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Hindery returns

Sep 17, 2001  •  Post A Comment

Leo Hindery was having breakfast with Sen. Tom Daschle, D-S.D., in Washington early Sept. 11 when disaster struck New York’s World Trade Center and the Pentagon.
Mr. Hindery, 53, drove back to New York on Sept. 12, where before the previous day’s tragic events he had announced his return to the cable industry through his involvement in and partial ownership of YankeeNets’ YES basic cable regional sports network.
“We’ve all lost friends and colleagues. This is a very sad day,” Mr. Hindery said after returning to Manhattan. “This is tough stuff.”
Mr. Hindery said he returned to New York to do what he could to help and, eventually, get back to business.
“The coverage the media is providing of all of this is admirable, but this is really a financial services industry phenomenon. Thousands of lives have been lost. Billions of dollars have been lost,” Mr. Hindery said. “This is a human tragedy.”
Earlier this week, Mr. Hindery, who integrated AT&T’s $20 billion of acquired cable systems after spending several years streamlining TCI Cable, said he was glad to be back in the cable fold.
But even during the Sept. 10 press conference announcing his appointment as CEO of the newly formed Yankee Entertainment and Sports Network, Mr. Hindery harbored no misconceptions about the challenge of selling a new basic cable network in a soft advertising market and an uncertain economy.
“The economy could be sent into a tailspin,” Mr. Hindery said.
“Media in general is having a tough time. This economy is having some strain. “But there is something magical about the New York Yankees. If I have to sell avails and sell programming, this is the kind I’d like to offer in this economy. The cable value is actually the greatest in a soft economy,” he said. “We’ll just do the best we can.”
Mr. Hindery is one of four private investors in YES. The others are Amos Hostetter, a former Continental Cable chairman and a current AT&T board member; Goldman Sachs; and The Quadrangle Group, an investment group launched by former Lazard Freres bankers Steven Rattner and Peter Ezerscky. The four investors collectively paid $340 million cash for a 40 percent stake in the YES network, which is set to launch March 1, 2002, at the start of Yankees spring training. The new network, valued at about $850 million, is 60 percent owned by YankeeNets.
The attraction of the Yankees franchise is what brought Mr. Hindery back to cable and is what he hopes prompts major cable operators and satellite service providers to provide carriage to the new network.
Mr. Hindery’s long-standing, deep-set cable connections will be key to securing content and carriage agreements. He declined comment on speculation that YES will offer cable operators a competitive $2-per-subscriber price. He said only that individual negotiations would determine where YES prices would fall in the average range of 85 cents to $2.70 per subscriber imposed by the other 27 regional sports networks in the United States.
Mr. Hindery’s first demonstration of strength could come as early as this week with the announcement of a YES management team, which could be made up of former AT&T Broadband and TCI associates.
The network will run an average of six hours a day of Yankees-related programming.
An average 18 hours of daily programming will need to be filled with acquired or shared regional sports and entertainment programming. Some of that programming could be provided by the three major cable operators in the East: Cablevision Systems, Time Warner and Comcast. Other programming could come from ESPN or ABC. As a diplomatic gesture, Mr. Hindery called the three largest cable operators and major satellite service providers ahead of last week’s YES announcement.
Having the right kind of regional sports and lifestyle programming to offset Yankees games is necessary for the success of the network. “You want this network to be a destination. You want people to go there and not be surprised,” he said.
A potential challenge could be dealing with the natural tension between Cablevision Systems and the Yankees, who paid $30 million to buy back the local television rights to 85 of their games from Cablevision’s Madison Square Garden (MSG) Network. MSG will broadcast its final Yankees game Sept. 30. Cablevision President and CEO James Dolan issued a statement saying, “We know that many of our customers want the programming and that the Yankees want to reach our customers. We look forward to hearing specifics from the new network.”
Time Warner is among the cable operators that have expressed concern about regional sports pricing because of the high cost of the programming. Time Warner Cable has taken the hard line in Orange County, Calif., where it refused to pass along to its subscribers a surcharge from News Corp.’s Fox Sports and blacked out some of News Corp.’s Los Angeles Dodgers baseball games.
“We’re going to go to a lot of pains to make it an offering that cable folks want to have for their basic subscribers. But it will take a while. It won’t happen overnight,” Mr. Hindery said.
New Jersey Nets basketball games and New Jersey Devils hockey matches could become part of the YES mix. They are subject to an existing contract but could eventually participate in the new basic cable network. “If and when they are available, we obviously would like for them to be part of this initiative,” Mr. Hindery said.
With the consent of the various professional sports leagues involved, YES will televise 125 to 130 regular-season Yankees games. Up to 25 games will be locally broadcast. YES is hoping to televise 75 Nets basketball games in its 24-hour/seven-days-a-week schedule. For fans of British soccer, Manchester United Football Club also could be featured.
Mr. Hindery said the network primarily will use advertising revenues and subscriber fees to finance operations and program acquisition. Most of the private investment money was “turned over to the teams,” he said.
A number of advertiser and sponsorship arrangements already in place will continue, but securing carriage pacts is critical to future ad sales, Mr. Hindery said. “It’s going to be tough to sell ads without eyeballs,” he said.
YES will establish a central location in Manhattan for its staff of 30 or so people, he said.
YankeeNets already has asked Cablevision and Time Warner to pay an estimated $180 million annually to carry the YES network to their 7 million subscribers in the New York City area.
MSG, which has televised Yankees game on cable for 13 years, will have paid out more than $546 million since the beginning of its rights deal.
Mr. Hindery said he is committed to making and keeping YES a basic cable network for an estimated cost of between $10 and $30 a year per subscriber. “One of the reasons you put something like this in basic is to make a team as vital and as important as the Yankees available to the region as a whole. They are not supposed to override stadium attendance.”