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YES Men

3/12/2012 9:01 AM Eastern

Over the YES Network’s 10-year run, the channel that George Steinbrenner built has put regional
sports on the same playing field as traditional entertainment channels. Innovative original documentaries,
live studio shows and series programming built around live New York Yankees baseball
and New Jersey Nets basketball games are hallmarks of the 24-hour local sports service.

YES was the first regional sports network to pitch several technological advances, including
live HD telecasts; interactive TV with various field camera angles and player cams; live game 3D
baseball telecasts; live game streaming on the Web; and national distribution of its signal (sans
live games) outside of the New York DMA. It also thrived despite not being carried by key New York
distributor Cablevision Systems in its first year.

Cover_Story_Image_03/12/12Fans may love it, but critics cite YES in the highly charged debate over sports-network. rights
fees. Its license fee — estimated by SNL Kagan at about $2.80 per subscriber per month — has
become a rallying cry for operators bemoaning the high cost of sports programming.

Multichannel News programming editor R. Thomas Umstead and Multichannel.com news editor
Mike Reynolds sat down with YES CEO Tracy Dolgin and chief operating officer Ray Hopkins
to discuss the network’s 10th anniversary, as well as what the field of dreams for regional sports
networks will look like in the future.

MCN: What did you expect when the
YES Network launched as an independently
team-owned, basic regional sports
network?

Tracy Dolgin: Ray and I were at Fox [when the
network launched in 2001] and we saw YES as
an enormous threat to our business model.
You have the best team in the world basically
taking out the middleman and controlling
their own destiny and controlling their own
branding. We saw it as a huge challenge.

I, myself, had tremendous doubts that
it was going to work and not because it
wasn’t a great idea, but from an execution
standpoint.

Secondly, everybody forgets about that
rough start. It was more than a rough start;
Cablevision [Systems] in New York had all
the teams and sports was the centerpiece of
Cablevision’s strategy here. When the biggest
distributor has all the teams on its own
networks, and you take one or two of them
away from them,
it’s not so simple —
nor is then having
to go back and get
distribution from
the same guy that
you’ve just taken
their teams away
from.

MCN: What impact
did YES have
initially on the regional sports business?

TD: I think what we saw in those first three
years before Ray and I got here was they did
an amazing job from a dead start. If you
look at this 10-year period of time, there
has been first after first after first with YES.

Think about what regional sports networks
were like at the beginning, before YES. Most
regional sports networks in the U.S. were sort
of shoddy game production; they didn’t even
have all the games. There was no backdrop
programming. YES changed all of that.

The business has developed really quickly
and now, looking to this new world that
we’re going to face going forward, it’s going
to be RSNs that are going to be the most important
thing in that development. I mean if
you’re a cable distributor or a telco company
you say to yourself, “What is the must-have
that’s going to prevent people from cutting
the cord or going to make people get cable, as
opposed to getting their telco service?”

You have to list the quality of that programming.
It’s got to be live programming,
it’s got to be available no place else, it’s got to
be stuff that people are passionate about and
[that’s] not available anyplace else.

So the only product that really is mustsee
and passionate and live is sports, and
the passion part really comes from the local
side, not the national side. And to some degree
the way they do news now fits that bill
also, whether it be CNBC or whether it be
Fox News [Channe] or whatever. But so going
forward as this cable industry grows, it
has to be regional sports that leads the way
on that. Without regional sports networks,
I’m not sure you could’ve ever gotten from
50% distribution on cable to the 90-plus percent
that you have now.

MCN: When we talk about the passion that
sports creates, we must point out that cable
operators are passionate too — about price. Are we at a point where the value of
sports networks is equal to the cost?


TD: No, you’re not at a point. And I’m not
saying that we don’t get a healthy affiliate
fee. But the value of sports is growing. So I
think the answer
is the price that
we get is set by a
free market and
they’re not paying
it unless there’s
that value. In the
early days of TV it
was the MTVs of
the world and obviously
the HBOs.

