More Deals Brewing at Cablevision

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As Cablevision Systems Corp.'s stock continues to
skyrocket, chairman Charles Dolan and CEO James L. Dolan keep looking at deals that could
add to their growing pile of programming assets.

Major League Baseball's New York Yankees confirmed
last week that James Dolan and team owner George Steinbrenner discussed the possibility of
Cablevision "buying into" the baseball team. "But no deal was made,"
the team said, adding, "The Steinbrenners will be with the Yankees for many years to
come." Steinbrenner was widely quoted as saying that there were no ongoing talks to
sell the team that he has owned since 1973.

Meanwhile, sources close to Cablevision confirmed last week
that there had been "very preliminary" talks about the possibility of the
MSO's Rainbow Media Holdings Inc. acquiring Encore Media Group's Encore and
Starz! movie networks in exchange for a minority stake in Rainbow. Officials at Encore; at
Liberty Media Group, the Tele-Communications Inc. programming unit that controls Encore;
and at Rainbow would not comment.

Cablevision's Madison Square Garden subsidiary already
owns the National Basketball Association's New York Knicks, the National Hockey
League's New York Rangers and the Women's National Basketball Association's
New York Liberty. Its Madison Square Garden Network has the cable rights to Yankees games
in a 12-year deal that has two years remaining on it.

Cablevision would only acknowledge that MSO officials and
the Yankees "talk all of the time," but the company would not comment on
"media speculation."

Newsday reported last Thursday that the MSO and the
team were holding discussions on the team's ownership.

Goldman Sachs & Co. cable analyst Barry Kaplan said
that if Steinbrenner isn't willing to sell a controlling stake in the Yankees, it
would be very difficult to get a deal done, especially considering the massive sums that
would be involved.

"I think that's a real deal-breaker," Kaplan
said.

As for the Rainbow/Encore deal, analysts said last week
that such a combination would make some sense. Encore, which consists largely of movies
from the 1960s to 1980s, and Starz!, a first-run network, would complement Rainbow's
American Movie Classics, Bravo and The Independent Film Channel.

Movies drive cable operators' digital penetration, one
source noted, and, with that lineup, there were lots of possibilities for analog and
digital cross-promotion. There could also be programming, marketing and affiliate-sales
savings.

Encore and Starz! might also help Rainbow's ongoing
search to partner with a movie studio, a source said.

One Rainbow source denied that the deal was also aimed at
replenishing the company's library of films. In recent years, an increasing number of
movie networks have tightened the availability of films and sent the prices of libraries
higher.

From TCI's perspective, Starz! has gained ground, and
Liberty has said that it expects the service to be "substantially better than
breakeven" on a cash-flow basis in 1998. But it made big commitments for Hollywood
movies, and Liberty may prefer to shift that liability over to Rainbow. And Rainbow might
also be better able to drive penetration of Encore and Starz! in non-TCI systems.

Published reports suggested that Rainbow CEO Josh Sapan
would run the new company.

Rainbow already has a partnership with Liberty and News
Corp.'s Fox Sports that owns most regional-sports networks. NBC also owns 25 percent
of Rainbow.

The possibility of Cablevision extracting more value from
Rainbow and from its Cablevision Lightpath Inc. subsidiary helped to fuel a surge in the
MSO's stock price last week. On March 13, Salomon Smith Barney analyst Spencer Grimes
began covering Cablevision with its highest rating, focusing on Rainbow and Lightpath and
on the possibility of separate stocks to track those assets. Goldman Sachs started
covering the stock Monday, adding it to the firm's "recommended" list.

The Woodbury, N.Y.-based MSO's share price rose 16
percent between the March 13 close and last Thursday's closing price of $120.25.

Kaplan said the creation of separate stocks for one or both
assets were "definite possibilities." TCI has had success with that approach,
isolating Liberty, TCI Technology Ventures Inc. and Tele-Communications International Inc.
(TINTA).

"You don't have to be a genius to look at what
TCI's done and realize that there's some value enhancement" with that
approach, Kaplan said.

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