YES Carriage Deal Craters

Just two days before the start of the Major League Baseball season, Yankees Entertainment & Sports Network's place on the Cablevision Systems Corp. lineup was in jeopardy.

An interim agreement by the parties reached earlier in the month broke down, leaving both sides pointing fingers and YES and Cablevision again at an impasse last Friday, thus adding another chapter to the continuing dispute between programmers and distributors over sports costs.

The parties had reached a one-year interim carriage agreement on March 12, mediated by New York Mayor Michael Bloomberg, former AOL Time Warner Inc. chairman Gerald Levin and former Time Warner Cable New York City president Richard Aurelio. That accord put a temporary halt to what had been a 15-month impasse, one that had kept the regional sports network from Cablevision's 3 million subscribers in the New York DMA.

YES is controlled by YankeeNets, the sports-and-media company that owns the Yankees, the New Jersey Nets and the New Jersey Devils. The channel airs Yankees and Nets games, along with other sports programming.

Cablevision was expected to pay YES $2.12 for each subscriber who received the regional sports, regardless of whether it is part of a basic, tier or an à la carte offering.

The impasse with Cablevision stemmed from YES seeking expanded-basic positioning and about $2 month per subscriber. Cablevision, which owns Madison Square Garden Network, the channel that held Yankees' game rights before YES, had held out for premium-service treatment.

Early Friday afternoon, Cablevision issued a statement pointing a finger at Yankees owner George Steinbrenner and YES investor Goldman Sachs.

"It appears that George Steinbrenner, on behalf of the Yankees, and Richard Friedman, on behalf of Goldman Sachs, have decided to renege on this agreement because it doesn't guarantee them enough money, and because it could have required the YES Network to show its financial records and resulting profitability to an independent arbitrator," said Cablevision president James Dolan in a statement.

YES chairman and CEO Leo Hindery said the deal fell apart because Cablevision refused to sign finalized versions of the March 12 draft documents, large portions of which were handwritten, and required board approval as had been provided for.

"We really don't know why Cablevision has walked away from this deal, which reflected compromises on both sides of the table," Hindery said in a statement. "After a series of meetings with the facilitators, we thought we had a framework on March 12 for the final agreements, and in good faith we participated in a press conference announcing the tentative deal.

"YES delivered to Cablevision fully executable versions of the draft documents on March 14 and requested a meeting to close the deal. For the following week, there was no response from Cablevision, despite repeated written requests and follow-up telephone calls, towards finalizing the draft documents of March 12."

Hindery said talks resumed on March 25, but Cablevision refused to sign the agreement and set a deadline on Thursday at midnight for the negotiations to conclude.

At a late Friday afternoon New York press conference, Hindery said he is open to negotiating with Cablevision through Sunday night, and said it would only take three hours to get the service on the MSO's systems.

Cablevision did not return calls seeking a response to Hindery's comments by press time.

Also at that conference, New York State Sen. David Patterson said he would introduce a bill Monday that would force vertically integrated companies, such as Cablevision, not to discriminate against competitors.

The parties had agreed to binding arbitration on Feb. 1, 2004, if they can't conclude a long-term deal on their own before then.

In a March 24 letter sent to Dolan and Hindery, Aurelio and Levin wrote that "we expect the parties to abide by the interim agreement reached on March 12." The missive stated, "Most of the issues raised in recent correspondences relates to the rules of arbitration, Since arbitration will be triggered only if the parties do not agree to a long-term agreement over the next few months, there is ample time to resolve such differences."

The letter said a meeting had been set for April 14 to commence the long-term negotiations.

The YES Network briefly pulled the simulcast of the WFAN radio program Mike and the Mad Dog
off the air Friday, right before the hosts were scheduled to interview Jim Dolan. The show was restored about a half-hour later, before an interview with Hindery.

"That was a screw-up — I didn't make it," Hindery said in the interview, adding that YES was trying to cut away to his press conference. "That shouldn't have happened. It was never intended to happen."

Asked during that interview if the Yankees' game against the Toronto Blue Jays would appear in Cablevision homes on March 31, Hindery said no.