News Corp officially purchases stake in YES

We already knew that media giant News Corp was going to buy a share of the YES Network from Goldman Sachs, but today we got the details, and they’re fairly stunning. News Corp will obtain a 49 percent share of YES Network, with the network’s various investors including the Yankees reducing their ownership share, and News Corp will have the option to increase that share a w hopping 80%, which would presumably entail the Yankees further reducing their stock in the $3.8 billion firm. As part of the transaction, the Yankees have committed to keeping their television broadcasting rights with YES through the 2042 season, with annually increasing payments from YES to the Yankees that will start at $85 million this coming season and reach a staggering $350 million in the final year of the agreement.

Frankly, I find this all pretty hard to process in the moment, so it’s hard to write a “what does it all mean” kind of post at the moment, but the surface level financials are pretty amazing, and it underscores how much money the Yankees’ are really making…that won’t be going into the payroll anytime soon. Now, back to saying nasty things about Jeffrey Loria.

Born in Southwestern Ohio and currently residing on the Chesapeake Bay, Brien is a former editor-in-chief of IIATMS who now spends most of his time sitting on his deck watching his tomatoes ripen and consuming far more MLB Network programming than is safe for one's health or sanity.

31 thoughts on “News Corp officially purchases stake in YES

  1. LarryAtIIATMS

    Mark it down as the dumbest deal of all time.

    • Don't leave us hanging, Larry!!! 'Splain us.

      • LarryAtIIATMS

        Start with an $85 million rights payment for 2013, which is something a bit more than half of what the Rangers receive, and is something like 35-40% of what the Dodgers are projected to receive.

  2. uyf1950

    Brien, those monies that you are talking about in your article. They do NOT include what the Yankees receive currently as a 34% owner of the network am I correct.? So it's those monies PLUS the ownership share of the profits.

    • LarryAtIIATMS

      An ownership share of profits that has just dropped in half.

      • uyf1950

        How did it just drop in half? I didn't see anyway that the Yankees current ownership share dropped from 34% and if it has nowhere have I seen where it dropped to 17% (half of 34%). Also even if it did drop some wouldn't the Yankees be being paid a premium on their portion of whatever shares they sell/sold.
        Larry please don't take this the wrong way but I have to believe the financial people with the Yankees (Yankee Global Enterprises) are smart enough to not have given away the store without being handsomely rewarded.

        • LarryAtIIATMS

          uyf, the reported deal is a 49% sale, with all existing partners giving up a proportional share to get to that 49%. So, the Yankees' stake after the deal is 51% of what it was before the deal.

          I'm not saying that the deal is bad for the Steinbrenners. It may be great for the Steinbrenners. It's just terrible for the Yankees. It's the same deal Fox offered the Dodgers in bankruptcy: cash now in exchange for bargain TV rights pricing going forward. Of course, it's possible that the Yankees will somehow retain all that cash and invest it in something just as valuable as their TV rights, that will spin off just as much cash flow as those TV rights, so that the Yankees' ability to spend money on payroll and anything else will not be affected. But if that was the plan, the team could just HOLD ON to the TV rights and have the same cash flow without having to pay the transaction costs.

          I am admittedly giving you analysis without having much in the way of facts … but the essence of this kind of deal is monetization: take an existing asset that promises to pay out cash over a long term, and sell a piece of that asset for cash today. Here on the West Coast we're all too familiar with baseball team monetization of assets, because that's what Frank McCourt did to bankrupt the Dodgers: he monetized everything, and moved the money he received out of the Dodgers into his personal account. It is conceivable that the Yankees will take the money they receive from Fox and do something with it to make the team more valuable — put a room on the Stadium, or something. But I'll bet 10-1 that the lion's share of this money flows out of the team.

          • LarryAtIIATMS

            *roof

          • uyf1950

            Please correct me if I'm wrong but I was under the impression that Goldman sold their entire shares which I thought amounted to about 40% with the balance of 9% coming from the other shareholders. At least that was my impression of how the first 49% was to be accounted for.

          • LarryAtIIATMS

            The AP report says that "Yankee Global Enterprises, Goldman Sachs and other investors will reduce their ownership as part of the transaction." My assumption is that the reduction would be pro rata, but I could be wrong.

