Industry Insight: Sizzling summer

by Richard Morgan

Will the Emap USA auction of enthusiast magazines give William Reilly, deposed head of Primedia Inc., the revenge so many feel he deserves? Or will it allow American Media Inc.'s David Pecker to transcend his status as tabloid titan?

We're not saying cancel your vacation just yet, but this summer promises lots of sizzle even when you're not on the beach. Its biggest potential blockbuster — a reverse takeover of AT&T Corp. by John Malone's Liberty Media Group, once it's cut loose Aug. 10 — has been served up as a just-dessert fantasy for quite some time.

But now CableWorld, citing not one but two sources, reports that Malone, whose collection of AT&T shares renders him the largest non-institutional stakeholder, "is attempting to take control of the company" with Leo Hindery, former CEO of AT&T Broadband.

The pair's last great act together was selling Tele-Communications Inc. to AT&T's Mike Armstrong during his heroic convergence phase. Armstrong's subsequent about-face has cost him credibility, as evidenced by a CableWorld source's take on where AT&T is headed today: "The least likely scenario in my mind is Michael Armstrong's plans of breaking the company up."

Fireworks are scheduled to begin after AT&T completes the spinoff of its wireless unit July 9 — just in time to compete with another spectacular, the finale of that great fight in the sky. We're talking about the conclusion of General Motors Corp.'s long-running auction of Hughes Electronics Corp.

News Corp.'s Rupert Murdoch can take comfort not only in his preferred-partner status but in Hughes' best-faith intentions to consummate the handshake deal reached when there was snow on the ground. There's also a Catch-22 some say will squelch any bid from EchoStar Communications Corp., considered the contest's sole surviving contender.

To get financing, this reasoning goes, EchoStar must first demonstrate it's a strong enough suitor to command a look at Hughes' books. But why should Hughes open its books and reveal trade secrets to EchoStar — the only competitor to its coveted DirecTV unit — before any banks publicly commit themselves to financing the rival's bid?

EchoStar's silence seemed to confirm a Catch-22 existed. But that may have changed Friday when a release came over the wire with the headline: "Corporate Profile for EchoStar Communications." The dispatch provided basic contact information, a company description and even a list of market makers. Why it arrived when it did, though, went unmentioned. Could be a coincidence, but it's just as likely a curtain-raiser on its issuer's long-anticipated bid.

And what's summer without a heated baseball contest? The New York Yankees spent much of last week trumpeting their liberation from Cablevision Systems Corp., for a mere $30 million, "to immediately participate in their own regional sports network to begin television Yankees and Nets games as early as March 22."

The agreement was an outgrowth of litigation in which Cablevision's MSG Network obtained an injunction last year to keep the Yankees from pursuing what the court deemed a faux bid for broadcast rights. The denied bid was cooked up with Trans World International — a division of the International Management Group sports-and-talent agency headed by "Jerry Maguire" inspirer Mark McCormack — and the suit it inspired dragged on so long participants agreed to a one-season extension of MSG's broadcast rights for $52 million.

Whom the Yankees will choose as their new broadcast partner is of no small interest. Of even more interest, though, is the aplomb with which Cablevision has accepted this outcome. The Dolans, who have run it since 1989, are notorious for not letting anything go. So their letting the Yankees go has fanned speculation they're also letting go.

AOL Time Warner Inc.'s Jerry Levin, who got his start in the 1970s at Chuck Dolan-created HBO, would love to re-unite Manhattan's cable customers under a single company. Then, too, Cablevision's recent collection of programming assets into a tracking stock called Rainbow Media Group could give the septuagenarian Dolan a chance to re-invent himself for a fourth or fifth time.

Stranger things have happened, though you no longer read about them in the National Enquirer. The American Media property has cleaned up its act since being acquired by Evercore Capital Partners LP and fronted by former Hachette Filipacchi Magazines chief Pecker, who hopes to take the company even more mainstream by winning the Emap auction.

A Pecker victory for such enthusiast titles as Motor Trend and Guns & Ammo would represent a distribution play, drawing on a tabloid field force that's three times the size of rival Time Inc.'s. Meanwhile, for AOL Time Warner, the play's another of the brute-force variety, buttressed by fits with the enthusiast titles acquired by its brute-force bidding for Times Mirror Magazines.

Finally, for fellow finalist Primedia, a victory would extend its enthusiast orientation, whereas for ex-Primedia head and Texas Pacific Group-backed Reilly, a victory could herald a sweet comeback.

Observers may recall that this ink-stained publishing veteran was dropped by Primedia power Henry Kravis for not boarding the Internet bandwagon.