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Facing the Music

Investors were wowed late last month by Cablevision Systems Corp. (NYSE: CVC)'s fourth-quarter operating results, sending shares climbing above $27. (See Cablevision Faces FiOS.) However, the fears of one Wall Street analyst about Cablevision's possible moves to expand its music and live venue holdings sent the MSO's shares tumbling below $22 again.

Already the proud owner of Madison Square Garden and Radio City Music Hall, Cablevision acquired the Beacon Theatre in 2006 and bought the Chicago Theater in 2007. When asked about the strategy on the earnings call, Cablevision CEO James Dolan said:

"We feel that there's a paradigm shift in the music industry where live events are becoming far more important than the artists, and we're going to look to grow our entertainment business... If there are good opportunities out there, we're going to be interested in looking at them."

That comment, and those from other Cablevision executives, led Pali Research analyst Richard Greenfield to downgrade the stock from Buy to Sell on March 3 and set a lowered target price of $22. Part of the concern centers around a rumored deal involving Cablevision, Ticketmaster, and concert promoter AEG Live.

Upside through synergies with Cablevision's Fuse TV are at the heart of the proposal.

Besides running Cablevision, James Dolan fronts a band called "JD & The Straight Shot," which spent part of last summer on tour with Joe Walsh. On the band's MySpace site, Dolan says:

"Music is one of my earliest passions and has always been a part of my life. One of my biggest thrills came a few years ago when I stepped onstage in front of a paying crowd for the first time. The crowd had no idea who we were, but we won them over. It was such an amazing feeling."

The paying crowd Dolan still seems to struggle with is Cablevision investors, some of whom are now concerned that Dolan's passion for music may lead the company off course.

— Michael Harris, Chief Analyst, Cable Digital News

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