Written April 5, 2005
Live from Oyster Bay (the Hampton home of the Dolan family) the FamilyFeud over VOOM has reached its apex. The Dolan's have outdone themselves again. Drumroll please...
March 31st was supposed to be the deadline where VOOM would shut down if Chuck Dolan (known going forward as the Old Man) did not have funding lined up to keep it running. Well March 31st came and went and no the Old Man did not have the money. In lieu of keeping his word he did the following:
1. Replace more board members: In case you're joining us in progress the Old Man removed 4 members in mid-March and replaced them with high profile bobo's loyal to him. He now wants to replace three more members. No word on whether Larry, Moe and Curly will take the gig. This is always a good move when you own 75% of the stock that allows you to pick the board members.
2. Challenge the sale of VOOM's satellite to EchoStar: Prior to the boardroom coup in February, Jim Dolan (the Old Man's son) sold the satellite to Honest Charlie Ergen of Echostar for $200M. After the Old Man ousted Jimmy he attempted to first negotiate with Charlie to get the satellite back. He soon found out that Charlie would have charged his own mother twice the price and there was no way the Old Man was going to do any better. Not to be deterred, the Old Man had his battalion of lawyers filed a complaint with the FCC that the sale of the satellite from his company to Echostar would hurt the competitive landscape of the satellite business. Now, read that last sentence again...a complaint with the FCC that the sale of the satellite from his company to Echostar would hurt the competitive landscape of the satellite business. If that doesn't make sense to you good. It means you're a sound and sane individual. Not to be outdone, Cablevision was forced to send out a letter "disavowing" their CEO for this ridiculous action. Again, if it seems ridiculous to you that a company would send out a letter disavowing it's own CEO, great news because it again reinforces you area sane, sound individual.
Where We Are At: I thought I had this one pegged. I figured the Old Man would secure funding for VOOM by selling Cablevision's sports properties (Knicks, Rangers, Liberty, Madison Square Garden). This would have raised more than enough money to run VOOM into the ground for another year or so and it had the added benefit of sticking it to Jimmy (who is known to love being known as the point man for the teams and MSG). On the other hand, Jimmy has done such a fine job running both the Knicks and the Rangers into the ground (both have the highest payrolls in their respective leagues and they both consistently miss the playoffs) that a sale would probably touch off a ticker tape parade down Times Square.
What We Have Learned:
1. Be mindful of investing in family run "public" companies: Partof the reason this clown show is taking place is because the Old Man owns majority interest in a special class of stock that allows him to replace 75% of the board at his own volition. Even though the Old Man owns less than 2% of overall Cablevision stock, this special stock lets him call the shots. But don't think this is a special case. Comcast has a similar ownership structure with the Roberts family. The moral ofthe story: when investing make sure you understand just how decision sare really made.
2. Just because you were a visionary once before, doesn't still mean you have the juice: The Old Man was a visionary. He started HBO and wired NYC with cable when everyone thought he was nuts. He was right then, but he is wrong now. VOOM simply does not have enough for the customer to make it work long term. DTV's investment in satellites to expand HD programming will bury any short term lead VOOM has incontent. Echo owns the lower end of the market and Charlie is a ruthless competitor so there is no room there either. There is a word for the Old Man's ideology here but visionary is not it. Try stubbornness.
3. If you're a moron, we'll all find out eventually (even if you are the boss's son): Jimmy Dolan still gets the Fredo Corleone Award for Family Management. He thought he could win a power struggle over the Old Man on VOOM and he was sorely mistaken. Yes, he was right in shutting VOOM, but he went about it all wrong. He knew that his father would fire the board if they tried to shut VOOM, yet he went ahead anyway. The smart move would have been to step down as CEO of Cablevision and move to split off the sports properties so he could continue to run those poorly all by himself. The capital raised would have helped VOOM stay afloat for awhile and kept him in his father's graces. It also would have given him leadership over these coveted (and very profitable) properties and kept him out of the Gone with the Wind type drama going on in Long Island.
I'll keep you posted on any other details. No word yet on whether or not the Dolan's will be guest lecturers at Wharton regarding boardroom management.
Link to latest article on VOOM http://www.newsday.com/business/ny-bzvoom4198390apr01,0,4583945.story
Link to site started by VOOM subscribers (guess who's side they are on?) http://jimdolansucks.com/
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