The 2002 baseball season opens this week, but it won't be business as usual when it comes to television. Baseball's wealthiest (and arguably most successful) team—the New York Yankees—is launching its own cable sports network this season, and other teams may follow.
Most of baseball's 30 franchises sell their TV rights to the local cable network or, less often, a broadcast station. But the Yankees, Minneapolis and Baltimore think they may be able to make more money retaining the rights and developing their own networks.
"I'm not sure it's not more about entitlement," said Leo Hindery, the cable veteran tapped to lead the fight to secure distribution for the Yankees Entertainment & Sports Network (YES). "They get tired of reading someone else's annual report that says how much money he got off their rights."
So confident are the Yankees that they can make more with the do-it-yourself approach that they spent $30 million to get out of a deal with MSG Network, a unit of Cablevision's Rainbow Media Group. MSG had been paying the Yanks about $50 million a year for TV and radio rights.
YES is controlled by YankeeNets, the merger of the Yankees and the National Basketball Association's New Jersey Nets. YES is ready to reach 5 million homes in the New York market, which would generate at least $120 million in annual subscriber fees and $40 million in ad revenue.
The money looks good, but the network has been having trouble persuading Cablevision to carry it. Without the MSO's 3 million homes, YES's subscriber-fee and advertising estimates take big hits (see page 16).
Because the Yankees no longer get hefty rights fees from an independent media outlet, Major League Baseball teams will receive nearly 5% less from selling TV and radio rights this season—$445.2 million, according to BROADCASTING & CABLES exclusive annual baseball-rights survey (see page 20).
The survey also found that the migration of baseball from broadcast to cable TV is continuing. In 2001, on average, teams telecast 50.2 of their games over broadcast TV. In 2002, the average will drop 8.4%, to 46. (The averages include only games broadcast in a team's principal TV market.)
The regional cable networks led by Fox Sports Net continue to grab local rights. This season, Cleveland Indians games will be only on Fox Sports Net Ohio. The Cincinnati Reds and Montreal Expos also have no over-the-air TV. Last season, WUAB(TV) Cleveland broadcast 75 games.
The Minnesota Twins are poised to start Victory Sports, although a court battle with Fox Sports Net North could put the network on hold. Fox contends that it has the option to extend its rights deal for two years. The Twins say it was up at the end of last season.
As it stands, 105 Twins games will air on Fox Sports Net North. But, if the court rules for the Twins, Victory will be on-air in 60 days, says Kevin Cattoor, Twins COO and Victory Sports president. "The reason we're doing this is, Fox in essence has a monopoly; every time a rights deal comes up, the team is at their mercy."
Victory has a deal with ESPN for sports news and the rights to all University of Minnesota product and the Big Ten fare that ESPN produces, says Cattoor.
Victory has not nailed down any permanent cable-carriage agreements, but the network did air 13 University of Minnesota basketball games on Charter Communications systems earlier this year.
In Baltimore, once the Orioles deal with Comcast SportsNet expires after the 2006 season, the team plans to offer its own "24/7 regional sports network," says John Claiborne, general manager of Orioles Television. This season, the Orioles are producing and selling 71 broadcast-TV games on WJZ-TV and WNUV(TV) Baltimore as well as 59 on WBDC(TV) Washington.
"In larger markets, the concept of doing it yourself makes sense," Claiborne says.
Comcast SportsNet doesn't seem worried about an Orioles move. "With five seasons remaining in our deal, we're confident we will have a new deal that will extend our relationship," says Sam Schroeder, executive vice president and general manager of Comcast SportsNet Mid-Atlantic.
Fox Sports Net declined to comment on teams' producing their own cable channels.
The Philadelphia Phillies have part interest in Comcast SportsNet Philadelphia, the regional cable net that carries that team and others.
In some cities, media companies own the team and the network or station offering its games. Rogers Communications owns the Toronto Blue Jays and RogersSportsnet. Fox owns the Los Angeles Dodgers and their cable (Fox Sports Net West II) and broadcast (KCOP-TV) outlets.
Other teams will watch to see how the YES Network does. "We'll explore all our options including the possibility of going with our own regional network," says Ken Pries, vice president of broadcasting for the Oakland Athletics, whose broadcast deal with KICU-TV San Jose, Calif., and cable contract with Fox Sports Net Bay Area are slated to end after next season.
Launching a regional cable network may also have some appeal to the Milwaukee Brewers, whose agreement with Fox Sports Net North will end after next season. "It's something any team would look at," says Tim Van Wagoner, Twins director of broadcasting. "They would be silly if they didn't."
In-house production is more common in radio than TV. According to the B&C survey, eight teams retain their radio rights and produce and sell their games.