Nov
21

The Latest on YES & News Corp.

By

The Yankees officially announced an agreement that allows News Corp. to acquire a 49% stake (which could reportedly grow to 80%) in the YES Network from investors like Goldman Sachs, NJ Holdings, and Providence Equity yesterday. The deal is still pending MLB approval and is expected to close by the end of the calendar year. The sale price indicates that the network is worth approximately $3 billion right now, meaning it’s likely more valuable than the team itself. Here’s more on the transaction courtesy of Darren Rovell, Andy Fixmer, and Scott Soshnick

  • The Yankees will sell 9% of their stake in YES, lowering their share to 25% and earning the club a whopping $270M. The team might also receive a $400-500M payment separate from the rights agreement, so think of it like a signing bonus.
  • As part of the transaction, the Yankees have extended their agreement with YES to ensure the network will broadcast games through 2042. YES currently pays the team $85M annually for broadcast rights, but escalators will push that to $350M annually (!) by the end of the new agreement.
  • Goldman, NJ Holdings, and Providence will retain some stake in YES but will have the option to sell the remainder to the Yankees and News Corp. in four years for a portion of the predetermined market value of $3.8 billion. That’s what everyone expects the network to be worth in 2016.
  • Although there has been speculation (including by me) this deal with News Corp. is an indication the Steinbrenner family will look to sell the team down the line, the reporting trio all say this move puts them in better position to hold on to the club long-term.
  • Brian Heyman has official statements from Hal Steinbrenner and others, so check that out if you’re interested.
Categories : News
  • Cris Pengiucci

    The team ownership is now in a position to sell the team within the next few years and make a huge profit. I’d guess that it would be sold within the next 5-10 years if that happens. Or, they can retain the team and earn huge profits. It’s all a question of how much they like running the team. Either way, they’ve got enough money to keep the family wealthy for generations to come.

    Anyone on close speaking terms with the Steinbrenner family and care to share their thinking with us? :-)

  • Mikhel

    It will be way easier to sell the Yankees now that their price has decreased due to a lower share of YES the Steinbrenner family owns, their value stays the same or even increased a bit, it is just that whoever is interested, will be buying a less pie pieces.

    • Gonzo

      That is assuming that Yankee Global Enterprises would have included YES in with the sale of the Yankees. It’s not certain at all that a new owner would have been able and had the option to buy anything other than just the Yankees.

      • Gonzo

        *Their piece of YES. Which was only 34% before this deal.

  • Murderers’ Row Boat

    $270m? Great! Now they can buy out A-Rod’s contract!

    • The Big City of Dreams

      hazah !!!!!!!!!!

    • Gonzo

      More like the $400/$500 signing bonus. That $270mm isn’t Yankee money. It’s Yankee Global Enterprises money.

      • Havok9120

        Shhh. Its much easier to ignore that they aren’t all the same thing so we can complain about the greed and awfulness of the Steinbrenners and corporations in general.

  • Rich in NJ

    As long as the mL system becomes a reliable pipeline of ML talent, I don’t care who owns the team. If that doesn’t happen, their ability to credibly claim that they are trying to win the WS every single year (the goal that Hal questionably advances) will be even more illusory than it is now.

    • http://www.nyc.gov/html/nycha/html/home/home.shtml The Big City of Dreams

      As long as the mL system becomes a reliable pipeline of ML talent, I don’t care who owns the team.

      —————-

      Is it possible to have a mL pipeline but questionable ownership

      • Rich in NJ

        It depends how you define questionable. For example, an owner who doesn’t want to spend much money could decide that the most cost-effective way to field a credible team, at least for a while, is to investment in the mL system, but then not spend enough to keep any of them once they are no longer cost-controlled. That would be an example of questionable ownership to some.

        • http://www.nyc.gov/html/nycha/html/home/home.shtml The Big City of Dreams

          That’s a good point rich I didn’t think about it that way.

          We miss your pov regarding the Yankees on Lohud.

          • Rich in NJ

            I just figured out who you are.

  • @coffeewithian

    So will News Corp be allowed to change tve network’s name once they have controlling interest? Could YES become the new FSN New York?

    • TheLeague

      Can’t imagine they would want to mess with the Brand that has built up the value they are paying for.

      • http://www.yankeeanalysts.com/ Steve S.

        I can’t imagine you’d spend 3+ billion for a network and not promote the parent brand.

