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Media Ownership Could Hurt Game

Tal Smith thought about the prospect of Cablevision buying a large part of the New York Yankees and sounded depressed. In baseball these days, it seems only the rich get richer.

"The small markets are getting left behind," the Houston Astros president said Monday. "It doesn't generate more revenue. If anything, it makes their competitive position worse."

Cablevision Systems Corp. is negotiating with George Steinbrenner to buy a major interest in the Yankees, giving the World Series champions access to even more money to buy big-name free agents. The deal, by some accounts, is worth $500 million to $600 million.

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  • By other accounts, that's the value being discussed for the share of the Yankees the cable company would be buying -- roughly 70 percent. In that case, the value of the entire team would be closer to $850 million.

    "Some of the numbers for the sale seem low to me," said Neal Pilson, the former president of CBS Sports and head of a sports consulting firm -- and also a former Cablevision director. "We're talking about New York, the biggest market in the country."

    Cablevision owns the Yankees' local television rights under a $486 million, 12-year contract that expires after the 2000 season. Under a new 8- to 10-year contract, Pilson estimates the Yankees' rights would be worth an average of $100 million to $150 million a season.

    That's what makes the Yankees and other large-market teams valuable media properties. A division of Rupert Murdoch's News Corp. bought the Los Angeles Dodgers this year for about $350 million, and that deal included Dodger Stadium and the land around the ballpark.

    "The Yankees' revenue or the Dodgers' revenue or the new stadium in Houston or Milwaukee does not impact on Kansas City or Montreal," Smith sid. "They still have to be valued independently. For those clubs, it doesn't generate anything but more red ink."

    In 1998, the revenue of the 30 major-league teams ranged from a high of $170 million to a low of $35 million, according to estimates compiled by the commissioner's office.

    Not all franchise values have skyrocketed. John Henry has a deal to buy the Florida Marlins for $150 million, and a group headed by New York lawyer Miles Prentice has a $75 million deal to purchase the Kansas City Royals.

    "Franchise values have very local effects," commissioner Bud Selig said."What a franchise in New York is worth doesn't necessarily translate to Kansas City."

    Selig isn't concerned about the influence of TV companies in baseball. In addition to the Dodgers, Time-Warner Inc. owns the Atlanta Braves, the Tribune Co. owns the Chicago Cubs and The Walt Disney Co. (the parent of ABC) has operating control of the Anaheim Angels and is in the process of buying 100 percent of team.

    "I happen to think the media companies have been very good owners and have been good for the game," Selig said. "In many cases over the 25 years, it's been the individual ownerships, not the corporate ownerships, that have exacerbated the problems."

    While Steinbrenner would remain managing general partner of the Yankees even if the deal goes through, and thus maintain operating control, Murdoch would have major influence with the Yankees' largest limited partner -- Cablevision. That's because Fox Entertainment Group Inc., a publicly listed News Corp. spinoff that technically is the Dodgers' owner, also owns 40 percent of Rainbow Media Holdings Inc., the Cablevision subsidiary that owns a majority interest in Madison Square Garden, the NBA's Knicks and the NHL's New York Rangers.

    Through Rainbow, Cablevision CEO Charles Dolan and Murdoch are partners in Fox Sports Net, the regional cable conglomerate that directly and indirectly has the TV rights to 24 of the 30 major-league clubs. Fox's flagship network also has the major share of baseball's national network TV rights as part of a five-year contract that runs through 2000.

    Some owners think these relationships are dangerous.

    "Any time you get ownership that can benefit another business by the operation of the team, you have potential problems," said Jerry Reinsdorf, the controlling owner of the Chicago White Sox nd the NBA's Chicago Bulls. "Not that it means there are problems, but there are potential problems. That's all I'm willing to say for now."

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