YES Network obtained rights to air New York Yankees games for five additional years, clearing the way for News Corp. (NWSA) to buy a 49 percent stake in the regional sports channel, said two people with knowledge of the pact.
YES will have rights to the Yankees through 2042, said the people, who requested anonymity because the transaction hasn’t been announced. By the end of the contract, YES will pay the Major League Baseball team about $350 million a year for TV rights, they said.
The extension secures three decades of Yankees games for the channel, eliminating a key hurdle as News Corp. negotiates to buy a minority stake in YES Network at about a $3 billion valuation. The rights contract provides for about a 5 percent increase each year from the current $85 million YES pays for the games, the people said.
“This kind of deal is not for the fainthearted,” Marc Ganis, president of Chicago-based consultant Sportscorp Ltd., said in a phone interview. “It’s something that only a very confident, well-capitalized management and ownership can do.”
News Corp., controlled by Rupert Murdoch, will be able to raise its stake in YES to 80 percent in three years, based on a $3.8 billion valuation for the channel, the people said.
Ganis, who advised the Yankees previously, said the agreement makes it highly unlikely that the family of George Steinbrenner, who died in July 2010, would sell the team. Getting rid of the Yankees would cut off the rich revenue stream.
Acquiring YES strengthens News Corp.’s regional sports business by adding a channel with the Yankees, a marquee MLB team, and the National Basketball Association’s Brooklyn Nets. The company plans a national sports channel next year to compete with Walt Disney Co. (DIS)’s ESPN and NBC Universal (CMCSA)’s NBC Sports, and is seeking to extend rights to Los Angeles Dodgers pay-TV baseball telecasts.
“For Fox, this is a necessary asset in their long-term strategy to create a competitor to ESPN,” Ganis said.
The Yankees have won a record 27 World Series championships, while the Nets are in their first season at the $1 billion Barclays Center in Brooklyn.
News Corp., based in New York, gained 2.9 percent to $23.97 yesterday in New York. The stock has climbed 34 percent this year.
YES Network generates more than $200 million in annual earnings before interest, taxes, depreciation and amortization, making it worth more than $3 billion, Forbes reported in April.
Goldman Sachs Group Inc. (GS) and Providence Equity Partners Inc., which provided capital to start the YES Network in 2001, are selling their stakes to News Corp., the people said.
News Corp. is vying with Time Warner Cable Inc. (TWC) for pay TV rights to MLB’s Dodgers on a regional sports network in Southern California. The Dodgers sold at auction earlier this year for a record $2.15 billion, fueled by the expiration of the team’s broadcast contract with Fox Sports at a time when there’s a premium being paid for live sports.