Marrying Paper, Electrons

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So now comes Cablevision as the latest outfit trying to save a major metropolitan newspaper from the furnace of Internet competition.

Hope Tom Rutledge has his fireproof skivvies on.

The handwriting is on the advertising checks: a 24-by-7 interactive text medium is drumming the once-a-day, one-way text medium. Classified ads are fleeing. Real-estate ads shrinking. Department stores disappearing.

Heck, Sam Zell, a real-estate tycoon himself, thought he could turn around his hometown newspaper operation, the Tribune Co. But there, first-quarter classified revenues were off a punishing 27%.

To help save his investment in the Chicago Tribune, he is tossing off Newsday, the Long Island, N.Y., tabloid. He picks up $650 million for the save-the-Tribune kitty. He paid $8.2 billion for its full complement of papers, which also included the Los Angeles Times, Baltimore Sun and Hartford Courant.

Now comes the interesting part. Is there really some sort of kinship between cable systems and newspaper operations that will make something grow out of this mating?

The Dolan family — through Rutledge — can probably figure some way to bundle Newsday subscriptions with Cablevision subscriptions. If that picks up 50,000 (or 100,000) subscribers for Newsday, that would be a big deal. The nation’s 10th-largest newspaper has weekday circulation right now of about 387,000.

Cablevision already sells classified ads on TV, through its Optimum Homes and Optimum Autos interactive services. And they’re underdeveloped. With the Newsday buy, it gets a print extension every day, plus weekly shoppers with 2.6 million in circulation.

Conversely, the Newsday sales staff can add Cablevision channels to their sales quivers. That could be a boon for the cable company.

Regardless, this will be a fascinating petri dish. When this deal consummates, Cablevision will be the primary supplier of television programming, telephone service, Internet access and daily print news on Long Island. Oh, and local TV news, through its News 12 Long Island channel.

Cablevision generates $257.3 million of operating income and $485.9 million of cash on revenue of $1.3 billion in a quarter. Tribune Co. lost $30 million from operations on revenue of $1.1 billion in its most recent quarter. Its print revenues dropped 11% to $823 million.

Cablevision can infuse Newsday with cash. But don’t think the Dolans are about propping up a money-losing newspaper just because they like owning the hometown newspaper.

This is about cross-promotion. You can get a taste of where this is more or less headed if you look at The Wall Street Journal, since it was taken over by Rupert Murdoch and News Corp. Ten days ago, there was a blurb between two house opinions on the editorial page. It asked readers to turn their attention to the Fox News Channel to see a Journal Editorial Report on the presidential campaign, featuring Newt Gingrich. A home-delivered copy came wrapped in plastic bags that promoted another News Corp. product, the New York Post.

You can see it now. The quad play at Cablevision becomes TV, phone, Internet and printed news. The quint play becomes all of that and free wireless phone and Internet service, throughout the Cablevision service territory. Heck, maybe New York Rangers and New York Knicks tickets become part of the package. Those sports teams are also Cablevision assets.

But it’s a tightrope act. If Newsday sees a 27% drop in classified revenue, don’t expect Cablevision to make it up overnight with more Optimum Auto or Real Estate ads. And don’t expect this deal is going to keep people off Craigslist.

If Tom Rutledge and his troops can figure out how to deploy a unified sales force able to sell everything from dynamically inserted video-on-demand ads to quarter-page black and white display ads and manage the cost of serious journalism, Cablevision may be on to something. Don’t bet against Rutledge; he’s as sharp an operator as there is in cable.

Of course, if there were obvious benefits from cross-ownership of cable systems and newspapers, you would think Comcast’s Roberts family would have made a play for The Philadelphia Inquirer two years ago. Didn’t happen.

Here’s to the Dolans and Tom Rutledge. Prove the skeptics wrong. Show how paper and electrons can work together, instead of against each other.

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