Dolan gets whupped, by George
The words were familiar.
In the late 1980s they were spoken by Cablevision founder Charles Dolan
during his battle with the Madison Square Garden Network.
On Wednesday, his son James, the president of Cablevision, which also
owns the Garden, its teams, its network and Fox Sports New York,
recycled those lines in reaction to a ruling by three arbitrators making
the Yankees Entertainment & Sports Network available on "expanded basic"
to Cablevision subscribers.
"This ruling is a significant step backwards that ignores the consumer's
desire for fairness and choice - core principles that were the basis of
Cablevision's dispute with YES," Dolan said.
His words ring hollow, especially to anybody who has experienced
Cablevision's definition of "fairness." The company's battle with YES
had nothing to do with the "desire" of any consumer and everything to do
with Cablevision, a sanctioned monopoly, looking to crush YES so the
fledgling network would not compete with MSG and FSNY.
Dolan's hard-line stance backfired.
It also gave George Steinbrenner a victory as big as - maybe even bigger
than - any Yankees World Series title.
With Cablevision, and all area cable systems, carrying YES on "expanded
basic" this year at a cost of about $1.93 a month per subscriber, YES is
guaranteed a major stream of revenue. YES will be able to attract
advertisers once reluctant to buy time on the network because it could
not deliver enough eyeballs.
What initially looked like a shrewd business move for Dolan turned sour.
If Cablevision had elected to engage in good-faith negotiations from the
get-go, he would have come away with a better deal.
Flash back to when Cablevision was thinking about purchasing the Garden,
and the MSG Network. One crucial factor that helped justify the roughly
$1.5 billion price tag was Cablevision's belief it could save big bucks
on the Yankee TV package.
Owning both MSG and FSNY, along with the area's largest cable system,
Dolan probably believed Steinbrenner would have no choice but to re-sign
with MSG when the contract expired in 2000. Logic said Steinbrenner
would either have to settle for no increase in rights-fee payments (he
was coming off a 12-year deal worth $486 million) or take a pay cut.
Instead of coming to Dolan hat in hand, Steinbrenner entered wielding a
club. He asked for a 10-year deal worth $1.4 billion. If he didn't get
what he wanted, Steinbrenner said, he would start his own network.
Dolan didn't believe Steinbrenner. He underestimated The Boss' resolve
and stubbornness.
Instead of trying to engage in any substantive negotiations with
Steinbrenner, MSG filed suit against the Yankees to extend the TV
contract for "an unspecified number of years," which led to a one-year
extension.
Following that blunder by Dolan, things transpired as expected.
Steinbrenner started YES, bringing in Leo Hindery to run the network.
Dolan wouldn't negotiate. He offered 55 cents per Cablevision subscriber
to carry YES. The offer was laughable considering most regional sports
networks, including MSG and FSNY, were averaging $1 or more per
subscriber.
At any time in this process, going back to 2000, if Dolan had negotiated
with Steinbrenner with serious intentions of getting a deal, this story
would have had a different ending.
MSG Network could have ended up owning Yankee TV rights outright for at
least 10 years. If that were the case, there would be no YES. With the
Yankees on MSG, network suits would have had a true marquee team with
power to alter the bottom line.
And if Dolan was serious about doing a deal with Hindery, once YES was
up and running he would have saved himself some money. Hindery was
looking for $2.12 per subscriber, but would have cut a deal for $1.82 -
or less. Now Dolan is paying $1.93 per subscriber.
To offset that cost, Dolan immediately raised subscriber rates on
Cablevision's "expanded basic" tier by 95 cents a month. No surprise,
especially to Cablevision subscribers who are used to seeing their rates
raised with no reasons attached.
YES' deal with Cablevision lasts for six years.
Dolan said he is looking forward to the day "when we can revisit this
issue."
Some guys never learn