August 2, 2007

THE CHANNEL THAT RUTH BUILT:

The dismantling of the Yankee empire: YES Network is the MVP of Steinbrenner's business empire, and it's for sale, report Fortune's Jon Birger and Tim Arango. Will the team end up on the block too? His son Hal says no. (Jon Birger and Tim Arango, August 2 2007, Fortune)

And what might a "full and fair" price be? Try a cool $3 billion to $3.5 billion. At that price, one could argue that the true gem of the Yankees business empire isn't the team itself but YES.

The team hasn't distributed profits to owners in about 10 years, two Yankees insiders say. (Responds Yanks chief operating officer Lonn Trost: "There have been distributions in the past and the expectation is there will be more in the future.) Meanwhile, YES brought in $340.5 million in revenue in 2006, up about 6 percent from the prior year, according to Kagan Media Research estimates. (YES doesn't release official financial data.) Kagan believes that 40 percent of that revenue - about $136 million - translated into cash flow.

The cash flow, of course, is the key to YES's valuation. John Mansell, a prominent sports-industry analyst, notes that stakes in other regional sports networks have traded hands recently at 19 times cash flow. So if YES, which is the cable home of the Yankees and Nets, can grow its cash this year by 8 percent or more - as Mansell thinks it will - a $3 billion valuation seems well within reach.


Except that isn't the entire value of the network tied up in Yankee telecasts? And why wouldn't the Yankees just seek another deal, or even create a new network, once they don't own YES?

Posted by Orrin Judd at August 2, 2007 11:53 AM
Comments

I got a chuckle out of the names that were thrown out by Fortune. News Corp. already tried to do that with FSN and the Dodgers purchase, and miserably failed. Cablevision already has a channel. Comcast doesn't do business in NYC. Verizon won't bid until they have many more folks on FiOS.

At any rate, $3B is significantly too much for a Yankees platform.

Posted by: Brad S at August 2, 2007 2:19 PM

Any purchaser will demand a long-term deal with the Yankees. Without that, the price will be much lower.

Posted by: pj at August 2, 2007 2:53 PM
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