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What Could the YES Sports Deal Mean for Amazon?

By Stephen Lovely – Sep 23, 2019 at 9:55PM

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Amazon gets involved in a regional sports network deal with the Bronx Bombers.

Disney's (NYSE: DIS) blockbuster deal with 21st Century Fox set the stage for big streaming video moves. But before Disney+ could become a reality, Disney had to get regulatory approval for its massive merger, and that ended up requiring certain 21st Century Fox assets to be excluded from the deal. Among those were the Fox Sports regional sports networks (RSNs). And that presented an opportunity for streaming rival Amazon (AMZN 1.71%).

The bulk of the Fox RSNs were acquired by Sinclair Broadcast Group (NASDAQ: SBGI), and at a very reasonable price. But YES -- the RSN that airs New York Yankees games, as well as Brooklyn Nets and New York Liberty games -- was different. Sinclair didn't get full ownership of that network, and now Amazon has a foothold in sports streaming. Here's what happened and why it matters.

Two men in business attire shake hands

Image source: Getty Images.

What happened with YES?

The reason that YES was different from the other Fox RSNs was its history. YES was founded by a holding company called YankeeNets, which was run by -- you guessed it -- the New York Yankees and the then-New Jersey Nets. After the Nets changed ownership, their share of the network was put up for sale, was acquired by News Corporation, and ended up in the hands of 21st Century Fox. Then, in 2014, 21st Century Fox acquired more shares and took control of the network. This somewhat complicated history left YES with some unique issues that were not present in 21st Century Fox's other RSN holdings.

Chief among them was the fact that Yankees Enterprises retained right of first refusal on the purchase of 21st Century Fox's shares, should they ever be put up for sale, which, of course, they were, as a condition of the Disney deal.

There was just one problem: The Yankees didn't have enough money to buy the network. But if they could find partners, they could get YES back under their control.

Like other tech companies, Amazon has a ton of cash, and it also has big interests in streaming. And few streaming properties are as valuable as live sports. So Amazon pitched in and secured an interest in YES that, while relatively small, could be of outsize importance in streaming.

In the end, YES reportedly went for $3.47 billion to the Yankees, Amazon, Sinclair, and private equity investors. That price was for 80% of the shares -- the Yankees already owned the other 20%. Amazon reportedly holds 15% of YES under the new ownership structure, and has the right to buy more.

YES and Amazon's streaming future

It makes sense that Amazon would want to increase its stake and have a larger say in what YES does. Amazon would undoubtedly love to have the super-popular Yankees playing ball live on its streaming platforms.

Live sports are a big deal in streaming -- a rare source of reliable "appointment viewing" -- and the market for sports streaming is still developing; there's no "Netflix of sports" dominating the space. That's why tech companies like Facebook, Twitter, and Alphabet have all cut deals to put streaming sports on their platforms -- even if those platforms are not primarily streaming-focused.

Amazon, too, has cut deals for live sports. Among other agreements, Amazon has cut a $130 million streaming deal with the NFL. It's nothing new for Amazon to be interested in sports. And now the company is significantly closer to getting the world's most popular baseball team on its streaming platforms.

The Yankees aren't everyone's favorite team, but they are unquestionably the most valuable franchise in baseball: Forbes says they're worth $4.6 billion. The team is massively popular, and offering nationwide streaming of Yankees games could be a big boost for Amazon in the streaming wars. Netflix doesn't offer live sports, and Hulu only offers them in its Hulu + Live TV bundle, which costs $44.99 per month. Sometime soon, Amazon Prime could become very appealing to Yankees fans.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Stephen Lovely owns shares of Amazon, Facebook, and Netflix. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Facebook, Netflix, Twitter, and Walt Disney. The Motley Fool has the following options: long January 2021 $60 calls on Walt Disney and short October 2019 $125 calls on Walt Disney. The Motley Fool has a disclosure policy.

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