The Yankees are to sports media what the Beatles were to the recording industry. Not only can they claim the most World Series wins and the most No. 1 hits, respectively — they've changed the rules of the game, again and again.
Just as the Beatles broke boundaries when they didn't release a single off "Sgt. Pepper's Lonely Hearts Club Band" and when they formed their own record label in 1968, the Yankees too have set trends and transformed the businesses of any company that's held their television rights.
They've been on local television since debuting with Dumont TV in 1949, several years before television became a nationwide craze. In 1951 they moved to WPIX Channel 11, where they stayed for nearly a half-century.
The Yankees were the first team to have a nationwide network of radio stations carrying their games.
The Yankees made their cable television debut on SportsChannel in 1979. Then in 1988 they reinvented the notion of what a local rights deal could be worth by signing a 12-year, $486 million deal with New York regional sports network MSG.
That was only a precursor to the bold move that would come next — the Yankees forming their own regional sports network, valued by Wall Street at $850 million before it ever televised a game.
Over the last few decades, media entities have seen the Yankees as more than just valuable programming — as a platform on which to build their entire businesses.
"MSG Network was a six-month service, and that's all it would be unless it got baseball," remembers Bob Gutkowski, former president of MSG. "We had to make a very bold step."
MSG paid an average of nearly $340,000 per game over the course of the deal, more than triple what the Yankees had been getting before and far more than they could hope to generate in advertising sales.
But within two years of adding the Yankees, MSG's base of subscribers went from 1.9 million to more than 5 million. Its per-subscriber fee grew from a range of 22 cents to 80 cents per month all the way to $3.70 per month by the time the deal was over. By then, MSG and SportsChannel, renamed Fox Sports Net New York, had merged, and its parent company had a virtual monopoly on New York regional sports television.
MSG controlled all the rights to locally televised Yankees games but sold 50 games a year to WPIX to keep games on free television. At one time, WPIX carried about 140 games a year.
Many innovations in sports broadcasting originated with WPIX's coverage of Yankees games, according to Marty Appel, who was the head of Yankees public relations from 1968 to 1977 and then joined WPIX from 1980 to 1992, producing Yankees telecasts himself in the later years.
Appel said WPIX was the first to use a center-field camera, one of the first to televise games in color (starting in 1965), and the inventor of the instant replay, in 1959.
"They began videotaping the games and doing highlights on a postgame show," Appel remembers. "A no-hitter was broken up and Mel Allen asked on the air if they could go to the tape. The networks got credit for [inventing instant replay], but it actually happened right during that game."
WPIX lost the Yankees in 1999 and picked up the arch-rival Mets, a switch that New York baseball fans still have trouble getting used to. Now, 20 Yankees games a year are shown locally on WCBS-TV, pre-empting network programming.
But that's merely a footnote in the bitter, very public series of battles that have taken shape over the Yankees' media rights since the MSG deal ended in 2000.
The Yankees decided to launch their own network, and MSG sued, saying the Yankees had violated the right-of-first-refusal clause in their contract. Eventually, MSG got one more year of rights to the Yankees, then accepted a $30 million buyout. The Yankees launched the YES Network for the 2002 season.
Goldman Sachs and other investors paid $340 million for about a 40 percent stake in the network, money that went to pay down team debt.
Launching YES shielded the Yankees from MLB's revenue-sharing system, because the profits from the network, split between the Yankees and YES' investors, are not subject to revenue sharing. Rights fees paid to the team are, but YES paid the Yankees only a $56 million per year rights fee, while MSG indicated it would have been willing to pay up to $100 million per year to keep the team.
What transpired from there has been a well-documented chapter in the history of the Yankees and sports media, but the end of the story hasn't yet been told.
Cablevision, the New York area's largest cable operator as well as owner of MSG and Fox Sports Net New York, said it would not carry the YES Network to nearly 3 million New York area cable subscribers. Then, just hours before the 2003 season started, the sides came to an accord. Cablevision would carry YES but would charge customers an extra fee for it, and do the same with MSG and FSNNY.
The settlement is for only one year, and the sides have agreed to binding arbitration if they can't reach a long-term agreement. Since that deal was announced, Time Warner Cable has announced plans to move YES to a premium tier, and cable operators all over the country have said they hope to follow Cablevision's lead by moving other regional sports networks to pay tiers.
Such a move would radically alter the economics of sports television, and not work in the favor of regional sports networks or the teams that collect millions of dollars in local rights fees. But if YES is a long-term success and can stay on basic cable, it will give momentum to the nearly dozen other teams looking to launch regional sports networks.
"YES is the poster child for the initiative, and in a painful sort of fashion it has been helping set the rule for other ballclubs," said Leo Hindery, YES' chief executive officer. "We're nearing the end of our finish line one way or the other, and it would be premature for someone [else] to start up their own [network] until they see how this plays out."
