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Cable Soars, Networks Tank at Cablevision

Cablevision posted another sterling quarter at its systems operation, but profits plunged at the company's Rainbow Networks—which could mean a problem for Chairman Charles Dolan’s plan to take Cablevision private. The proposed deal hinges on the value of Rainbow, which would be placed back onto outside shareholders.

For the three months ended June, Rainbow’s core networks—AMC, IFC and WE—increased a modest 5% to $270 million compared to the same period last year. But operating cash flow dropped a sharp 16% to $32 million. One major problem is AMC’s ongoing dispute with Time Warner Cable, which has sued over the network’s format change and has threatened to drop the channel. Though the dispute is near an agreement, Time Warner has refused to pay license fees until the situation is resolved. The Rainbow networks also booked higher marketing and programming costs for the quarter.
The rest of Rainbow—including regional news network News 12 and IFC Films—is an even bigger mess. Revenues (primarily for the company's regional sports networks) plunged 34% to $149 million. Operating cash flow dropped 76% to $29 million. The major snag is the collapse of Rainbow’s Chicago regional sports network, which has lost all of right deals with major Chicago teams.
Rainbow’s problems swamped the strong performance of Cablevision’s cable systems, which increased revenue 15% to $855 million and cash flow by 13% to $337 million.
Companywide, Cablevision’s revenue increased just 6% to $1.2 billion while operating cash flow dropped 14% to $400 million.