Now it’s really
sports. It’s live. It’s
current, it’s passionate. And so I think the
value equation of what sports means to the
distributor’s business is growing, it’s not
shrinking.
Now, if you ask me where are they going
get the money from, the answer is pretty simple.
The money is going to come from those
other 280 channels. This is not denigrating
the 300-channel landscape is right now, but
I think in the world of TV Everywhere, if you
ask a cable operator what’s going to be on
TV Everywhere [platforms], in the long run,
its going to be live, 24-hour networks and
they’re going to be sports and news.

The amount of money you pay for expanded
basic is a bargain. And when you add on
top of it TV Everywhere — the ability to
watch it anytime, anyplace on any device
that you want — it is the single greatest bargain
in the history of the media or the entertainment
business. And so I don’t think it’s
overpriced, I think it’s a bargain.

Ray Hopkins: But I think that business
model has served the industry very well
and ultimately has served the end users
very well in terms of the choice and
the diversity that it’s been able to offer. I
mean God forbid we were ever to go to an
a la carte model, because ultimately what
you’re going to have is people paying virtually
the same amount of money but for less
choice.

MCN: How successful has YES’s TV Everywhere
product been?

RH: I think on the authentication standpoint,
it’s gone very well. It’s gone seamless,
because going into it, no one had done authentication.
I mean we don’t get into the
exact numbers. I would say that the product,
interestingly, has probably performed
better than our distributors thought it
would perform, but I think it would be fair
to say probably not at the levels that we internally
thought it would be at. So it would
be somewhere in between.

We’re going to be rolling it out for this season
and we’ll do it next season as well. And
then at that point we kind of step back and
take a look at, you know, with [Major League
Baseball Advanced Media] where are things,
how has the technology advanced, and how
can we further make this a better product going
forward.

MCN: You mentioned the development of
YES Network and how everyone else has
followed the network. Are there too many
standalone regionals out there now?


TD: Well, let’s put it this way: Not all content
is created equal, not all regional content
is created equal and not all teams are
created equal. So just because it worked for
us, there are teams and networks it didn’t
work for.

RH: I think in terms of the model, to take
a check is the safest, the next one would be
to start a regional sports network and then
partner with a distributor. And then the
third is going out on your own with a financial
partner that’s not the distributor.

MCN: What should we expect from the YES
Network going forward?

TD: No. 1, the next three years probably are
going to be the birth of TV Everywhere. So
you’re going to take mobility and deviceagnostic
into the vocabulary, because that’s
the way people are starting to consume the
product. Convergence has happened.

Coming off that convergence, it’s going to
give you capabilities, no matter what device
you use to enrich your experience. Right now
all you’ve done is shrunk your experience so
to speak. People always say why would anybody
watch a Yankee game on a phone if they
could watch it on a 52-inch TV?

The answer is the Yankees are your primary
viewing target.

What I see is a multi screen experience,
a community experience while watching a
game. What I’d love to do is I’d love to watch
my 52-inch screen and even if I’m not in the
same room as all the Yankee fans, I’d like to
be sitting there talking to other Yankee fans
and communicating and sharing the energy
of the stadium with other Yankee fans or
rooting and trash talking the Red Sox fans
or Mets fans or whomever we happen to be
playing at the time.

MCN: What are the biggest issues facing
the regional sports network going forward?

TD: It’s really an industry issue. So goes
the industry, so goes the regional sports
networks. And again, I see bright skies versus
clouds on this because I think we’re
the only industry in
the media business
that reacted to this
convergence proactively,
coming with
a solution to it and
giving people a reason
to want to do it.

They’ve got a lot to
figure out on TV Everywhere:
They’ve
got to figure out the
technology, they’ve
got to figure out the
authentication and
Nielsen’s got to figure
out how to count
how many people
are watching the YES
Network on an iPad
or a phone or a Droid
or whatever they’re using. So that’s got to
happen.

But I think my No. 1 concern would be to
make sure that we’re all doing it. Sometimes
when people do deals with people for extra
income and give their product to a competing,
over the top service, I just shake my
head. I’m thinking, “Where are you making
your money?” It’s shortsighted, but some
businesses don’t have long-term futures and
they manage quarter to quarter to quarter.
We wouldn’t do a shortsighted deal like that.

So I think we’ve got to keep our eye on
the ball to make sure that everybody stays
healthy and everybody cooperates as partners.

September