Swish! Cablevision putting Madison Square Garden in the can

According to Bloomberg, an unidentified source reports that Cablevision (CVC) is getting ready to spin off its Madison Square Garden assets into a new company that will be called, oddly enough, Madison Square Garden. Cablevision stockholders will be given one share of the new company for every CVC share they own.

Madison Square Garden's assets would include the New York Knicks pro basketball team, Radio City Music Hall, the New York Rangers hockey team, and two New York-area sports networks. The wisdom of this move largely depends upon how much it charges consumers: if this is a free channel, then spinning it off will be a good move; on the other hand, if it is a premium channel, it could be a hard sell.
Part of the problem is the New York Knicks, who have turned into a punchline in the NBA. The once strong franchise is now spending money hand over fist only to finish in second-to-last place in the NBA's Eastern Conference. The Knicks hired former NBA great Isaiah Thomas to run the team; unfortunately, rather than drive it into the history books, he ran it into the ground. Long story short, it seems unlikely that people will line up to pay for a cable channel that will force this team down their throats.

As for the New York Rangers, there could be some drawing potential here -- if the channel is available in Canada. As ESPN and Versus could attest, hockey does not sell in the United States. The NHL's attempts to reverse this trend has largely consisted of uprooting Canadian teams and plunking them in strategic locations like Colorado and Arizona.

In fact, it's worth asking how smart the NHL actually is. It turned down a $212-million bid for the Phoenix Coyotes from Canadian businessman Jim Balsille, only to sell the team to Jerry Reinsdorf for $64 million less. The reason for this is, largely, because Reinsdorf won't move the team back to Canada. Unfortunately for CVC, the NHL's popularity in the United States is very low -- and "smart" business decisions like accepting the Reinsdorf bid seem calculated to ensure that the league will remain a lower-tier "major" sport.

Positioning the Knicks and the Rangers as the crown jewel of the new Madison Square Garden company casts serious doubt on the new company's potential performance. When you are banking on the popularity of one of the biggest jokes in the NBA and on an essential minor-league sport, it is hard to believe that success is in the cards. There are business reasons for the move, including the fact that such a spin-off could make an acquisition of CVC easier and open up of some free cash flow. However, it is worth noting that the main reason that the company will be easier to acquire is that the new channel will "remove the hardest asset to value within the company." Who would have thunk it: the Knicks and the Rangers have become "hard assets"!

On the bright side, the new channel may have an inside track on the Rockettes.
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