Insight Buys Out Source; Source Will Say 'Bye'3/24/2002 7:00 PM Eastern
Insight Communications Co. has acquired the 50 percent of SourceSuite LLC it didn't already own, surrendering bonds issued by SourceSuite's parent, Source Media Corp.
SourceSuite operated an interactive digital television platform that Insight used in several of its systems. Now Insight will operate the platform.
Insight said it tendered all of its 12 percent senior secured notes, due 2004 and issued by Source Media. The MSO bought the bonds — with a face value of $10 million — for about $4.1 million in October of 1999.
Insight wrote down the value of that investment to about $402,000 as of Dec. 31, 2001, according to a report by UBS Warburg LLC high-yield cable analyst Aryeh Bourkoff.
Source Media had big plans to make its interactive platform available to MSOs, counting Cablevision Systems Corp. properties in Boston, Framingham and Lexington, Mass., as its anchor systems. But when AT&T Broadband bought the Cablevision systems in 2000 — and dropped SourceSuite the following June — Source began running into trouble.
To date, Insight was the only MSO to use the SourceSuite product.
RUN UP ON RUMORS
Source Media stock — which was valued as high as $30 in 1998, amid speculation the company would be taken over by Microsoft Corp. or AOL Time Warner Inc. — closed at a penny per share on March 20.
In 2001, Source Media said it would miss interest payments on its debt and told investors it would soon run out of cash. Its stock was delisted from the NASDAQ National Market and placed on the over-the-counter bulletin board in March of that year.
In a press release, Source Media said it would cease operations as a result of the Insight transaction. Insight plans to make SourceSuite available to other operators, although no deals are in the works yet.
"We are looking forward to working with the staff at SourceSuite to continue delivering our industry-leading digital products," Insight president and CEO Michael Willner said in a prepared statement. "Our first order of business will be to develop a plan to offer SourceSuite's products to other broadband distributors around the world."
In an unrelated transaction, Source Media said it has sold its IT Network business — which provided audio and text for all digital-media platforms — to BlueStreak Media Inc. for $245,000. BlueStreak also agreed to make additional payments equal to 5 percent of revenues earned over the next year, under certain contracts it assumed.