MSG Ponders Yankees Deal

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Cablevision Systems Corp. is mulling whether to pay $2.5 for the television rights to Major League Baseball's New York Yankees-six times what it pays under its expiring deal-or allow the team to create a competitor to the MSO's regional sports networks.

With just seven months before the first pitch of the 2001 season, some industry observers believe it would be difficult for YankeeNets, the partnership which controls the Yankees' TV rights, to launch a new service in time, so the two sides will likely come to terms.

Cablevision-owned Madison Square Garden Network has until this week to accept or refuse a YankeeNets proposal to pay $1.3 billion up front or $2.5 billion over the next 10 years to retain the rights, according to sources close to the situation. YankeeNets is a combined entity of the Yankees and the National Basketball Association's New Jersey Nets.

After a session at the East Coast Cable 2000 show last week, Cablevision chairman Charles Dolan told reporters he was still negotiating with YankeeNets about a programming contract. But he said he had "no idea" when an agreement could be reached.

"It's the public: what are they willing to do, what are they willing to pay?" Dolan said. "The cost [of the new YankeeNets contract] would insure a substantial increase [in rates] without any change in service. I predict the public will react to that."

Representatives from YankeeNets could not be reached for comment at press time.

If the Yankees don't ante up, the YankeeNets could try to launch a competing regional sports network. The service would not only offer Yankees games, but also New Jersey Nets basketball and New Jersey Devils hockey games after those teams' current pacts with Cablevision-controlled Fox Sports Net New York expire.

But that scenario might be hard to pull off.

Industry observers said it would be very difficult for YankeeNets to create and launch a regional sports network by the time the Yankees open their season next April. The company would get a late start on selling ads, and would still have to negotiate what will inevitably be very difficult carriage deals with area operators, who have already expressed little interest in offering a third, potentially expensive regional sports service.

Paul Kagan Associates sports analyst John Mansell believes Cablevision and YankeeNets will eventually hammer out an agreement.

"I think they will come to terms, because most of the leverage is held by Cablevision," Mansell said.

But Mansell said New York DMA could handle a third regional sports network, if necessary.

"I think there are a number of markets that can support three regional networks, including New York," he said..

Mike Farrell contributed to this report.

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