Judge blocks Yankees’ cable net bid

MSG relieved, but must sweeten pot with equity stake

NEW YORK — Madison Square Garden won the first skirmish in its legal battle to keep the cablecasts of New York Yankees games on MSG after the existing contract expires later this year.

A Supreme Court judge in New York stopped the Yankees from concluding a deal with Trans World Intl. (TWI) to form a regional sports network to carry Yankee games. The proposed channel, called New York Sports Network, gave 95% ownership to the Yankees, 5% to TWI.

In his decision Monday, Judge Barry Cozier said that the problem with the TWI deal is that it’s unfair to MSG because MSG has the right to match any offer to cablecast the games, and all the Yankees were offering was TWI’s 5%, not the 100% as called for in the existing MSG-Yankees deal.

In a statement, Dave Checketts, president and CEO of Madison Square Garden, applauded the judge for “uphold(ing) our position, ensuring that the Yankees Partnership will fulfill its contractual obligations regarding MSG Network’s right of last refusal.” Checketts added that “we look forward to more productive discussions in the future.”

Lonn Trost, chief operating officer of the YankeeNets, said in a conference call with reporters that his interpretation of the ruling is that “we can do whatever we want if we value the deal appropriately and present it to MSG.”

Yankees to ask a lot

“The one thing that’s certain is that the Yankees are going to demand a premium for cable and TV coverage of their games,” said David Carter, a principal in the Sports Business Group. “The Yankees are probably the No. 1 sports brand not only in the U.S. but in the world.”

In order to keep the rights to the games, Carter said, MSG may be forced to cough up an equity stake in the network, which is 60% owned by Chuck Dolan’s Cablevision Systems Corp. and 40% by Fox Sports Group.

In the conference call, Harvey Schiller, chairman of the Yankees, said he’s definitely interested in getting a piece of MSG, which has profited hugely over the past 12 years, thanks in large part to the exclusive transmission of Yankee games on cable TV. MSG Network’s subscriber base has ballooned from 2 million in 1988 to more than 7.5 million today.

But Schiller said he’s also fielding offers from other companies, and one source says Time Warner Cable of New York City has broached the idea of helping the Yankees set up a regional sports network.

They could work it out

But Schiller doesn’t rule out a return to the bargaining table with MSG, saying that, although neither side has scheduled a firm date for the resumption of talks, “we’re ready to keep the discussions going.”

“What MSG and the Yankees are working through right now is a legal dance, embellished with a lot of saber rattling,” Carter said. “I wouldn’t be surprised if both sides eventually found a way to strike a financial deal that each of them could live with.”

But the courtroom two-step could continue for the rest of the summer. Trott said the Yankees plan to answer MSG’s complaint in court Thursday.