MSG equity or 3rd sports net is threat

NEW YORK — The New York Yankees are demanding an equity stake in Madison Square Garden as the price of renewing the team’s exclusive cable-TV contract with MSG, which expires at the end of this season.

Demand by the Yankees emerged in an interview with Dr. Harvey Schiller, chairman and CEO of YankeeNets, who was responding to the lawsuit filed against the Yankees by MSG late last week.

One TV-sports expert, who requested anonymity, said that the MSG suit and the threat by the Yankees to set up its own regional sports net are “more symbolic than real.” The source said, “Neither (George) Steinbrenner nor (Chuck) Dolan wants to go through the bloodbath that would take place if the Yankees set up a third sports network” in the greater New York area. Steinbrenner is majority owner of the Yankees; Dolan is chairman of Cablevision Systems, which jointly owns — with Fox Sports — the only two regional sports networks in Gotham (MSG and Fox Sports NY).

But Dolan is balking at the prospect of restructuring MSG by handing over as much as 33% of the equity in the network to Steinbrenner just to get the Yankees to sign another long-term renewal.

Cablevision owns 60% of MSG, and Fox Sports owns the other 40%, so both parties would have to relinquish a sizable portion of their respective stakes to accommodate Steinbrenner’s strategy.

Yankees mull own channel

When Cablevision resisted such a deal, the Yankees informed Dolan on July 5 that it had signed a deal with Trans World Intl. (TWI) to set up a company called Newco, which would set up a channel dubbed the New York Sports Network, to start with the Yankees’ 2001 season.

In its lawsuit, filed in Manhattan Supreme Court, MSG called the TWI arrangement a “sham,” concocted to deprive MSG of the chance to match any outside offers for cable carriage of Yankees games.

But an official with the Yankees said the whole trend of the sports business over the last few years is for teams to negotiate more control over cable transmission of their games. He cited the way Turner Broadcasting leveraged its ownership of the Atlanta Braves and Hawks to make TBS the most powerful superstation in the U.S. and create two separate regional sports nets, Sports South and Turner South.

Other examples include the pur-chase of the Los Angeles Dodgers by Rupert Murdoch, at least in part to serve as the linchpin of Fox Sports West, the L.A.-based regional net.

Exiled to pay TV?

A source for the Cablevision/Fox partnership said Dolan has an ace in the hole: If the Yankees set up another regional sports net, cable operators in the area such as Time Warner Cable of NYC and Cablevision Systems could refuse to put it on basic cable, relegating it to a pay network and charging as much as $10 extra a month.

These cable operators would have to survive the political tidal wave that would rise when cable subscribers found out they’d have to pay for the Yankees. But if they did, New York Sports Network would not be sustainable as a pay channel: There’d probably be too few pay subs to generate vital ad revenues.

But it might take New York Sports Network a couple of years to collapse, and meanwhile the MSG Network would suffer severe losses of its own: Its contracts with cable operators call for a substantial dropoff in license fees if the Yankees vanish from MSG.

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