New York Yankees owner George Steinbrenner will have to wait at least a little longer before launching his own regional sports network.
Current Yankees cable-rights holder Madison Square Garden Network has sued the Yankees limited partnership for breach of contract for not allowing the network to effectively match a bid for a new cable contract.
The outcome of the suit could have far-reaching ramifications on the New York sports landscape and threaten MSGN parent company Cablevision Systems Corp.'s current stranglehold on area sports teams' cable contracts.
The suit, filed in New York State Supreme Court, alleged that the Yankees breached the "last-refusal" clause in a contract with MSGN by not giving the network a fair opportunity to match an offer from distributor Trans World International.
According to the lawsuit, TWI is a "vendor" of television-production services that would hold a small equity interest in Newco, which the Yankees would fully control with 95 percent ownership.
Newco, and not TWI, would eventually launch a new regional sports network in 2001 to compete against MSGN, according to the suit.
The lawsuit claimed that MSGN would have to match points in the offer from TWI that go well beyond distribution of Yankees games-a violation of its $500 million deal with the club, which was reached in 1988.
The new agreement would call for the network to give the Yankees no less than 25 percent of all regional-sports-network income derived from MSGN's parent company, Cablevision.
MSGN would also have to agree to carry New Jersey Devils National Hockey League games once the team's carriage agreement with Fox Sports New York expires next year, as well as content from TWI's available sports-archives library.
It would also force the network to drop its coverage of New York Knicks National Basketball Association and New York Rangers NHL games in order to match the offer.
MSGN called the Yankees' offer a "sham" that "in no way comports with MSG's right of first refusal."
"The provisions in the so-called TWI offer were deliberately and impermissibly designed to make it impossible for MSG to exercise its right of last refusal," the lawsuit said.
MSGN executives would not comment on the lawsuit. Representatives from the YankeeNets group could not be reached for comment at press time.
At stake is control of the vast New York sports marketplace. Cablevision currently owns majority stakes in MSGN and in the area's second sports network, FSNY. Fox Sports Net owns the remaining stakes.
Cablevision's sports networks also have cable deals with six of the eight professional-sports teams in the area. The National Football League's New York Giants and New York Jets games are telecast on broadcast networks.
But with the Yankees' cable deal due to expire at the end of the year, the YankeeNets group-a company formed with the merger of Major League Baseball's Yankees and the NBA's New Jersey Nets-have been planning to launch a competing regional sports network.
The network's primary programming would feature both Yankees and Nets games-FSNY's deal with the Nets ends in 2001. It may also feature Devils games once the group finalizes its purchase of the franchise later this year.
In fact, sources said, the YankeeNets group-headed by former Turner Sports executive Harvey Schiller-had made plans to announce the launch of the new regional sports network last week. MSGN's response to the Yankees'offer was due July 14, sources said, but the two sides' reached agreement postponing any launch until July 31.
The launch of a third regional sports network would almost certainly rile area operators, as they are already paying more than $2 per subscriber in licensing fees for both MSGN and FSNY.
One system executive who wished to remain anonymous said he doesn't believe there's room for three regional sports networks in the market.
"One regional sports network alone is very expensive. We could not afford to pay for three of them," the operator said.