Could Sale of Mets Threaten Yankees’ Empire State of Mind?

(The following is being syndicated from The Captain’s Blog).

Recent times have not been kind to Fred Wilpon.

The last five seasons haven’t been very kind to the Mets. Whether on the field or in the board room, the team has been besieged by a myriad of unfortunate circumstances ever since Carlos Beltran was mesmerized by a Adam Wainwright curve ball to end the 2006 NLCS. Not surprisingly, the Mets’ hardship has led to much ridicule, particularly from the less compassionate segment of the Yankees’ fan base. Despite the dark days still ahead, however, there is every reason to think the Mets could still have the last laugh.

In the three years since Bernie Madoff’s massive securities fraud was uncovered, Fred Wilpon has been desperately trying to maintain his hold on the New York Mets. Despite insisting at the time that the scandal would have no impact on his ownership of the team, subsequent events have proven otherwise. Since that time, which, unfortunately for the Wilpons, coincided with poor play on the field and a corresponding decline in revenue, the current ownership group has relied on debt to remain afloat. According to a recent report in the Daily News, those loans are about to come due.

The team is not for sale, not a piece of it, not a part of it. We are not for sale. We have no reason to sell. We have other money. Just because you guys don’t know how much money we have, we have other money outside of this, from diversity.” – Fred Wilpon, quoted by the New York Times, December 17, 2008

Despite Fred Wilpon’s fervent desire to remain as majority owner of the Mets, the prospect of looming debt payments and even further deflated revenue in 2012 could soon force his hand (while creditors, and perhaps even the commissioner, slowly pry loose his fingers). As Frank McCourt has learned with the Dodgers, the weight of debt can become too much of a burden, especially when the alternative is selling out and making a handsome profit.

Just about any circumstance compelling Fred Wilpon to sell the team is likely to be viewed a positive by Mets’ fans, many of whom have blamed his stewardship for the team’s inability to build a business model as successful as the Yankees. However, sometimes the devil you know is worse than one you don’t. Of course, that sentiment could also be expressed by baseball’s 29 other teams with regard to Wilpon’s ownership of the Mets.

Pay TV is the future of baseball.” – Angels Executive VP Buzzie Bavasi, April 17, 1981

Everywhere you look, the value of sports’ franchises is being driven by their attractiveness as a television property. Although this phenomenon extends back all the way to the early 1980s, it has been only recently that the dollar figures have really exploded. So, if (or when) the Mets are put up for sale, the level of interest should be intense, not only because the team plays in the nation’s top media market, but also because it holds an equity stake in SNY, a regional sports network (RSN). However, one potential bidder in particular seems to be a logical fit: Cablevision (via spin-off MSG, which is also controlled by the Dolan family).

If you’re paying $500 million for a TV deal, you’re better off buying the team.” - Robert Gutkowski, former head of Madison Square Garden, quoted in the New York Times, March 20, 1998

Throughout the 1980s and early 1990s, Cablevision and MSG, which then was independent from the cable giant, made occasional overtures to buy the Yankees from George Steinbrenner, and even as late as 1998, there were reports about a possible deal.  When each entity was unable to buy the team, they turned their attention to vying for the television rights. Steinbrenner leveraged this competition into a then historic 12-year, $486 million with Paramount-owned MSG. Dolan responded to losing out on the bidding by first tying to keep the network off its basic tier. Then, when that failed, he bought it.

In 1994, Cablevision and ITT purchased MSG from Viacom (which acquired the asset from Paramount in 1993). As  part of the transaction, Cablevision received the world’s most famous arena, the Knicks and Rangers, as well as the regional sports network bearing the MSG name. As a result of the sale, Cablevision went from being a smaller player on the New York sports scene to the only game in town. With its legacy Sports Channel and the newly acquired MSG, Dolan’s sports portfolio included every area sports team in the NHL, NBA, and MLB (the Mets were on SC and the Yankees on MSG).

The idea that we control something is less accurate than we have opportunities to do something with the distribution of that product that will be more successful than before.” – Charles Dolan, quoted in the New York Times, October 11, 1994

Charles Dolan built a sports empire at Cablevision.

Not longer after it was built, the Dolan’s sports empire began to crumble. First, the Yankees broke away to form the YES Network in 2002, and then the Mets followed suit with SNY in 2006. In both instances, Cablevision tried litigation to stop the formation of each network, but failed. With YES, the cable company went a step further by refusing to carry the station on its basic tier for an entire year, but that strategy also failed to stymie the new network. As a result, Cablevision was not only forced out of the baseball arena, but its MSG and SC properties were greatly marginalized altogether.

More recently, Cablevision, under the leadership of James Dolan, decided to spin-off its MSG-related properties into a standalone company named Madison Square Garden, while the network was revamped with more entertainment offerings to help offset the loss of baseball. Despite these changes, it’s still not hard to imagine Dolan salivating over the opportunity to fold the Mets, and SNY, into MSG, which alone reported well over $1 billion in revenue during its recently completed fiscal 2011.

Although Mets’ fans who also root for the Knicks might view a change from Wilpon to Dolan as going from bad to worse, the resources behind an MSG-led ownership are undeniable. If the Mets ever hope to compete toe-to-toe with the Yankees from a financial standpoint, then being under the Dolan’s umbrella would be a good place to start. Without a dramatic shift in ownership structure, the Mets could be looking at a lengthy rebuilding process, which would only serve to further entrench the team as a second class citizen.

From the Yankees’ perspective, having to compete with a well-heeled Mets’ franchise could present several challenges, especially when you consider how dependent YES is on its carrier arrangements with companies like Cablevision. Even though the Yankees have built themselves into a multi-billion dollar brand, their resources don’t even come close to what’s available at either Cablevision or its MSG subsidiary, so the prospect of an arms race with the Mets could be detrimental to the franchise’s long-term dominance of New York City.

Instead of laughing at the Wilpons, Yankees’ fans should be saying a prayer or two for the family’s solvency. Who knows, maybe Hal Steinbrenner should consider floating him another loan? With Wilpon as Mets’ owner, the Yankees have owned New York, a position that could be weakened by a change in the status quo. Then again, considering the black cloud under which most Mets’ fans seem to think the team operates, it’s probably just as likely that the Amazins will follow the path of the Knicks and Rangers and wilt under the guidance of MSG. Of course, that seems to be the way they are headed now.

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