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Rainbow buys Sundance Channel Rainbow buys Sundance Channel

Cablevision’s Rainbow Media, which already owns AMC and IFC, has bolstered its film portfolio by ponying up $496 million for the Sundance Channel.

Launched in 1996, Sundance’s owners include NBC Universal, CBS/Showtime and Robert Redford.

Rainbow will swap about 12.7 million shares it owns in GE, tax-free, with additional cash based on the value of GE shares relative to the total purchase price. GE will get all of its shares, and CBS and Redford will get cash for their stakes.

The deal brings Sundance its fifth owner in the past 12 years, but the channel and Rainbow execs see more upside with a single owner.

Deal also triggered speculation that Rainbow’s long-term goal is to fold IFC and Sundance together. Several execs in on the transaction insisted that Redford, whose film persona and thriving festival business is bound up in the channel, had personally been assured that would not happen.

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Many cable operators carrying both IFC and Sundance, however, are unhappy that they’re paying hefty license fees for nets that don’t subscribe to Nielsen and thus can’t offer any ratings guidance.

“There’s just not a big enough audience to sustain two networks like IFC and Sundance,” said Mike Egan, a cable consultant and principal in Renaissance Partners. “A plausible plan would be to merge them and combine them into one network.”

IFC reaches about 41 million subscribers, Sundance about 30 million. Chris Marangi, an analyst with Gabelli Partners, which owns 20 million shares in Cablevision, said the lost license fees from Sundance could be made up by a jacked-up fee for the combined network.

Marangi added that the merged network could save money on original series and movie packages because suppliers would no longer have two networks bidding against one another for the same programming.

But there was no hint in Cablevision’s announcement of the purchase that there would be a melding of the two in one Sundance/IFC Network.

“Programming that attracts a dedicated viewing audience has always been Rainbow’s mission, and we think that Sundance Channel is an excellent fit and consistent with that rich heritage,” said Cablevision chief operating officer Tom Rutledge, who oversees Rainbow Media for the company. “We also believe that with Rainbow’s resources, we will have a tremendous opportunity to build upon Sundance Channel’s success.”

Rich Greenfield, an analyst with Pali Capital, said he expects Cablevision “to maintain both Sundance and IFC as separate entities but to meaningfully reduce the overhead at Sundance.”

Under prexy-CEO Larry Aidem, Sundance has recently branched out beyond its movie roots to explore original series like “Iconoclasts.” It also has embarked on an ambitious environmental initiative, the Green.

Still, about 70% of Sundance programming consists of theatricals.

The purchase poses an interesting question for indie film companies doing business with Sundance and IFC. A deal with either reps a second or third window for pics from studio specialty arms, but smaller companies have a lot more at stake when they pact with one of the channels. Any erosion in prices due to the combination could hurt the already battered indie film sector.

For Rainbow, the move enriches its movie offerings and demographic reach. Sundance viewership skews wealthier and older than IFC’s, and overlap between the two has diminished in recent years. Purchase also makes Rainbow itself a more appealing potential takeover target down the road, though recent rumors of buyers circling will likely subside in the wake of the deal.