Jeremy Lin Blackout Began With Cablevision Spin (Update 3)
Updated to reflect New York state attorney general statement and closing stock prices .
NEW YORK ( TheStreet) -- Cablevision's(CVC) 2010 decision to spin off Madison Square Garden (MSG) helped shareholders reap giant rewards, but "boobirds" may be emerging if some of those investors are Time Warner Cable (TWC) customers.
That's because the spinoff made possible an extended standoff between MSG and Time Warner Cable that's made many in the New York area miss the biggest Knicks drama in a generation, even if investors are profiting from a record MSG share surge.
|Jeremy Lin has led the New York Knicks to eight straight victories.|
"Our office has worked diligently with Time Warner Cable and MSG Networks over the last month to bring about a resolution to their dispute. We are pleased that both parties have reached an agreement that will finally allow Knicks, Rangers, and Sabres fans to enjoy the rest of this season's games," said Schneiderman in a statement.
Nevertheless, the nexus of the 48-day standoff that frustrated New York cable customers is in part due to Cablevision's 2010 spinoff.
"Had Cablevision not spun off MSG, I doubt there would be a dispute," said Roger Noll, a professor of economics at Stanford University prior to the carriage settlement. Noll explains that's because the Federal Communications Commission wouldn't allow Cablevision to hold out programming like the Knicks and New York Rangers from competitor cable systems for an extended period.
"In the past, the FCC has imposed compulsory arbitration," said Noll of programming carriage settlements between cable companies that own programming networks. For instance, after News Corp. (NWSA) bought a controlling stake in satellite giant DirecTV(DTV) in 2003, regulators forced News Corp. to arbitrate disputes with carriers of its programming.
That agreement made it impossible for Rupert Murdoch's media empire to use DirecTV to extract higher rates for its Fox programming from cable and satellite systems like Dish Network (DISH) and Comcast(CMCSA) . In Comcast's 2009 NBC Universal joint venture with General Electric (GE) , the nation's largest cable company made similar assurances.
The FCC also compelled a similar settlement of high definition carriage in an arbitration between Cablevision and Verizon(VZ) FiOS.
But an independent network can duke it out. It's why MSG and Time Warner Cable were locked in a 2012 stall on negotiating a distribution package for MSG and MSG+ sports programming.