New York -- In a surprise move that could have significant
ramifications on the New York sports television markeplace, the New York Yankees baseball
and the New Jersey Nets basketball teams will merge their two businesses into one company.
The deal could set the stage for ESPN or another media
company, such as Time Warner Cable, to create a new regional sports network to compete
against Cablevision Systems Corp. and Fox Liberty Network's Madison Square Garden
Network and Fox Sports New York.
The new company, YankeeNets, will combine the business
interests of the storied New York Yankees baseball franchise and the up-and-coming New
Jersey Nets basketball franchise. Terms of the union were not disclosed, but the new
entity, which will allow both teams to be managed by their respective ownership groups,
will control the lucrative television rights for both teams.
Currently, both the Yankees and the Nets are under contract
with Cablevision to air their games on MSGN and Fox Sports New York, respectively. But the
Yankees deal expires in 2000, while the Nets deal ends after the 2000-01 season.
But the union will now allow the group to sell its sports
rights to the highest bidder, or develop its own regional sports network.
"Both teams together can do more than they can do
separately," said Lee Berke, senior vice president of the Marquee Group, a sports
marketing firm. "Neither could create a regional sports network by themselves, but
with 180 to 190 events throughout the year, they have that ability."
Already there's speculation that ESPN, which two years
ago unsuccessfully tried to launch a Southern California regional sports network, will bid
for the rights in an effort to establish a regional presence in New York. But an ESPN
spokesman would not speculate on whether the network would make a run at the rights.
"We look at all opportunities when presented and
whether it makes good business sense," said the spokesman.
The deal is a blow to Cablevision, which several months ago
was in talks to purchase the Yankees from owner George Steinbrenner. With ownership rights
to the New York Knicks basketball and New York Rangers hockey already under its belt, a
purchase of the Yankees would have given Cablevision full control of three of the seven
major area sport franchises.
Instead, Cablevision will now have to pay what is expected
to be major dollars for both teams' TV rights -- but especially the Yankees.
MSGN's current and unprecedented 12-year, $486 million Yankees agreement could go for
as high as $800 million to $1 billion.
"If the only thing they get out of this is a better
deal from Cablevision, then it would be considered a good [merger]," Berke said.
In a prepared statement, Cablevision CEO James Dolan said
the company has enjoyed "long-standing, productive relationships with both
organizations" and looks "forward to continuing those relationships in the