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.|
The spinoff pick and roll that freed up MSG to battle Time Warner isn't to say that Time Warner Cable is blameless as the two parties finalize negotiations on what's thought to be a multi-year distribution package for the Knicks and Rangers that may result in a 50% programming price increase over a 5 year-plus contract. Time Warner Cable has said that MSG was asking for a 53% price increase, a point MSG contests. "I do think that in defense of MSG, Time Warner Cable is exaggerating the price increase," said Martin Pyykkonen, an analyst with Wedge Partners prior to Friday's settlement. He expects a price increase that will be in line with what the roughly 70% boost that the National Football League is charging Fox, CBS (CBS) and ESPN for football broadcast rights, a 10% yearly price increase. Since the carriage battle made it on public airwaves and a deal broke down at the end of 2011, the upper hand may have shifted with the emergence of Lin. Time Warner Cable is the second largest cable network in the U.S. and its 2.8 million New York area customers are a key market for MSG's programming. But with Lin turning the Knicks from a missable underperformer to a must see sports drama in a matter of days, MSG may have gained the advantage. "With a 70% increase in MSG ratings and the increased likelihood that the Knicks make the Playoffs, negotiating leverage has tilted towards MSG," wrote Collins Stewart analyst Thomas Eagan in a Feb. 15 note. Time Warner still may be in a better negotiating position. "MSG needs TWC more than TWC needs MSG," added Eagan. For more on Jeremy Lin, see why he is a $170 million man and ways to trade on Linsanity. Linsanity will continue at Madison Square Garden on Friday night, as the Knicks look for their ninth consecutive win in a battle against the New Orleans Hornets. According to New York Times reports, that game is set to be broadcast to Time Warner Cable customers. Details on the reported settlement haven't yet been released by MSG or Time Warner Cable.
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