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Cablevision to consider spinning off MSG unit

Cablevision Systems Corp., whose share price has been under pressure from investors looking for better returns and hoping the Bethpage company would sell some assets, said Thursday that it is looking into possibly spinning off its Madison Square Garden unit.

Last year, investors cheered a Cablevision announcement that it would consider selling assets, sending the company's stock soaring. At the time, Cablevision did not name any assets it might sell and later rescinded the plan in the face of the economic crisis.

Spinning off the MSG unit could mean establishing it as an entirely separate, publicly traded company. Among MSG's major holdings are the Knicks, the Rangers and Radio City Music Hall.

James Dolan, Cablevision's chief executive, who is also chairman of Madison Square Garden, said Thursday in a conference call with analysts that the company would not answer any questions regarding the possible spinoff.

It's considered likely that any spun-off MSG entity would have the same or a similar ownership structure to Cablevision itself, with the Dolan family maintaining a large or controlling interest.

The cable television operator, the largest in the metropolitan area, buried the announcement in the last paragraph of its first-quarter earnings report.

"The board of directors of Cablevision has authorized the company's management to explore the spinoff of its Madison Square Garden business," the statement said. It did not elaborate.

Other MSG businesses are the regional and national programming networks MSG, MSG Plus and Fuse, MSG Entertainment, the Beacon Theatre and The Chicago Theatre.

Cablevision said that in the first quarter, the Madison Square Garden unit's revenue rose 2.3 percent, to $271.3 million, and that operations lost $2.2 million, nearly a 9 percent improvement over first-quarter 2008.

In total, Cablevision said its first-quarter revenue grew 10.6 percent, to $1.9 billion, compared with the same period last year. It said net income was $20.1 million, compared with a loss of $31.6 million in the same period last year.

Cablevision said its newest acquisition, Newsday, had an operating loss of $7.2 million. The company's Newsday segment includes the Long Island daily paper, as well as amNew York, a free daily serving New York City, and other Internet properties, and Star Community Publishing weekly shoppers.

The company said revenue in its cable television business rose 4.8 percent, to $1.2 billion, and operating income rose 13 percent, to $292.4 million.

The number of basic video customers was down 6,300, or 0.2 percent, from December 2008 and down 23,100, or 0.7 percent, from March 2008. Optimum online high-speed data customers were up 29,800, or 1.2 percent, from December 2008 and up 141,700, or 6 percent, from March 2008.

At the company's Rainbow unit, which includes AMC, WE TV and IFC, revenues rose 10.7 percent, to $249.3 million.

Last year, Cablevision said it would consider spinning off one or more of its businesses. That came after shareholders complained Cablevision spent earnings to acquire the Sundance Channel and Newsday.

According to a Bloomberg report, Gabelli & Co. valued the Madison Square Garden unit at about $2.5 billion.

Joe Bonner, who follows the cable TV industry for Argus Research in Manhattan, noted that investors had been pressing Cablevision to sell assets. As far as a sale of Madison Square Garden, Bonner said, "It would depend on the price, as always."

Bonner said Madison Square Garden is a "distraction" for Cablevision, which may want to focus entirely on its cable television business.

In a note to clients, analyst Craig Moffett of Sanford C. Bernstein & Co., said a spinoff of Madison Square Garden "could release huge value."

Staff writer Mark Harrington contributed to this report.

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