          • LarryAtIIATMS

            ESPN says the Yankees would sell nine percent of its YES stake, reducing its ownership to 25 percent. Goldman and Providence will reduce its share to approximately 12 percent from 32 percent, as will NJ Holdings. As part of the deal on the table, the Yankees are guaranteeing that the team will remain with YES for another 20 years beyond the already agreed-to 2021 season, sources said. There is talk that the Yankees could be paid an additional $400 million to $500 million by News Corp separate from the rights agreement itself.

            The option to increase News Corp's ownership to 80% turns out to be an option to buy out the entire share of Goldman, Providence and NJ Holdings, and evidently the Yankees have both purchase and sale rights at that point.

          • uyf1950

            It would seem one of the benefits of the internet and almost immediate news is also part of it's problem. Facts/updates continue to come out hours and probably days after what we all thought were the facts. Thanks for the update.

  3. Baseball Guy

    And they are going with the $189 million budget why?

    I'm not one of these, "If George owned the Team" Guys. I grew up in the 1980's and saw what George did, BUT, that being said, the Yankees operating like a small-market team is getting tired.

    I understand $189 million is a lot of money, but, most of that is sunk costs already and they need to continually invest in the product and continually improve the product.

    At this point, it seems the Yankees just print money – it would be nice to see them re-invest some of that money in the team this winter.

    • LarryAtIIATMS

      The money that News Corp is paying is not going to stay with the Yankees. It will go to the family that owns the Yankees.

      • And Goldman Sachs' partners.

        • LarryAtIIATMS

          Somewhere, Frank McCourt is ROFL.

          • dar34

            And George is ROIHG!

      • uyf1950

        That's probably true. But that doesn't address the yearly fees the Yankees will be receiving, and I'm not sure if anyone knows all the aspects of the agreement to keep the games on YES through 2042. Such as escalators in the payments based on specified criteria. As well as their share of the profits the Yankees (Global Entertainment Enterprises) will be receiving as what another blog called "significant minority ownership".
        Even if ultimately the Yankees have a 15 to 20% ownership stake in YES instead of 34% currently. Is nothing to sneeze at and still will give them a very, very nice revenue stream. Just my opinion.

  4. LarryAtIIATMS

    The report indicates something like 4-7% annual increases in the TV rights fee, which may or may not keep up with inflation, but which bears no relationship to the rate of increase we're seeing in these rights fees on the open market. Also keep in mind that if that 15-20% ownership stake does end up generating a nice revenue stream, then News Corp can exercise its option to take an 80% share of YES, thus reducing the Yankees' ownership stake to around 7%. That option is the rough equivalent of the opt-out clauses Soriano negotiated in his contract with the Yankees.

  5. Sabrina

    I need to make money fast. Because soon yanks will be up for sale lol

  6. ProfRobert

    When do you think the hacking of Buck Showalter's cell phone will start?

  7. brian

    why are we not talking about the elephant in the room here..

    the fact that NEWSCORP, one of the most slimy "conglomerates" out there may own 80%of yes sometime soon, and i'm conservative and feel that way about newscorp, imagine all the liberal fans if that guy who shall remain nameless is running the yankees???

    why couldn't george steinbrenner have one competent son who actually gives a crap about baseball and his fanbase/customers… was that too much to ask?

    • uyf1950

      Brian, we were talking about News Corp. and their current ownership stake and potential future ownership stake in YES. But just so we are all on the same page, you do understand that even before this the Yankees only owned 34% of YES so in effect someone or some groups other then the Yankees owned 66% of the YES. Effectively the Yankees only owned an interest in YES. They owned a minority interest before and they will continue to own a minority interest in the future be it a smaller minority interest but a minority interest nonetheless.

      • BrienJackson

        Pretty much that. Aside from the fact that all media conglomerates are basically equally bad so far as it goes, a rather large share of YES was already owned by Goldman Sachs, so as far as liberals* go you can't really go much lower than that in terms of opinion. Of course, a rather large number of teams have deals with the various Fox Sports RSNs, so my guess is that no one really cares that much who owns their team's television broadcast partner (or who owns the team, for that matter).

        *Anyone who follows me on Twitter should be aware of my own political sensibilities, I would assume.

