Amazon is coming to New York – to grab a piece of the Yankees sports network.
Jeff Bezos’ tech giant has teamed up with the great baseball organization in an effort to buy the YES Network from its majority owner, 21st Century Fox, according to two people close to negotiations who have been identified because the deal wasn’t yet official. If it goes forward in its current form, the deal is expected to take a few months to close.
The Yankees will become the largest shareholder in the channel, a regional sports-focused network serving the New York metropolitan area that has been valued at just under $ 3.5 billion, the people said.This less than the approximately $ 4 billion it was worth five years ago, when 21
st Century Fox increased its stake to 80 percent.
Joining the deal are Sinclair Broadcasting, Redbird Capital, the Blackstone Group and others
The YES network was born out of a partnership struck in 1999 between the Yankees and the Nets basketball franchise. The Yankees, whose business operation has been led by Randy L. Levine, its president since 2000, formally took over the project in 2004 and sold a 49 percent stake to Rupert Murdoch’s 21st Century Fox in 2012. A second deal, in 2014, gift the Walt Disney Company, the new owner of most 21st Century Fox assets, is managing the current deal as part of its plan to sell YES along with 21 other regional sports networks. The sell-off of those properties was a condition of the Justice Department’s approval of Disney’s $ 71.3 billion acquisition of the 21st Century Fox assets last summer.
Media rights to Sports franchises are incredibly lucrative, but their value on traditional cable systems is as few people are willing to pay for traditional TV. A large part of the upside in sports rights now comes from streaming. For Amazon, owning a piece of YES could be to its prime program (which costs $ 119 a year), especially if membership included access to those games. That, a turn, could add more revenue, as Prime members tend to buy more on Amazon than casual online shoppers.
Amazon’s motivation becomes clearer when considering the fact that growth in the number of Amazon Prime members in the United States has recently slowed down. It hit 97 million members last year, up from about 90 million in 2017, according to an estimate from Consumer Intelligence Research Partners.
Amazon already streams “Thursday Night Football” on Prime, for which it had paid $ 50 million for one N.F.L. seasonings. With the rise of streaming, regional sports networks have found themselves in a tricky position. They are effectively the middlemen of sports rights; they get money from cable and satellite companies to carry the networks, but they, in turn, have to pay sports leagues for the rights to broadcast the games. Lately, cable and satellite companies have tried to pay less to these networks, given the decline in subscribers – but the sports teams are set to receive contractual rate increases every year.
Unlike broadcast rights, the streaming rights to Major League baseball games come up every two to three years. That means YES could potentially lose streaming rights to Yankees games in the near future. The league has been trying to unify streaming ownership, much like the N.F.L., so that it can extract more lucrative terms from internet and broadcast companies. That could dampen the long-term value of regional sports networks like YES.
Disney, along with AT&T and NBCUniversal, plans and aggressive move into streaming by the end of this year. Its deal for most of 21st Century Fox was a keystone to that plan. Fox’s regional sports networks would have become the “perfect complement” to Disney’s ESPN, the company’s chief executive, Robert A. Iger, said when announcing the deal in December 2017. But the Justice Department disagreed, and the two companies did not challenge the condition. on the merger imposed by the government. Disney already has a sports streaming app called ESPN + that has more than two million subscribers and will become an integral part of the company’s larger streaming strategy.
Disney’s acquisition has not formally closed yet, and the company has 90 days after the merger. official to sell the sports channels. The company already has approval from shareholders and regulatory bodies in the regions in which it operates.