Inside Cablevision's Battling Visions

The VOOM battle appears to be increasingly a proxy for the future of the company itself. In one corner sits founder Charles F. Dolan, who believes in the long-term viability of high definition TV, despite currently low VOOM subscriber numbers. In the other sits one of his sons, James Dolan, who appears to be concerned about buttressing Cablevision sports programing ventures through its bid for MTA's West Side Hudson Rail Yards.

In the latest salvo, the VOOM web site was taken offline yesterday. (If you want to place orders you should visit www.voomllc.com instead.) Cablevision's board added my old boss John C. Malone, chairman of  Liberty Media; Frank J. Biondi Jr., the former chief of  Viacom and Universal Studios; Dr. Leonard Tow, the former chief executive of Citizens Communications; and Rand Araskog, the former chief executive of the ITT Corporation. The new directors succeed three directors who were less enamored with VOOM, and also replace the late John Tatta.

Critics of Charles Dolan - such as the Weinberg Center for Corporate Governance - who appear to be trying to link board support for the founder with a failure to observe fiduciary duty - miss the role of business judgment. Given Cablevision's investment opportunities, and its competitive, information, and regulatory environments, I think it's all about short-term pressures from loss of sports programing versus longer term enterprise value.

In the short term, there's no doubt that Cablevision will come under fire as a result of the NY Mets walking away to start their own television unit, who hope to emulate the success of the Yankees' YES Network. The question is whether James Dolan is right in whether the mixed-use stadium property will provide enough leverage to create revenue streams that offset larger changes in the sports programing equation.

Critics of the elder Dolan would do well to become familiar with the GI Mistake, when cable executives got caught up in short-term set-top box issues and neglected larger, more strategic issues. Sarbanes-Oxley raises important issues, but today there is an almost reflexive desire among less-seasoned executives at companies (of all sizes) to overcompensate. Dr. Malone can be counted on to balance both short-term pressures and long-term value, a good sign for Cablevision investors and VOOM subscribers alike.

To the man who only knows how to use a hammer, everything looks like a nail.

Link: Weinberg Center working paper on Industries, Investment Opportunities, and Corporate Governance Structures (Adobe Acrobat required)