  • JonS

    Ok Mike, now that you’ve put those numbers out from the TV deal. I’m really pissed at the $189 plan. $350m annually? Going cheap to get to $189 is bullisht. Especially considering their most egregious contract was their own damn fault.

    • Gonzo

      Just to be clear. The $350mm is at the end of the deal. Like in 2041. Not that I’m defending the $189mm. I’m just pointing out the facts.

      Their take next year is still less than $90mm for the rights.

    • Havok9120

      A) That’s YGE, not the Yankees, making that money. B) the deal is worth that in THREE DECADES and it would not be all that strange for the escalators which buff the deal up to that number not to be automatic.

  • Bavarian Yankee

    I really think the Yankees as a team are worth more than 3 billion. You know, most people around the world aren’t interested in baseball BUT you see Yanks merchandise all over the world.

    Most people that I know – and I’m not joking – think that the famous NY logo of the Yankees is some kind of fancy fashion label. I see lots of people every day wearing some kind of Yankees merch and they have no idea that they’re wearing the logo of a sports team. For those of you living in the US this may sounds unbelievable but it is true. You rarely see people wearing merch of any other US teams over here.

    I think the whole merch thing alone makes the Yanks a 5 billion dollar team. They could stop playing baseball and still earn money like it’s no one’s business.

    “As part of the transaction, the Yankees have extended their agreement with YES to ensure the network will broadcast games through 2042.”

    hey, I might still be alive when they sign a new tv-deal :D

    • Gonzo

      I’m not 100% positive, but I think the Yankees only see the merch money if it’s sold in the stadium or within a radius of it. I think all merch money is diverted to the central fund and shared among teams. All that Yankee gear is paying for J. Loria’s new wing on the mansion if I believe.

      Anyone else clarify this?

      • Steve (different one)

        You are correct.

        Part of this is likely behind the $189M plan. We know the Yanks don’t mind spending on players. But I get why they are tired of writing checks that pay other teams’ bills, while other teams pocket the cash.

  • Gonzo

    After looking at the numbers, I’m not so sure this is such an awesome deal for the Yankees. I mean considering the Angels got $3billion for 20 years recently. At the end of the 20 year deal for the Angels they’ll be making $150mm (assuming the $3b is spread out equally over the deal). The Yankees will be making roughly $225mm after 20 years.

    Shouldn’t the Yankees be making much more for their deal than the Angels? I know it’s LA, but still. I bet the Dodgers get a better deal next year.

    I guess it all comes down to the $400/$500mm upfront payment.

    • CountryClub

      Don’t forget that the Yanks still own 25% of YES. That could change in the future, but at the moment they’ll be getting a quarter of the annual YES profit on top of the rights fees.

      Plus, while I understand your comparison, they did just sign a deal that’s going to reportedly bring the team around 700 mil (including the “signing bonus”). It’s hard to ignore that money.

      • Gonzo

        My point is that Yankees don’t own YES. Yankee Global Enterprises does. Yankee Global Enterprises owns the Yankees and YES. The Yankees, the baseball club, does not own YES. I would imagine they see none of that money other than rights money.

        Again, it will bring the team, the Yankees, the baseball club, $400/500mm. The money from the sale of 9% of YES, $270mm, is going to Yankee Global Enterprises NOT the baseball club.

        Could it find it’s way to the Yankees, sure. Is it structured that way? Nope.

    • Need Pitching & Hitting

      I agree.
      If the numbers being reported are correct, it would work out to about $2.8B in rights fees over the next 20 years (about $5.65B total through 2042). Add the $400/500M payment, and the deal exceeds the Angels deal, but I would have thought they could have exceeded the Angels by more than $200/300M over 20 years.

  • craig

    A quick estimation on the deal in comparison to LA. With the escalators going up almost 9 million a year (which is a guess because we don’t have the agreement) it would pay the Yankees about $3.4 billion over the next 20 years, which is $400 million more than LA. $20 million a year is not insignificant.

    I also wonder if some of this was due to the increase in capital gains taxes that will occur in 2013. The last time the Steinbrenner family did a major financial deal it also coincided with tax laws changing.

    I don;t see this as a precursor to selling. I see it as smart business, which is what the Steinbrenners are good at. I think they hold the team.

  • alpah

    This actually could increase the worth of the Yankees brand. News corp is a big entertainment conglomerate, and often how they do is they package all of their channels together so they are all sold in a bundle. Viacom does this too, every cable customer expects to get MTV and viacom knows it, so for a cable company to buy rights for MTV they also have to end up paying per customer for a ton of other channels, often ones that nobody watches. This deal could get YES Network into more houses.

