Monday, November 19, 2012
Could Yanks say YES to takeover?
By Wallace Matthews ESPNNewYork.com
Hal Steinbrenner has never been comfortable in the New York media spotlight.
Rupert Murdoch is knocking on the door of Yankee Stadium. How long will it be before he owns the entire building, and everything in it?
According to a New York Times report, News Corporation, the multimedia behemoth run by Murdoch, is on the verge of acquiring 49 percent of the YES Network.
A senior New York Yankees official, who insisted upon anonymity, confirmed the impending deal, although the official insisted it was merely "the stockholders looking to monetize their investment."
"This has nothing to do with selling the team," the official said. "Under no circumstances will the team be sold."
And up until a few months before his death in 2010, George M. Steinbrenner was still running the Yankees, every bit as forceful and in command as he had been when he bought the team for $8 million in 1973.
Rupert Murdoch, on the other hand, loves to be the center of attention.
The point is, nothing is ever precisely the way the New York Yankees portray it to be.
George was in charge, until he wasn't. Joe Torre was the manager, until he was fired. And the team isn't up for sale.
Until it is.
The sale of nearly half of the YES Network to Rupert Murdoch may be as simple as the senior team official says it is, an expedient way for Goldman Sachs -- which makes its living buying and selling off assets -- to score a cool $1.5 billion or more on its 10-year-old investment.
Or it could be the first step in an exit strategy designed to get the Steinbrenner family out of the baseball business within the next three to five years.
There is compelling evidence to support both arguments. With many large corporations looking to cash out on investments before an expected corporate tax increase in 2013, it would seem to be the right time for Goldman Sachs to dump its share in the YES Network.
But in order for News Corp to acquire 49 percent of YES, a figure that the team official confirmed, Murdoch will need to buy more than just Goldman's 40 percent share of the network. How much of the remaining nine percent will come from the Yankees' 34 percent share is not known.
The fact that the Yankees are not taking the opportunity to increase their own share of YES to 51 percent, to ensure they retain control of their own network, indicates that they are willing eventually to cede that to Murdoch -- who reportedly will have the option of increasing his share of YES to 80 percent within five years.
Can you imagine The Boss allowing someone else, anyone else, to have control over an entity that he valued as much as the Yankees? And we're not taking about just anyone here, but a man every bit as power-obsessed and victory-crazed as Steinbrenner was.
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Remember that famous quote by John McMullen, a minority Yankees shareholder, who said "There is nothing in life quite so limited as being a limited partner of George Steinbrenner"?
Well, the same could be said about Rupert Murdoch. His history shows that once he gets his foot in the door, he winds up owning the place. There's little doubt that his aim is to take over YES. He is starting his own national sports network, FoxSports 1, and will need a strong regional network in New York to anchor it. The only question remaining there, it seems, is what he will call the network once he takes over.
And from there, how much of a stretch is it to imagine Murdoch, or his family, seeking to own the team as well? They've already dipped their toes into the water, owning the Dodgers for five unsuccessful years before selling to Frank McCourt in 2003.
Ever since Hal Steinbrenner assumed control of the team -- reluctantly, by most accounts -- after his father's death in July 2010, there has been a perceptible shift in the philosophy of the organization.
Unlike George, for whom winning was more than a goal, it was a pathology, Hal never really cared for the game or the business of baseball. Unlike his dad, he is uncomfortable in the spotlight, shuns the media and is rarely seen at the ballpark. I have never seen him in the Yankees' clubhouse and doubt if he has met many of his own players.
Last May, when the Daily News reported that the Yankees were exploring the possibility of selling, Hal Steinbrenner branded the story "fiction."
"Me and my family have no intention to sell the Yankees and expect it to be in the family for years to come," he said at the time.
But Hal revealed his true nature at spring training 2011 when he said: "I'm a finance geek. I guess I always have been. That's my background; budgets matter and balance sheets matter. I just feel that if you do well on the player development side and you have a good farm system, you don't need a $220 million payroll. You can field every bit as good a team with young talent."
And he is about to back up his words by insisting his general manager, Brian Cashman, trim the team payroll by 2014 from approximately $210 million to $189 million, the luxury-tax threshold, even as other teams are increasing their own spending thanks to a lucrative new MLB cable TV rights deal.
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Obviously, Young Steinbrenner is driven by impulses quite different from those that drove Old Steinbrenner, and being able to call himself the owner of the New York Yankees does not appear to be one of them.
The headaches of running a baseball team -- and not just any baseball team, but the signature franchise not just in baseball but probably all of professional sports -- are not his headaches. They were his inheritance, and he may well want to pass them on to someone else, especially now, with the value of the team at its highest and the possibility of some bleak years looming.
Remember, Cashman doesn't really have a $189 million payroll to work with, but more like a $75 million payroll, since he is locked into $114 million for six players, at least three of whom are aging and likely to decline before their contracts run out.
And it is only going to get harder to sustain that payroll with a monster of a ballpark that requires near-capacity crowds to satisfy its debt service, let alone turn a profit. In 2012, the Yankees won 95 games and their division, and made it to the American League Championship Series, the final step before the World Series.
And already, large swaths of their fan base -- which has been dismantled and remodeled into a smaller, quieter, wealthier and less loyal group -- have begun to peel off, with embarrassing stretches of empty seats visible in the ballpark during the final playoff games.
Perhaps the sale of nearly half the YES Network to News Corp is as simple as the Yankees team official is trying to make it appear.
Or perhaps the self-confessed finance geek has taken a look around his ballpark, at his roster and at his beloved balance sheets and calculated that it is time to get out while the getting's good.