Media Channel

Cablevision Finalizes $650M Deal to Buy Newsday

Cablevision Systems Corp., which finalized its $650 million purchase of 97 percent of Newsday Tuesday, will quickly embark on initiatives aimed at expanding the paper’s circulation over the digital cable network while exploiting access to Newsday’s subscribers and portfolio of advertisers.

In an interview at Newsday’s Melville offices hours after the deal was announced, Tom Rutledge, the Cablevision chief operating officer who will oversee the Long Island daily, said the company plans to expand ways to get Newsday to more people, including via a forthcoming wireless Internet network.

“I can see a day when we will be able to push the paper to you electronically no matter where you are,” he said.

But Rutledge also said Cablevision will be “disciplined” in its approach to running Newsday, a suggestion that it will carefully watch spending and push for Newsday’s traditional cash flow, most recently reported at around $80 million annually on revenue of around $500 million. Cablevision shares closed up 1 cent Tuesday at $20.66.

“Newsday is a successful paper and we bought it because it’s a successful paper,” he said. “We haven’t had any discussions about changing the newsroom, its shape or its size. Our intent is to get a return on investment.”

He added, “We will continue to invest in the business if we think that that investment will create more value.” At present, Cablevision “doesn’t have any plan to increase staff” at Newsday, he said.

Rutledge said he expects the paper and its current management to continue operating in the print media market Newsday has dominated locally for decades. Publisher Timothy Knight and his team will continue to operate the paper day to day and report to Rutledge. “My goal and my intent is to let Tim Knight manage the paper. We have no plans to change existing management,” he said.

Rutledge said he expects Newsday and the cable and online News 12 Networks to maintain separate operations, though he didn’t rule out future ventures. “Each entity needs to keep its own identity,” he said. “They’re distinct businesses with unique identities. Each will have its own culture. But there are opportunities going forward to build new services that are probably electronic.”

The paper will maintain its editorial independence, Rutledge said, including in its coverage of Cablevision. “We’ll have to get used to it,” he said of the notion of the paper critically covering its parent, including its cable and sports operations (Cablevision owns the Rangers, Knicks and Madison Square Garden). “We respect the news gathering process.”

That said, “We expect to be treated fairly and consistently with the best practices you already maintain.”

Local businesses say the union of region’s two largest media companies warrants review and perhaps optimism.

Michael Watt, executive vice president of the Long Island Builders Institute, said his 600 members in the building and remodeling sectors have closely watched the Newsday buyout with an eye toward its impact on ad pricing.

“For advertisers, a lot depends on the nature of the packages that will be put together” for print, TV and online ads, Watt said. “It’s always in the best interest of advertisers to have media outlets competing against one another.

That said, Watt applauded Newsday’s return to local ownership and expressed hope the purchase will revitalize the paper.

Newspaper industry analyst John Morton said while Wall Street has shown little patience for the idea of investing in newspapers as readership and ad revenue decline, he believes Cablevision would do well by bolstering Newsday.

“As competition increases, it’s crucial for papers to strengthen their brands, increase their standing in communities and increase their quality. Failure to pursue those goals will only hasten newspapers’ demise,” Morton said. Investment after years of cost-cutting and staff reductions would be “a smart thing for Cablevision to do.”

Pointing to Cablevision’s access to 80 percent of Long Islanders through its cable franchise, Rutledge said Cablevision will quickly move to allow cable subscribers to order the physical paper by clicking their remote control. The offering comes on the eve of a broader Cablevision initiative called Optimum Click that will let subscribers order a broad range of products during an advertisement. The company will play middleman between customer and companies, allowing reduced sales, marketing and distribution costs.

“We have the ability to promote Newsday subscriptions on the cable network in ways never done before,” he said. “We think we can drive the traditional [print media] business, but we also think we can build a new one. It’s the reason we purchased Newsday.”

Cablevision could, he said, run an ad during Thursday night baseball on ESPN that will say, “Here’s an offer for Newsday. If you want to subscribe, click now.”

Rutledge also noted that Cablevision in the fall will begin rolling out a wireless Internet network on Long Island. He said there are prospects for pushing Newsday’s and its News 12 Networks’ content onto mobile devices. Cablevision has said the service would be free for Optimum Online users.

The network, once complete, will allow Cablevision to compete more fiercely against rival Verizon, which is building a fiber optic digital service in the region called FiOS that’s a direct competitor. In a direct swipe at Verizon, which derives the bulk of its profits from its wireless cellular division, Rutledge said the Optimum wireless network will eventually offer wireless phones and, “I do think if other companies do what we’re doing [in Wi-Fi], that you could envision a world where you wouldn’t need cellular service.”

Within weeks, he said, Cablevision will offer a channel for Newsday on its cable network, offering information about the paper, video on demand and a subscription offer.

Rutledge said Cablevision intends to have “successful relationships” with all Newsday employees, including the unionized workforce of reporters, copy editors, photographers, press operators and delivery workers. The company has 585 full-time unionized members and 500 part-timers. “We have unions at Cablevision, though we prefer not to have them in the [cable sector of the business],” he said.

Rutledge said Newsday’s current online model, in which readers access content for free and outsiders such as Google reap greater ad revenue linking to stories, indicate that the paper’s digital operations “are not being monetized fully the way they should be. We think there’s a way to bring that into our subscription business.”

Newsday’s newsgathering ability and the content it produces are “the reason we purchased Newsday. We think content is valuable,” Rutledge said.

He did not rule out the idea that Newsday news content would be available to subscribers outside Long Island, although initially that won’t be the case. “The goal is to serve Long Island, but if it’s effective, you could see where, at least in electronic form, it could move outside its core market. If we were knockout successful,” geographic expansion is possible, he said.

Newsday’s paid circulation has been on the decline, dropping nearly 5 percent in paid weekday copies for the most recent reporting period, to just under 380,000 papers. “If more people go to the Web, we’ll have to continue to watch our costs,” Rutledge said. “Our goal is not to let that happen.”

By Mark Harrington