The Washington Post Co. yesterday announced an agreement in principle to sell part of its interest in four regional cable television sports networks to CBS Inc. and Cablevision System Corp.'s Rainbow Program Enterprises (RPE).
The sale will produce a one-time gain of about 40 cents a share, or $5.6 million, for Washington Post Co. stockholders.
Richard D. Simmons, president of the Washington Post Co., said the CBS investment and additional payments in the agreement mean the SportsChannel venture is now worth approximately $115 million. The company was valued at about $90 million a little more than a year ago, based on the price paid by the Washington Post Co., Simmons said.
Under the agreement, each of the companies will own one-third of regional pay sports networks in New York, Philadelphia and Chicago and one-sixth of a sports channel in New England when the transaction closes later this year or early in 1985. The cable operations have a total of about 1 million subscribers.
In addition, CBS will also purchase a 50 percent interest in The Rainbow Service Co., a two-channel cable service consisting of Bravo, a performing arts and international films channel, and American Movie Classics, which shows pre-1970 American Films, and a 50 percent interest in the company that markets and distributes the SportsChannels and Rainbow.
CBS, which lost about $30 million on an earlier cable television venture, will purchase all of these interests for $57 million. Washington Post Co. officials said about $37.5 million of that is for CBS's one-third interest in the SportsChannels.
The Washington Post Co. reduced its investment in the SportsChannels from $45 million to $25 million as a result of the transaction, which also left it with a one-third interest.
The SportsChannel broadcasts bring professional sports to subscribers for $8 to $10 a month. The featured teams include: the New York Yankees, Mets, Islanders, Cosmos, and New Jersey Nets; the Philadelphia 76ers, Flyers, and Phillies; the Chicago White Sox, Bulls, Black Hawks and Sting; and the Boston Celtics and the Hartford Whalers.
The New York and Philadelphia operations are profitable, while the newer Chicago and New England ventures are losing money because of high start-up costs, Simmons said. He said all four operations should be profitable in about three years.
"I'm terribly pleased that a company of the stature and experience of CBS saw the same future in this business as did we," Simmons said. "Our foresight in originally associating with the Dolan organization Cablevision has been rewarded in a fashion which provides a most worthwhile return to our stockholders, while at the same time enhancing the future prospects of this business by our new association with CBS."
Analysts said CBS brings experience in marketing to the venture, in addition to contacts and bargaining power that will enable the SportsChannels to more effectively obtain new programming.
"The addition of CBS as a partner in our regional sports services brings new depth and latitude to the existing ventures while promising even greater development for the future," said Charles F. Dolan, founder and general partner of Cablevision.
CBS officials said the investment represents one part of the company's plan to invest in businesses that are logical extensions of its existing operations.
"The growth of the sports channels, particularly in Philadelphia and New York, has been outstanding and we are going to add our expertise in programming, marketing and distribution," said CBS spokesman George P. Schweitzer.