This post has been read 1047 times!
May 28, 2012 By Steven Greer
The Daily News recently reported that rumors are flying within the ranks of Major League Baseball offices that the Yankees managing general partner Hal Steinbrenner is shopping around the Yankees for sale. The distressed LA Dodgers were recently sold for nearly $3 Billion. The article listed a few reasons why this would be a good business decision, but did not mention the most important reason why the valuation for the Yankees might be at its peak right now.
According to Forbes, The majority of the revenue for the Yankees parent company, Yankee Global Entertainment, LLC, is derived from Cable TV deals and their cable TV YES Network. In 2011, YES Network earned $400 Million in revenue, compared to $325 Million from ticket sales at the stadium.
Cable TV is a cash cow that provides the largest portion of the revenue pie for companies such as Disney, with ESPN, and News Corporation with Fox News, FX and European satellite stations. The new Yankee Stadium is funded mostly by the YES Network. However, cable TV is also a big bubble about to burst very soon, and the media does not report on this for obvious reason.
As we have previously reported, the cable TV content providers, such as YES and ESPN, are jacking up their fees they charge to the cable provider companies, such as Comcast or Time Warner. Those fees are, in turn, passed along to the consumer. The typical cable TV subscriber now pays $150 or more per month simply receive hundreds of channels of bad TV shows. Young adults are watching less and less TV and turning to video content straight from the Internet via Netflix, Hulu, etc. As the smaller screens, like iPads, get better and better, the need for cable TV is diminishing. Once a really smart living room 50-inch TV with built-in Internet access reaches the market, people will cut their cable TV subscriptions rapidly. This could all happen within 12-months.
Another challenge facing the richest team in baseball is the MLB luxury tax, which will make the sport more like the NFL, where all teams across the country have greater parity in talent. And then, of course, the global depression is not letting up. All of these financial pressures make the prospect of cashing in now by selling the Yankees a smart prospect for the Steinbrenner family.