Blending cable, retailing

Electronic News, Feb 16, 1998 by Carolyn Whelan

Woodbury, N.Y.--Is self-proclaimed "diversified telecommunications and entertainment company" Cablevision getting just a little too diversified for its own good? Recently, the company announced that it was buying New York area retailer Nobody Beats the Wiz after that firm had declared bankruptcy.

Until now the Wiz has owned and operated 53 PC, TV and audio retail outlets in the New York area. That's very different from Cablevision's role of a cable operator, though it recently moved into the live event arena by buying Madison Square Garden properties, including The N.Y. Knicks, Rangers and Liberty, and by purchasing Radio City Productions, home of the world famous Rockettes and Christmas Spectacular.

It's hard to find a common thread among cable TV, the Rockettes and Walkmans at the Wiz. That is unless Cablevision has plans which it currently won't divulge, to move into the equipment vendor business, say for cable modems and Digital TV--or tackling the small business market, like stationery supermarket Staples has.

Cablevision said it is moving into entertainment to create a real synergy between the distribution and content of cable services and products, and reducing its focus to three geographical areas. "We're now a telecommunications and entertainment company, creating and distributing content, and supplying telecommunications services through Lightpath. We're combining all those to be a full service entertainment provider," said a Cablevision spokesperson.

The company's new high-speed cable service called Optimum Online allows customers to go online at speeds up to 100 times faster than conventional dial-up telephone modems, says Cablevision. Its Lightpath subsidiary will use the network infrastructure to introduce low-cost telephone services to both commercial and residential customers.

"The activity of the past year reflects our goals to reduce debt, deleverage business and strengthen core clusters in the New York metropolitan area, Cleveland and Boston," added Cablevision. The company is selling off systems in 14 of 19 states to narrow its focus on those three markets.

Cablevision views its acquisition of the Wiz in tandem with its pending purchase of cable systems from TCI, which Cablevision said will increase its New York customer base to 2.5 million households. The company plans to keep open 36 of the 53 existing Wiz locations and close the rest.

Overall, Cablevision said the deal would enable it to offer one-stop shopping for electronics hardware and services, and bring the company closer to its customers.

Among the one-stop-shopping soon to be available to customers, says the company, is paying Cablevision bills, ordering new services, and purchasing tickets to live events at Radio City Music Hall and Madison Square Garden. At first glance most customers probably wouldn't lump those errands together. Also, how the acquisitions will help it reduce debt wasn't made clear.

But some industry watchers think the acquisition makes sense, and predict that other cable companies may pursue the same model. "It's certainly not in the main vein of cable business," said Paddi Reali, an analyst with Dataquest, "But Cablevision is well placed because its largest markets are the top 10 markets that are transitioning to Digital TV."

"And as the cable industry transitions to more of a retail model, cable modems, high speed Internet connections, and Internet telephony will be available through outlets." she added.

Comcast has already established a similar arrangement. Customers go to the greater Philadelphia retail outlet to pick up and drop off converters and subscribe to cellular service. When cable modems open up, Comcast will probably offer those, too.

Though Cablevision is not willing to share its vision regarding management changes, new technology focuses or plans for the Wiz, the company said it will continue to leverage the Wiz's benefits and strengths, where computers and modems will still reside. The company will display its telecommunications services side-by-side with electronics equipment consumers use to access those services.

"Acquiring Nobody Beats the Wiz gives Cablevision direct access to our customers at a time when our brands and services are expanding and we are preparing to deploy new digital technology," said Cablevision CEO James L. Dolan. Cablevision said that a retail presence will create a showplace for new technologies important to Cablevision's future such as cable modems and HDTV. But right now the company doesn't make computers and cable modems or broadcast Digital TV.

The common thread, then, may lie in a new digital area that it hasn't mentioned, or completely revamping the outlet to focus on a new market. Add telecommunications services and cable modem installation and its a pretty potent mix.

Dataquest analyst Ellen M. Carney thinks so, and believes that Cablevision may have quite a bit of success as small businesses go more digital and interactive. Though it only trails Comcast as the first acquisition of its kind, Ms. Carney predicts others may follow suit, as electronic neighborhood retail outlets become the corner store "do-it-all" shop.