        • uyf1950

          Brien, thank you for mentioning the fact that many teams already have a relationship with FOX Sports RSN's. I neglected to mention that in my comment. Also, while some here see this new partnership between the Yankees/YES/News Corp. as a negative I tend to see it as a positive. I've been a Yankee fan for more years then most who comment here have been alive. I've seen the good and the bad of what the BOSS did. From rescuing the Yankees from CBS to the late 70's and 80's teams to their current teams. Some good, some bad and some very good. But getting back to this deal. Maybe just maybe it will make the Yankees better. Better at developing talent, better at signing FA's and not just throwing money at guys like Pavano, etc… So instead of seeing the glass as half empty here I prefer to see it as more then half full. Just my opinion.

      • brian

        80% bro, that's not "a relationship"… that's a take over

        And I haven't heard anyone else mentioning how disgusting rupert murdoch and news corp truly are… and how painful it's going to be to be a yankees fan if HE is running this team in 5 years

        I understand that Goldman Sachs blatantly robbed the country and all these media empires are slimy, thats a good point, but news corp and murdoch are so blatantly non-truthful that having them run YES, and eventually, the Yankees team is tough to stomach

        • Marcus

          Is Murdoch still under in indictment in the U.K.? Wouldn't that prohibit him buying a MLB team?

        • BrienJackson

          Well, to put it in perspective, the vast majority of professional sports team owners are billionaires who suck up as much public money as they can get for their own pockets and hold their communities hostage when they can't otherwise get it. Then they turn around and extract every bit of profit they can get out of the enterprise even if they have to cancel games and threaten the entire season if they can't otherwise get concessions out of the players who actually attract the customers' money to the industry. So far as groups go, they're already about as loathsome and deserving of scorn as it gets these days. You could add Attila the Hun to the club and I'm not sure they'd be appreciably worse on the morality scale.

          There's so many things I'd change about the culture of professional sports ownership if I ruled the world, worrying about which loathsome billionaire owns the team (and hell, the team is already being run by Austerity Hal, slashing budgets as revenue increses and charging gobs of money to attend a game at a publicly financed stadium to pull every dime of profit he can out of the franchise) barely even rates on the outrage meter right now.

  8. uyf1950

    I have to say the speculation here about Murdoch/News Corporation buying the Yankees at some time in the foreseeable future is unbelievable. There is absolutely nothing that has happened to warrant or justify that speculation in my opinion. Fox owns numerous Regional Sports Networks across the country that pay for the rights to broadcast sports teams games. For Example: Fox Sports Southwest just recently negotiated a deal with the Texas Rangers. The Rangers aren't being sold to FOX or News Corp. FOX Sports is talks with the Dodgers on a new TV deal. The Dodgers aren't being sold to the FOX or News Corp. and the list goes on. For well intentioned fans to speculated or anything else that the sale of YESNetwork is anything other then News Corp/FOX/Murdoch foray into the largest sports media market in the US is folly. If anyone still has concerns google "News Corporation" and check out Wikipedia's list of their holdings. If that doesn't convince you that their interest is in the media markets and not sports teams or the Yankees nothing will.
    With that I'm done here for the night. I want to wish everyone a very Happy and Safe Thanksgiving. If you're driving, please don't drink.

    • BrienJackson

      Yeah, this. That News Corp has an interest in owning the biggest RSN in the country given their on network of RSNs isn't that surprising at all, and doesn't really say anything about any intention to buy the Yankees, or any intention for the current ownership group to sell, which, honestly, I don't see happening. For the life of me I don't understand why local media outlets keep trying to drum up rumors or expectations that the Steinbrenners are going to sell. I guess it's to scare Yankee fans with the prospect of Dolan buying the team, but given that the franchise is like personal ATM that spits out fresh million dollar bills AND gives you an extremely rare amount of stature and celebrity even as far as billionaires go, it certainly doesn't make any sense.

      • uyf1950

        Brien, to quote you "I don't see happening. For the life of me I don't understand why local media outlets keep trying to drum up rumors or expectations that the Steinbrenners are going to sell."

        I think the answer is a simple one. It increases their readership and or viewership. Anything controversial or negative about the Yankees always gets Yankees fans riled up and gives Yankee haters ammunition to spew their venom. Just my opinion.

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