After 42 years, the Dolan family will no longer control Cablevision.
The New York-based cable operator announced this morning it has agreed to sell to Altice Group, a European telecom company controlled by French cable entrepreneur Patrick Drahi. Altice will pay $34.90 a share, making the deal worth $17.7 billion including debt. The acquisition also includes Newsday Media Group, publisher of Newsday and amNewYork, but does not include the Madison Square Garden Company, which owns the namesake arena and the New York Knicks and New York Rangers.
It's the second U.S. deal for Altice this year. The company announced plans to acquire Suddenlink Communications, which operates in 17 midwestern and southern states, in May. Cablevision, which predominately serves the New York metro area and Long Island, has about 3.1 million subscribers. Altice says that with Suddenlink and Cablevision combined, it will be the fourth largest U.S. cable provider, behind Comcast, Charter and Time Warner Cable (the latter two of which are attempting to merge).
"The deal underscores the increasingly global nature of premium video content and distribution, a trend that is also illustrated by the international growth path that Netflix is on," said Eric Schmitt, evp of TV and media at cross-channel marketing firm Allant.
This morning's deal caps a frenzied two years of cable consolidation as subscribers continue to drop cable in favor of going over the top—Cablevision lost 16,000 cable homes in the second quarter while adding 14,000 Internet-only customers.
And that's not going to make customers who are increasingly dissatisfied with their cable service any happier, notes Stephen Beck, founder and managing partner of management consultancy cg42.
"Cablevision was not as bad from a brand vulnerability perspective as a Comcast or Time Warner, but they had substantial frustrations that customers were experiencing," said Beck, who has found 33 percent of cable customers are not happy with their service.
"The frustration rates are higher than any category that we've studied," he said. "Will nontraditional players and OTT providers continue to benefit from the soup of misery that the cable companies seem to want to create for their customers?"
Altice has invested heavily in broadband and Internet services for its other global operations. With Cablevision and Suddenlink, it hopes to have the heft to keep what it pays for programming in check. Schmitt said the heat is already high on networks, and this deal could bring it closer to a boiling point; Suddenlink dropped Viacom's channels earlier this year when the two couldn't come to carriage terms.
"We will likely see more of this type of content pruning in the future as a smaller and stronger set of distributors takes steps to curb costs," said Schmitt. "Networks, in turn, will have greater incentive to go directly to consumers over the top."
Beck added, "You're going to continue to see over-the-top grow," adds Beck.
Altice hopes to close the deal in the first half of 2016 subject to regulatory and other customary approvals. But, with a European giant owning what could be the fourth largest cable system in the U.S., Beck anticipates a painful regulatory process ahead. "It would not surprise me if regulatory hurdles were significant," he said.