Yankees fans still bitter over last season's World Series swoon at the hands of the unheralded Florida Marlins may have reason to smile now. The Yankees Entertainment & Sports (YES) Network was handed a victory in a binding arbitration dispute with Cablevision Systems (NYSE:CVC). According to the terms outlined, Cablevision will be forced to offer YES to over 3 million subscribers as part of its basic cable package.
In return, YES will receive $1.83 per subscriber, short of the $2 the network had been seeking. It appears arbitration was influenced by a precedent in which Fox Sports Net successfully lobbied to have its network included as part of Cox Communications' (NYSE:COX) basic cable platform.
The upstart YES Network began operations in 2002, offering a variety of sports-related programming. Viewers in New York, New Jersey, Connecticut, and Pennsylvania enjoy 130 televised Yankees games per season, as well as minor league action from Class AAA affiliate Columbus Clippers and the Class A Staten Island Yankees. Fans of other sports also tune in to watch New Jersey Nets basketball, regional college sporting events, classic sports, and biographies.
Problems first surfaced in 2002 when Cablevision, citing cost concerns, refused to include YES with basic cable. Instead, it bundled the network inside a pricier sports package. YES balked at the proposed arrangement, essentially leaving millions of Yankees fans without coverage of their beloved pinstriped Bronx Bombers. About 45,000 irate viewers retaliated by defecting from Cablevision, many of them to satellite television. The contentious two-year battle that ensued finally reached a tentative cease-fire when New York Mayor Michael Bloomberg and State Attorney General Eliot Spitzer stepped in to arrange an interim agreement until the issue could be settled in arbitration.
Chalk this up as yet another win for George Steinbrenner. The enigmatic Yankees owner owns 60% of the YES network, and the victory will double his core New York audience. With the possible exception of Mets fans, viewers in the New York area will applaud the inclusion of YES as part of Cablevision's basic package.
Cablevision shareholders, however, have little reason to cheer. Persistent subscriber loss is hampering top-line growth, net losses in 2003 reached $283 million, and the company is saddled with a mountain of long-term debt ($7.7 billion at last count).
Cablevision has come out swinging in the bottom of the ninth, donning its rally cap and announcing a partially offsetting $0.95 cent rate hike. This knee-jerk reaction may be sound tactically, but will further alienate an already disgruntled subscriber base.
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Fool contributor Nathan Slaughter is a dedicated Cubs fan who refuses to follow the American League until the designated hitter has been abolished. He owns none of the shares listed, but is convinced the Cubs' starting rotation will pave the way to that elusive National League pennant.
