Cablevision: Ready to Roll on Network DVR

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Just weeks after winning a court appeal that paved the way for its network digital video recorder product (dubbed the RS-DVR), Cablevision Systems chief operating officer Tom Rutledge said that the Bethpage, N.Y.-based company could begin trials for a service shortly, with an initial rollout slated for early next year.

“We're going to start rolling it out on our campus next week,” Rutledge said at the Merrill Lynch 2008 Media Fall Preview conference in Marina Del Rey, Calif., on Sept. 10. “We've won a monumental case and all of the things that we said we thought we could do, the court agreed with. We're ready to go to market with that product.”

Rutledge said that Cablevision is currently working through a variety of iterations of the product, which essentially functions as a set-top DVR but is located at the cable company's central servers.

“Technically, we'll be doing a real consumer trial in the relatively near future,” Rutledge said. “Early next year, we will go to market with a set of products that rely on our fair use that we won in that case.”

The appearance at the conference, the first for Rutledge and CEO James Dolan in years, was spurred in part by Dolan's pledge to get out in the investment community and investigate alternatives to boost shareholder value, which he made during Cablevision's recent earnings conference call. Since then, Cablevision's board has authorized management to look into alternatives such as selling off assets, initiating a stock buy back and setting a regular quarterly dividend. On Aug. 15, Cablevision's board of directors authorized a 10-cent per share quarterly dividend.

Dolan offered little insight into Cablevision's plan to boost value, adding that the company is looking at all of its options, including the spin off or sale of its Rainbow programming unit.

Rainbow Media Holdings has been a favorite target of some analysts who expect Cablevision to divest assets, mainly because it has a high valuation (about $4 billion) and contains networks that have generated some recent buzz, including AMC's Mad Men original series which recently won a handful of Emmy nominations.

Dolan appeared to be leaning a bit toward individual sales rather than spins, but did not fully commit.

“We're studying all of it,” Dolan said. “We're looking at spin, we're looking at sale, we're juxtaposing those against shareholder value and which will be more accretive to shareholder value. I would say that the more developed channels tend to be more likely as sale candidates. But we're still studying it.”

In a research note, JP Morgan Securities media analyst Bryan Goldberg said that Dolan's comments appeared to signal a preference for selling rather than spinning assets.

“Management sounds interested in selling some or all of Rainbow (and most willing to part with AMC and WE TV)”, Goldberg wrote. “A Rainbow spin still appears possible, but sounds less likely for now. We continue to prefer a Rainbow sale as strategic buyers would likely pay a higher multiple than the public would.”

Cablevision stock was up $1.46 per share on Sept. 10 to $30.93 each, but fell back slightly on Sept. 11, to $30.19 per share.

Dolan also talked about planned renovations to Madison Square Garden (new ground-level luxury boxes will be priced as much as twice that of existing boxes) and the possible expansion of its music business holdings. Cablevision purchased the Chicago Theater last year and recently acquired a 10% stake in personal music-management firm Front Line Management.

Dolan said that additional investments could happen in the future, but assured the audience that it won't affect the other units of the company.

“We're looking to continue to grow them,” Dolan said. “… The growth will be self-funded. We're not going to use free cash flow from telecommunications assets in order to grow entertainment assets.”