21st Century Fox Acquires Majority Control of YES Network

Increases Stake to 80% from 49% of New York RSN

The New York Yankees reshaped their lineup with a free-agent binge this offseason, and now 21st Century Fox has retooled its interest in the YES Network, taking a majority stake in the regional sports network.

A little more than a year after predecessor company News Corp. acquired a minority position in YES, 21st Century is looking to consolidate control, pushing its interest to 80% in the RSN that is home to Bronx Bombers ballgames, as well as contests and related programming of the NBA’s Brooklyn Nets. 21st Century declined to provide financial details of the transaction, which is expected to close during this quarter.

In November 2012, News Corp. bought 49% of YES for $584 million and retained the right to increase its holdings to 80% within three years at a $3.8 billion valuation of the network. The company also paid another $250 million in programming costs.

With Rupert Murdoch splitting News Corp.'s television and studio assets from its publishing holdings last June, 21st Century accelerated the time table on its purchase of the additional stake, fortifying its network portfolio that includes 22 owned-and-operated RSNs, the most in the U.S.

Tracy Dolgin, who is CEO and president of the YES Network, will continue to lead the RSN.

YES, which counts some 9 million subscribers within its TV territory of New York, New Jersey, Pennsylvania and Connecticut and has national distribution of 15 million via a programming package that excludes Yankees and Nets telecasts, is the most valuable RSN in the country. It counts upward of $540 million in annual revenue, commanding a monthly subscriber  fee of $3.20 within its primary area and a total $468.5 million from affiliates, and $73 million in ad sales, according to estimates by Needham Insights.

That revenue base could grow as 21st Century, which has been engaged in the RSN’s business operations following its initial investment, will look to ink a renewal with Time Warner Cable, whose contract with YES is set to expire.

Back in November 2012, Yankees Global Enterprises, Goldman Sachs, Providence Equity Partners, NJ Holdings (the former New Jersey Nets owners) and other smaller investors all reduced their stakes in YES. At that time, Yankees Global Enterprises, the holding company for the Yankeees and YES that is controlled by the Steinbrenner family, decreased its stake from 34% to 26%. When the new deal closes, Yankees Global Enterprises will own the remaining 20% stake in YES.  

During the initial transaction, News Corp. reportedly paid some $500 million as an incentive to facilitate matters and another $420 million to trigger a trio of five-year rights options and add a similar-length fourth set that secures YES’s deal with the Bronx Bombers through the 2042 season. The Yankees reportedly garnered between $85 million to $90 million in rights fees for the 2013 season, but with annual escalators in the 5% range the rights fee in the final years will reach the $300 million to $350 million range. It was unclear at press time if 21st Century furnished any financial accelerants to exercise its purchase option early.

Since launching in 2002, YES has been the most-watched RSN in the nation. However with the Yankees suffering through an injury-marred campaign in which they failed to make the playoffs for just the second time in 20 years, the club’s telecasts declined 31% to 244,000 viewers on average in 2013.

Although baseball’s all-time closer Mariana Rivera and fan favorite, southpaw starter Any Pettitte have retired, the team is hoping that captain Derek Jeter and first baseman Mark Texeira can return to form after injuries cost them most of last season. The Yankees also allocated close to $500 million in long-term contracts on free-agent outfielders Jacoby Ellsbury and Carlos Beltran, catcher Brian McCann and Japanese right-hander Masahiro Tanaka, among others, to re-energize its fan base and viewers.

21st Century Fox will soon have more of an interest in hoping those moves pay dividends on the diamond and for YES.

Tim Baysinger contributed to this report.