With Insight Communications reaching an agreement to sell about half its subscriber base to Comcast Corp., the begging question is how can the soon-to-be downsized MSO continue to operate with 640,000 subscribers as programming costs soar?
In late May Insight hired Morgan Stanley and Waller Capital Corp. to "consider its strategic options," said Insight vice chairman and CEO Michael Willner. He acknowledged that rising programming costs are problematic because Comcast had negotiated on behalf of Insight for about 60% of the smaller MSO’s deals.
Willner, however, downplayed rising programming costs as the core strategic issue. "It’s not as though we never negotiated programming deals ourselves," he scoffed, adding that Insight, as a member of the National Cable Television Cooperative, can benefit from programming discounts that group receives for its members. "What difference does it make if we are now the nation’s 10th largest MSO, instead of the ninth?"
So is Willner really a seller this time, or just a runaway bride? Astutely, he’s not showing his cards. "We owe it to ourselves" to go through this process, he said, which includes a possible sale or perhaps other acquisition opportunities. The wild card here is Insight partner The Carlyle Group, which Wall Street is betting simply wants out.
I’m taking the contrarian view, betting that Insight will not be sold, even though Time Warner Cable could be the perfect buyer, given its footprint in Midwest markets where Insight will continue to operate after the Comcast deal closes at year’s end. Clearly, Insight is an attractive acquisition, especially since the MSO has completed all its retransmission consent deals with broadcasters.
So why, unlike Wall Street, do I not smell a deal in the air? Well, Willner’s been down the aisle twice already. He eyed an Insight sale in the late 1980s but ultimately got cold feet because "it was a bad time to sell in the tightened credit market," he said. He approached the altar again in the early 1990s, but eventually balked. He didn’t care to elaborate on why that trip was aborted.
So I asked him directly if he wanted out this go-round. He laughed, saying he would have no problem going to "Fiji without a BlackBerry." But that’s just idle Willner banter about coping with the problem at hand — doing what’s best for Insight and its partners, employees and subscribers.
I’d hate to see him sell and exit the cable scene, and watch yet another small player give up the ghost in this seemingly unstoppable race of consolidation.
Like Michael Willner, Marianne Paskowski is a masochist with strong ties to cable. Reach her at: email@example.com or 508-255-1901.