Thursday, February 4, 2010

Looking Back On The YankeeNets Partnership

Good morning Fackers. Mired in an abhorrent season that is on pace to be the worst in NBA history, the New Jersey Nets are less than an afterthought for most Yankee fans. They serve only as off-season filler for YES, killing time between episodes of Hot Stove and Yankees Magazine. Monday, the news broke that the Nets were close to a deal that would see them leave the Meadowlands to play the next two seasons at Newark's Prudential Center, and then presumably make their long awaited move to Brooklyn in 2012.

Moving is nothing new for the Nets. The Rock would be the seventh different arena to house the team since their inception in 1967, joining such sports meccas as the Teaneck Armory and the Rutgers Athletic Centers as courts they called home. But there is a certain irony in the Nets now reaching a deal to join the Devils in Newark, as it was the proposed construction of a Newark arena that proved to be the final straw in breaking the ambitious, if ultimately unsuccessful, YankeeNets partnership.

In the midst of their 114 victory 1998 championship season, the Yankees were approached by Cablevision, who presented an offer to purchase the club from George Steinbrenner and his partners. Cablevision owned MSG Network, which had carried Yankee games since 1989 as part of a then-record 12 year, $500 million dollar television rights contract that changed that landscape of TV deals for professional sports teams. With that agreement nearing expiration, Cablevision was looking to consolidate their position and maintain their monopoly on the rights of all seven major sports franchises in the metropolitan area. Cablevision already owned the Knicks and Rangers, the marquee basketball and hockey franchises in the area, and were looking to add the area's most valuable franchise to their portfolio.

Negotiations continued into the off-season, and just as it seemed a deal was imminent, it fell apart over the issue of how much control George Steinbrenner would exert as the Yankees managing partner from a minority ownership role. With Cablevision off the table, the Yankees turned to the Nets, and in 1999 YankeeNets was formed as a holding company, owning both franchises. The following year they added the New Jersey Devils to the fold, purchasing the club in the midst of their run to the 2000 Stanley Cup. Interestingly enough, the Devils had been owned for their entire history by Dr. John McMullen, the former Astros owner and a one-time minority owner of the Yankees who said "Nothing is so limited as being one of George's limited partners".

With three major professional franchises in their holdings, from a business standpoint YankeeNets was well positioned to leverage their collective holdings into favorable arrangements. With the Yankees TV deal with Cablevision expiring after the 2001 season, and the Nets deal expiring in 2002, the two teams could collectively negotiate for new deal, or even form a network of their own. Meanwhile, by adding the Devils to the group, the partnership contained two New Jersey based teams desiring a new arena, leaving them better positioned to work towards a new home.

As we all know by now, the first proposition came to pass. Together, the Yankees and Nets offered enough year round programming to establish their own regional sports station, and the highly successful YES Network launched in early 2002. The second issue ended up being the undoing of the partnership. Both the Nets and and Devils were in favor of building a new arena in Newark, But as individual business entities, despite success on the court and on the ice, both teams were losing money and couldn't secure enough funding to finance the project. Given the financial state of the two teams, Steinbrenner was unwilling to put up the remaining funds. This fractured the partnership, and when a resolution couldn't be reached, the dissolution of YankeeNets followed. The Devils and Nets were sold in early 2004 and YankeeNets was renamed Yankee Global Enterprises. It still serves as the holding company for both the Yankees and the YES Network.

While the partnership lasted just five years and fell short of all that seemed possible at its formation, the brief existence of YankeeNets benefited the Yankees in ways they are still enjoying today. It allowed for the formation of the highly successful YES Network, providing the Yankees with an extremely lucrative revenue stream. Though the two teams are no longer linked from a business standpoint, the continued presence of the Nets on YES provides the network with needed winter programming, allowing it to be viable year round. And if nothing else, the YankeeNets partnership prevented the Yankees from reopening sale negotiations with Cablevision. Looking back on the train wrecks that both the Knicks and Rangers have been for the past ten years, I shudder at what might have been had the Yankees falled under the Dolans umbrella. If that's not enough to get you to have a little pity on the 4-44 Nets, nothing is.

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