The New York Yankees would receive $838 million for their TV rights in the next 10 years under a proposed deal with a division of the International Management Group.
The Yankees and IMG's Trans World International subsidiary would form a new cable network to carry the team's games, and the Yankees would own 95 percent with TWI owning 5 percent.
The fee would start at $65 million next year and escalate 7 percent yearly to $119.5 million in 2010, giving the Yankees, who have won three of the last four World Series, even more money to increase their payroll.
Madison Square Garden has sued to block the Yankees from forming the new network, claiming it violates MSG's rights to match any offer, a provision in the $486 million, 12-year contract between the Yankees and MSG that expires after this season.
A hearing on MSG's request for an injunction to block the deal is scheduled for Monday before New York Supreme Court Justice Barry Cozier.
Former MSG head Bob Gutkowski has sided with the team in the dispute.
"At no time did I believe (nor do I now believe) that the Yankees Partnership was somehow forbidden from forming a new network in which the Yankees Partnership would hold the sole, or any equity stake, and on which the Yankees' games would be televised," Gutkowski said in an affidavit signed July 24 and obtained by The Associated Press.
On behalf of MSG, Gutkowski negotiated the contract with the Yankees in 1988.
"Mr. Gutkowski is a disgruntled former employee of MSG, who was fired in 1994," MSG responded in a brief to the court Friday. "Since his termination, Mr. Gutkowski has solicited business from and provided consulting services to the Yankees Partnership."
As part of the deal, the new network would pay YankeeNets, the parent company of the baseball and basketball teams, $96.7 million for rights to televise New Jersey Nets' games for 10 years starting with the 2001-02 season.
YankeeNets is negotiating to buy the NHL's New Jersey Devils, and the new network could eventually acquire the Devils' TV rights, which are held by Cablevision Systems Corp., MSG's parent company, through 2006-07.
MSG Network, as part of its deal with the Yankees that expires after this season, has the right to match any offer for the Yankees' TV rights.
The Yankees say MSG Network could match the offer from TWI to form a new network. But MSG said the team's argument is "nothing but smoke and mirrors" that would force it to buy into a new network.
"MSG cannot be made to pay to acquire benefits or obligations unrelated to the television exploitation of Yankees' games," the network said in court papers.
MSG Network also objected to a provision that would force it to pay for Nets rights as part of the deal and to another clause that would force Cabevision, if the offer is matched, to give the Yankees a minimum 25 percent of Cablevision's net income from all its sports networks in the United States.
"From a commercial standpoint, the exclusivity agreed to by TWI may be difficult though not impossible for an existing network with other sports team alliances to match," YankeeNets chairman Harvey Schiller said in an affidavit.
He said, however, that MSG still could match the proposal but never discussed it with the Yankees.
The Yankees said MSG could also have matched the deal by agreeing to pay the team the $838 million plus what the Yankee determined its 95 percent stake in the new cable network was worth.
"Although I understand MSG may choose not to match for reasons of its own, such a choice by MSG does not mean its rights under the agreements have been breached," Gutkowski said.
Gutkowski was president of MSG Network from 1985 to 1991. He then became president of Madison Square Garden until he quit under pressure in 1994 after Viacom Inc. agreed to sell the company to Cablevision.
Kenneth Munoz, MSG's executive vice president of business affairs and general counsel," said Friday that Gutkowski leaves many questions unanswered and his role in this matter is tainted.
"Mr. Gutkowski's statements should be viewed in the context of his termination from MSG in 1994 (and) his desire to assist the Yankees Partnership to form a new network," he said.
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