(Cablevision Rainbow spinoff article updated with analyst commentary.)

NEW YORK (

TheStreet

) --

Cablevision

(CVC)

management is exploring a potential spin-off of its Rainbow Media business as a "tax-free pro rata distribution" to stockholders.

The new, public Rainbow company would include national programming networks AMC, WE tv, IFC, Sundance Channel and Wedding Central. It would also include IFC branded films and Rainbow network communications.

Cablevision would remain head of its cable and telecommunications business,

Newsday

, News 12 networks, MSG Varsity and Clearview Cinemas.

The company is looking to complete to split by mid-year 2011, and it is not considering the sale of Rainbow or its cable and telecommunications business.

In the third quarter, its Rainbow segment saw a

12% increase in revenue

to $291.4 million from $260.1.

"Rainbow achieved double-digit revenue growth for the third quarter thanks to impressive gains in both advertising and affiliate revenue," Cablevision president and CEO James Dolan said in the company's third quarter financial report.

The division saw a 12.9% increase in advertising revenue due to higher pricing at AMC and WE TV. The number of viewing subscribers increased 2.8% at AMC, 2.5% at IFC and 2.8% at WE TV.

Cablevision believes that the prospective spin-off would give each company "greater flexibility to pursue strategic objectives," according to an official statement.

Analyst Craig Moffett of Bernstein Research said that while Cablevision stated it may not be interested in selling Rainbow right now, he believes that as its own entity it will be an easier acquisition target for larger media companies such as

Time Warner Cable

(TWC)

.

In a Nov. 18 note he said Rainbow is "likely to command a far higher valuation as an independent entity than it currently does embedded in Cablevision."

Moffett also pointed out that if Cablevision successfully splits Rainbow from its core cable business, it will be separating its content and distribution, unlike

Comcast

(CMCSA) - Get Report

, which is

joining its cable business

with

General Electric's

(GE) - Get Report

NBC Universal.

The board of directors has approved the company to file the necessary documents with the Internal Revenue Service to obtain tax-free status for the transaction.

-- Written by Theresa McCabe in Boston.

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