Cablevision posts Q1 profit, adds subscribers

Company mulls Madison Square Garden spin-off

Cablevision swung to a first-quarter profit, as the company added more digital-phone and Internet subscribers and saw a lift in ad sales dollars at its Rainbow Media programming unit.

The Bethpage, Long Island-based company, which also owns Madison Square Garden and the professional sports franchises New York Knicks and New York Rangers, reported a profit of $20.2 million, or 7 cents a share, reversing a year-earlier loss of $31.6 million, or 11 cents a share.

Revenue rose 11% to $1.9 billion, up from $1.72 billion in the first quarter of 2008.

During Thursday morning earnings call, chairman James Dolan announced that the board of directors has authorized management to explore the spin-off of the company’s MSG business, although executives declined to offer further comment on the matter.

“I’m sure you’ll understand that we will be unable to provide any additional details at this time,” Dolan said.

Cablevision’s core MSO business saw revenue increase 5.3% to $1.33 billion, driven by subscriber acquisitions. In the quarter, the operator added 9,400 digital-video subs, up 6.7% versus year-ago period. Digital phone customers rose by 244,500, or 14.%, and broadband subs grew by 6%, as Cablevision picked up 141,700 new high-speed Internet customers.

Despite a discouraging advertising market, the company’s Rainbow Media unit posted impressive gains in the quarter. The programming arm, which includes the networks AMC, WE tv, IFC and Sundance Channel, upped revenue by 10.7% to $249.3 million, thanks to a 9.4% increase in affiliate revenue and a 7.6% increase in ad sales dollars.

Rainbow president and CEO  Josh Sapan said the ad sales increases were largely driven by volume increases at AMC, which is reaping the benefits of high-profile original series “Mad Men” and “Breaking Bad.”

While Sapan noted that the company is pleased with the results, he refrained from making any projections for the current quarter and beyond. “We do expect to see an increase in expenditures as we promote season three of ‘Mad Men’ ... and other series,” Sapan said.

AMC increased its penetration by 2.2% since last year, closing out March with 86.5 million subscribers. Adding 4,800 households, WE increased its penetration by 8.4%, reaching 61.7 million subs.

IFC’s reach grew 9% versus the first quarter of 2008. The network is now available in 49.6 million households.

Across Seventh Ave., MSG posted $271.3 million in net revenue, a 2.3% increase versus the year-ago period. The MSG and Fuse networks generated an additional $8.5 million in revenue during the quarter, thanks in large part to higher affiliate fees.

Cablevision’s newly minted newspaper division posted $83.4 million in revenue on the quarter. Last July, the company completed its acquisition of a 97% stake in Newsday from Tribune Co. for $650 million.

Chief operating officer Tom Rutledge told investors that Newsday would launch an online subscription model later this summer.

Shares of Cablevision were up $1.25, or 6.8%, to $19.58 in late-morning trading.
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