablevision is looking to dominate ad sales on Long Island. Cablevision will also promote its products in Newsday and sister publication amNewYork.
But the deal caught immediate fire from Wall Street analysts who did not see enough cost savings or opportunities in Newsday to justify the $650 million price tag.
“It’s not an obvious fit,” said Christopher Marangi, a media analyst at Gabelli & Co., whose affiliate, Gamco Investors, owns 8% of the company. “There are some advertising and circulation synergies, but they are not compelling enough given the price they paid.”
Marangi and others said Cablevision should have used its money to fund a stock buyback. Cablevision’s shares closed Monday at $24.50, down 45 cents.
Newsday generated an estimated $80 million last year in profits before interest, taxes, depreciation and amortization. Sales hit $500 million, though they have been shrinking in recent years, in line with the declining newspaper industry, analysts noted. The paper’s average weekday circulation in the six months ended in March was 379,613, according to the Audit Bureau of Circulations.
David Joyce, an analyst at Miller Taback, said Cablevision will try to tap its subscribers on Long Island to boost Newsday’s subscriber base. The majority of Cablevision’s Long Island customers do not currently get Newsday, the company said Monday.
By offering Newsday as part of its cable, TV and Internet package, Cablevision could boost Newsday’s circulation, said media appraiser Kevin Kamen. “It will be part of the enchilada,” Kamen said, adding, “they will be able to cross sell advertising.”
The Dolans’ Newsday buy comes on the heels of announcing plans to buy the Sundance Channel for $496 million and to launch a high-speed wireless network.
Last year the family, known for infighting between Charles and his son James, Cablevision’s CEO, failed in an effort to take the company private in a $10.6 billion deal.