    -I would never sell Yankees if I was them. They have enough money to live without selling it.

    • alpah

      But overall may not lead to benefit for yankees. There is less incentive to have a stellar team even if it means paying more, because now they don’t directly feel the ratings hurt or bump from owning both.

  • RetroRob

    The $85M licensing rights per year is quite low, which is why I question it.

    The Angels, for example, signed a twenty-year TV deal that will pay them $3B or on average $150M a year with Fox. The Dodgers deal is expected to be larger. Even the Texas Rangers’ cable deal is worth at least $80M a year. Does anyone really believe that the NY Yankees have gone through all this trouble to run its own network, own the largest brand in the sport in the country’s largest market, only to make roughly what the Rangers do in loval TV licensing and substantially less than yet the Angels, and soon other teams? I don’t. The low licensing fees and the creation of YES Global Enterprises is designed to shield the Yankees baseball team from any attempts by MLB to get a slice of their local TV revenues. In other words, question all reports of payments.

    At the very least, it doesn’t include profits YGE generates through YES. I think one of the stories mentioned YES generated $250M profit last year on $500M revenue. Thirty-four percent of $250M is interestingly $85M, the exact same number being reported as the Yankees licensing fee. The licensing fee for Yankee rights is entirely different than YES profits, so that would indicate the Yankees made $170M off of YES last year, or that media stories misreported the Yankees take in revenue as the licensing fee. I guess it’s possible it’s also a coincidence the two numbers are the same.

    Either way, the Yankees are making way more than $85M per year. We better hope so; otherwise, the Yankees went to all this trouble to put themselves at a competitive disadvantage compared to other major markets when it comes to yearly licensing fees.

    • Gonzo

      NY Yankees baseball club =/= YES Network

      The Yankees make much more than just the licensing fees. If a team’s only revenue was licensing fees, the Rangers would be spending MUCH less than they are right now.

      The licensing fees are getting all the press now because of the huge numbers being reported.

      • RetroRob

        Yup, although I’m not trying to compare the Yankees resources to the Rangers, or any other team. I’m trying to do a comparison on the revenue generated just by their local TV cable deals. In the Yankees case it’s through an entity they helped launch and are an owner, YES, compared to straight the cable licensing fees that the Rangers get. I’m questioning the dollars that have been reported in the media.

    • http://www.yankeeanalysts.com/ Steve S.

      The 85M fee was just the Steinbrenners taking money out of one pocket and putting it in another. It allows them to show that they operate the Yankees at a loss, and hide some of their revenues from MLB rules. The new CBA may factor in here, though I’m not sure how.

      In any case, if I’m the Stienbrenner family (Hal is one of 4 owners) and I have an opportunity to cash out 1B, avoid next year’s Cap Gains increase, and enjoy an enormous increase in rights fees, that’s too attractive to pass up. It doesn’t necessarily correlate with whether or not I plan on holding onto the team long term. Though it may, we really don’t know.

      Another thing that could signal a Yankee sale may be the 189M commitment. That lowers their tax rate enormously, which adds profitability and therefore value to a prospective buyer. That, and the added rights fees would increase the value of the franchise enormously. The Yanks would go from showing a small loss to about 100M in annual profits. As a stand alone entity, anything that increases both profits and revenues adds value.

      • RetroRob

        True, although I don’t think the deal signals a sale. It’s a excellent financial transaction, and one which I add they’ve been looking to do since their old man was alive in 2007. The reports were they didn’t want multiple buyers and they preferred someone with expertise in the cable industry to help maximize the value of the asset. It took five years to find the right investor, or for the right investor to come forward, but that’s exactly what the Steinbrenners got in Newscorp. That’s why I can’t really see it as a signal to sell. I don’t think Hal & Co. are operating with the idea of selling, but are operating to monetize the YES business.

        Now prettying up the books is a good way to sell the Yankees, yet the Yankees have also just been locked into a 30-year committment to YES. Someone buying the Yankees might actually view that as a negative, preferring a shorter-term deal, or none at all, so they can negotiate what they view as an even better deal. That’s why the Dodgers went for such a premium. That premium potential has been taken off the table by Hal, and if the Yankees aren’t willing to also sell their investment in YES to any one buying the Yankees, then all the buyer is getting is the Yankees. That’s why overall I think this deal signals the Steinbrenners are looking to hold the Yankees in the family.