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Volume 24 No. 155
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News Corp. Completes Deal For Stake In YES Network, Reportedly Will Pay Yankees $500M

News Corp. will pay the Yankees $500M as part of the media company’s purchase of 49% of YES Network, a source said. The $500M, which was a separate inducement to get the Yankees to agree to sell the stake, is subject to MLB revenue sharing. The first $300M is due upon closing of the deal, which was announced Tuesday, and $200M in three years, the source said. The network is valued at $3B, but if News Corp. in three years exercises its option to increase its stake to as much as 80%, the valuation jumps to $3.8B, the source said. As part of the deal, the Yankees secured a rights extension through '42 that, due to accelerators in the contract, will pay the team $300M that final year, up from $85M this year. The Yankees’ stake in YES Network is declining from 34% to 25% as part of the deal, while private equity companies Goldman Sachs and Providence Equity will keep about 10% each. Former owners of the Nets will own the remainder. The source said even if News Corp. takes control of the channel, the Yankees will retain control over the broadcast of their own games (Daniel Kaplan, SportsBusiness Journal). A source said that News Corp. will "make a payment of $420 million to the Yankees that exercises" three five-year options and adds a five-year extension for YES to air Yankees games through '42 (N.Y. TIMES, 11/21).

SETTING THE TONE: In N.Y., Chozick & Sandomir note the acquisition "underscores the competitive and lucrative arena of televised sports." News Corp.’s Fox Sports division "already owns 19 regional sports networks nationwide." Adding YES Network would "strengthen that unit" as News Corp. prepares to "introduce 'Fox Sports 1,' a cable sports channel that would compete against ESPN." YES Network reaches "about 15 million homes" and is the most-watched RSN in the country. Even with Fox programming "that will eventually be added to YES, the Yankees will still control the channel’s content, so the pro-Yankees coverage is not likely to change over the next three years." When Fox "assumes the majority stake, it will run the business" (N.Y. TIMES, 11/21). CABLEFAX DAILY notes with News Corp. "expected to soon launch a national sports net, some see this as the programmer further flexing its muscle in sports" (CABLEFAX DAILY, 11/21). YES Network President & CEO Tracy Dolgin said, "Sports is unique. It's the only way you can get people to subscribe to a distributor -- a cable, satellite or telco operator. If you don't watch sports live, it's gone" (N.Y. POST, 11/21).

B1G OPPORTUNITIES AHEAD: USA TODAY's Michael Hiestand writes under the header, "Big Ten Expansion Boon For News Corp." With the announcements that the Univ. of Maryland and Rutgers Univ. will be moving to the Big Ten Conference, Fox' Big Ten Network will "try to turn Maryland and New Jersey into so-called footprint markets." BTN's business "right now isn't based on selling TV ratings to advertisers," but it does "get revenue through cable operators, from subscribers." In the net's "footprint states, cable operators pay about 80 cents per TV subscriber and give BTN broader exposure by including the channel on basic cable." In non-footprint states, operators "pay about 10 cents per subscriber and usually relegate the channel to a pay tier." Big Ten Commissioner Jim Delany said that BTN will move to "charge cable operators more in Maryland and New Jersey ... only that as current deals expire." He said, "We'll have discussions, and I'm sure those discussions will be constructive" (USA TODAY, 11/21). Delany also said that News Corp.'s purchase of the stake in YES Network was "a 'pure, unadulterated coincidence' with the pending addition of Rutgers, which craves attention from New Yorkers." In Chicago, Teddy Greenstein notes News Corp. "could try to bundle BTN with YES to get BTN distributed in New York" (CHICAGO TRIBUNE, 11/21).

LAWYER UP: Yankees COO Lonn Trost said that a "30-lawyer team advised various parties on the YES side of the transaction." Trost said that Yankees President Randy Levine, who also is senior counsel with Akin Gump in N.Y., "played a major role in the negotiations with News Corp." THE AM LAW DAILY's Brian Baxter noted Boies, Schiller & Flexner Partner Richard Birns is "leading a team from the firm representing YES on the News Corp. deal." Advising the Yankees and "their holding company Yankees Global Enterprises on the deal with News Corp. is Trost's former firm, Herrick, Feinstein." Skadden Arps M&A Partner Thomas Greenberg, Tax co-Head Matthew Rosen and Tax Partner Dean Schulman are "advising Goldman Sachs on the sale of most of its equity stake in YES." Weil, Gotshal & Manges M&A Partners David Duffell and Michael Weisser are "leading a team from the firm advising Providence Equity Partners on the sale of part of its stake." Fried, Frank, Harris, Shriver & Jacobson Senior Counsel Arthur Fleischer Jr. and Corporate Partner Peter Golden are "taking the lead representing YES' remaining stakeholder N.J. Holdings." News Corp. "turned to teams of lawyers" from Hogan Lovells and Jenner & Block (, 11/20).