News Corp. is scooping up another marquee sports property and adding more firepower to its effort to challenge ESPN for TV supremacy.
The conglom has clinched a deal for 49% of the Yankees Entertainment and Sports Network and a long-term pact to keep the Yankees on YES Network through 2024. Pact was unveiled Tuesday by News Corp. deputy chief operating officer James Murdoch in the clearest sign yet of the scion’s return to grace Stateside after a career temporarily derailed by the U.K. phone hacking scandal.
The YES agreement, anticipated for a week and announced Tuesday, allows News Corp. to boost its stake in the popular regional sports net to 80% after three years.
No pricetag was given. YES is worth an estimated $3 billion, but the deal includes assumption of some debt, said people familiar with the transaction. Whatever it costs, News Corp. has $10 billion of cash on hand and can swallow it easily.
“We are delighted to see News Corp. potentially deploying its cash. We believe the glut of cash-on-hand is the single biggest issue holding back growth of News Corp.’s enterprise value,” said Bernstein Research analyst Todd Juenger, referring to another measure of a company’s value besides market cap.
Deal represents another reminder of the increasing value of high-end sports franchises, which remain DVR-proof programming. ESPN is the Mouse House’s most reliable cash machine, but it is facing increasing competition for rights from Fox Sports and NBCUniversal, which is in the process of beefing up its NBC Sports Network.
The Fox network recently expanded its current deals with the NFL and MLB, as well as outbidding ESPN for soccer’s 2018 and 2022 World Cup.
Rupert Murdoch’s News Corp. has been making deals selectively in recent months, with sports high on the agenda. It acquired outstanding stakes in Fox Pan American Sports and ESPN Star Sports and is likely to buy out Sky Deutschland. The company also spent $2 billion on Australia’s Consolidated Media, which gives it full ownership of Fox Sports Australia and a half interest in Foxtel.
The YES-Yankees rights deal is subject to Major League Baseball approval and is expected to close by the end of December. News Corp. will purchase the stake from current YES owners including Yankee Global Enterprises, Goldman Sachs and Providence Equity.
“We’ve long been a believer in the unique appeal of sports entertainment. Partnering upstream with rights holders is even more important today in the dynamic media marketplace in which we compete,” said James Murdoch. “This is a tremendous opportunity to enhance News Corp.’s industry-leading portfolio of sports properties while also strategically re-entering the New York market.”
James Murdoch is particularly close to this deal as member of the board of Yankee Global Enterprises.
The younger Murdoch moved from London to New York earlier this year when it was still unclear if legal fallout from the hacking scandal might hit him. Things are heating up there again as British prosecutors filed more charges Tuesday against former News of the World head Rebekah Brooks and editor Andy Coulson.
But James’ position was strengthened by a September report from U.K. communications watchdog Ofcom that said it found no evidence he was aware of widespread wrongdoing or was complicit in a cover-up. It did say that his seeming diffidence in pursuing an investigation was “difficult to comprehend and ill judged.”
As deputy COO of News Corp. James reports to chief operating officer Chase Carey and has oversight of all News Corp. operations. His background is in television; he was a whiz at BSkyB before resigning as chairman-CEO last April. He’s still on the board.
News Corp. had been considering giving him some direct responsibility on the television side. Nothing has been formally announced, but he appears to be stepping things up. He’s been present on recent investor calls to discuss quarterly earnings.
YES, launched in 2002, carries exclusive live local television coverage of New York Yankees baseball and Brooklyn Nets basketball to about 9 million area households. It covers New York, Connecticut, New Jersey and parts of Pennsylvania, with national availability on several cable and satellite television distributors.
Hal Steinbrenner, chairman of Yankee Global Enterprises, said the transaction “underscores the great value we and our partners created in establishing the YES Network and sets the network on the path for even greater achievements in the future. We are excited to have News Corp. as a partner. Its stature and acumen in sports broadcasting on a global scale is unmatched.”
He said the Steinbrenner family expects to have “a continuing, long-term ownership stake in the YES Network.”
Yankee Global will keep a significant minority stake, News Corp. said.
Providence Equity CEO Jonathan Nelson called it a “remarkable achievement” to grow YES from a startup to the nation’s biggest regional sports network. “We have appreciated our partnership with the Yankees, YES management and our co-investors,” he said.