By year’s end, News Corp. is expected to hold a 49% stake in the YES Network, but one shouldn’t expect many -- if any -- changes in the way the regional sports network home to the New York Yankees goes about its business.
YES president and CEO Tracy Dolgin, a former News Corp. sports and entertainment executive, welcomes Fox Sports Media Group’s expertise and acumen in the local sports as it operates 20 RSNs. However, he says it will be status quo when it comes to YES employees and what’s on the network, which also televises games of the revitalized Brooklyn Nets.
“Fox will have 49 percent, but it will still be a minority partner. YES will continue to be run as an independent operation,” said Dolgin in an interview.
Viewers will still see a service orbiting around what Dolgin calls the “greatest sports franchise. YES is for, by and from the point-of-view of the New York Yankees and their fans,” he said. “If Fox has some programming that makes sense, we would be interested. But that would happen anyway. Similarly, if we have something that they would have interest in, we would be happy to lease it.”
Under the transaction that currently values the network at some $3 billion, News Corp. is acquiring stakes from all of YES’s stakeholders: Yankees Global Enterprises, Goldman Sachs, Providence Equity Partners, NJ Holdings (former Nets owners) and other smaller investors. With this deal, all of the parties will retain smaller holdings in the network, according to sources familiar with the agreement.
Three years from now, Fox, which is re-entering the New York RSN game via this pact, has the option to increase its holding to 80% of YES at a valuation of $3.8 billion. At that point all of the parties would exit the business --save for Yankees Global, which will reduce its stake in YES to 25% from 34% upon conclusion of the current transaction, according to sources familiar with the deal.
Moreover, News Corp., according to published reports, has agreed to pay the Yankees an additional $500 million as an incentive to make the deal, plus another $420 million to trigger a trio of five-year rights options and add a similar-length fourth set that will take YES’s deal with the Bronx Bombers through the 2042 season. Reports indicate that annual escalators in the 5% range will ultimately push the rights fee in the final years into the $300 million to $350 million range. YES, counting 9 million subs within its home-team footprint and national distribution of some 15 million, currently allots $85 million to $90 million in annual rights to the ballclub.
The rights extension is subject to approval by Major League Baseball.
Teaming such leading brands as the Yankees, YES and Fox is a win-win-win, according to Dolgin.“Fox stands for quality, enthusiasm and passion and has a tremendous knowledge of the local sports business,” he said. “Fox’s interest is a testament to the increasing value of sports in the digital entertainment environment. You can watch top entertainment programs in different outlets in different windows. But live sports are only available through distributors -- your cable, satellite or telco provider.”
On the carriage front, sources expect YES to be included within Fox’s bundle of sports and other programming assets, as a means to garner higher license fees. SNL Kagan pegs YES’s monthly subscriber license fee at around $3. Given its ratings prowess as the top primetime performer in the RSN sector, its position in the nation’s top media market, and that some RSNs are deriving higher affiliate fees, YES figures to increase its distribution funds. Sources indicate that Time Warner Cable and Comcast’s affiliate deals with YES expire in 2014.
Asked if he thought YES would benefit from being part of Fox’s portfolio, Dolgin said he is not anticipating any changes in the RSN’s affiliate game plan. “This is not a consolidated market. Deals are always coming up with big and small distributors,” he said. “The [News Corp.] deal will be finalized by the end of the year. We’ll certainly have discussions then to see what makes sense and do what’s best for the company.”
Dolgin also noted that YES is gaining from the higher profile of the Nets since they crossed the Hudson River from New Jersey to New York City’s largest borough. He noted the club has generated improved ratings thus far in the 2012-13 NBA season, although measurement for early games was disrupted as meters were out in the wake of the fury of Superstorm Sandy.
“It’s been night and day in terms of the interest in the Nets this season,” said Dolgin, who anticipates more advertising gains in the second-half of the season. “It certainly helps to sell stronger ratings.”
On Nov. 20, the Nets-Los Angeles Lakers game at 10 p.m.(ET), averaged 125,000 households and scored a 1.69 household rating in the New York DMA to become the Nets' best-regular season contest on YES in seven years and the club's third most-watched and highest-rated telecast ever on the RSN.
Looking further out, Dolgin responded to the prospects of Fox becoming the majority holder in YES thusly” “Fox has not only secured [media] rights, but bought into the human capital at YES. If they were to go to 80 percent, it’s TBD as to what would change.”