Will $400-500 Million YES Network Sale Bring Back Yankees' Blank-Check Payroll?
New York Yankees principal owner Hal Steinbrenner has publicly stated his intention to get the team's payroll under the $189 million luxury tax threshold for 2014. He's all but declared it a mandate.
“I’m looking at it as a goal, but my goals are normally considered a requirement,” Steinbrenner said to reporters, including The New York Times' David Waldstein in March.
“Is it a requirement with baseball that we be at 189? No, it’s not a requirement. But that is going to be the luxury tax threshold, and that’s where I want to be.”
All right, but will Steinbrenner be singing the same tune if $500 million suddenly drops into his lap? According to ESPN's Darren Rovell, that's what the Yankees could receive from the sale of 49 percent of the YES Network to News Corp. for extending the team's broadcast rights with the channel for another 20 years.
There's more to the story than this development, as ESPN New York's Wallace Matthews reports. First and foremost, this is being seen in some circles as a precursor to News Corp. (the parent company of Fox) eventually buying the Yankees from the Steinbrenner family.
But how this affects the baseball side of the operation is the more compelling story.
Clearly, the Steinbrenner scion intends to run the Yankees as a business, calling himself "a finance geek" when speaking with The New York Times and saying that budgets and balance sheets matter to him.
That's quite a different approach than his father George Steinbrenner took when he was in charge of the team. Much like the Los Angeles Dodgers now, the Yankees seemingly had no regard for a budget when George ran the team. All he cared about was putting together the best team in baseball year after year, no matter the cost.
But local television contracts have significantly changed the competitive balance in MLB. Along with the Dodgers, the Texas Rangers and Los Angeles Angels are major players for top talent thanks to their massive multimillion, and perhaps billion, dollar TV deals.
The Yankees are still the big dog, with YES Network worth $3 billion. But plenty of other teams are now barking loud as well.
The gap between the Yankees and their competitors is even smaller when Hal Steinbrenner and general manager Brian Cashman choose to stay under luxury tax thresholds rather than flex their considerable financial muscle for an advantage.
As Matthews points out in his article, the Yankees may have a $189 million payroll to work with on paper, but Cashman is really working with something closer to $75 million because of $114 million tied up by six players. Alex Rodriguez, Mark Teixeira and CC Sabathia likely won't give the Yanks good value toward the end of their contracts either.
Consequently, the Yankees have apparently been bargain shopping thus far into the offseason. Outfielder Nick Swisher won't be re-signed and the team reportedly intends to fill his position with a platoon arrangement.
Torii Hunter or Melky Cabrera would have fit nicely in right field, but the Yankees don't want to sign anyone to more than a one-year contract right now.
That could leave the Yankees to re-sign Raul Ibanez to be the left side of a platoon with someone like Jonny Gomes taking the right side. Maybe Andruw Jones could be brought back to bat against left-handed pitching too.
That's not exactly inspiring, especially to a demanding fanbase that showed its dissatisfaction by leaving many seats empty during playoff games at Yankee Stadium. Yankees fans want their team to do something more than bring back Hiroki Kuroda and sign a platoon outfielder or two.
Oh, this team also needs a catcher.
Can the Yankees sell this to their fans when they'll receive $270 million from News Corp. by selling 49 percent of YES Network? That doesn't even include the aforementioned $400 million to $500 million that will come from extending the channel's rights to game broadcasts.
The reason the Yankees are so concerned about the luxury tax is that they'll be a "four-time offender." Under those circumstances, as explained by the Philadelphia Inquirer's Matt Gelb, the amount of money that exceeds the $189 million threshold will be taxed 50 percent.
But with the money derived from the YES Network sale, don't the Yankees have the money to cover whatever penalty they would incur from the luxury tax?
That might not be the financially responsible way to run the team, which is how Steinbrenner and Cashman are trying to do business. But it's likely how Yankees fans feel on the matter.
With the additional revenues, could the team sign Mike Napoli to be its catcher? Anibal Sanchez would fit nicely in the starting rotation. Would Rafael Soriano return to the bullpen? What about Josh Hamilton as the left fielder? Hasn't that typically been the Yankees' move?
Suffering a four-game sweep in the ALCS to the Detroit Tigers would seemingly increase the urgency to bring in some new talent and keep the Yankees a level above the Baltimore Orioles, Tampa Bay Rays, Boston Red Sox and Toronto Blue Jays in the AL East. As recently as 2009, the team would have taken major steps to buy pieces for a World Series contender.
The Yankees' deal with News Corp. would appear to enable a return to those free-spending days that blew away the competition. But will the team's current regime take that approach?
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