Amazon is coming to New York — to grab a piece of the Yankees sports network.
Jeff Bezos’ tech giant has teamed up with the storied baseball organization in an effort to buy the YES Network from its majority owner, 21st Century Fox, according to two people close to negotiations who declined to be identified because the deal wasn’t yet official. If it goes forward in its current form, the deal is expected to take a few months to close.
The Yankees will become the largest shareholder in the channel, a regional sports-focused network serving the New York metropolitan area that has been valued at just under $3.5 billion, the people said. That’s less than the approximately $4 billion it was worth five years ago, when 21st Century Fox increased its stake to 80 percent.
Joining the deal are Sinclair Broadcasting, Redbird Capital, the Blackstone Group and others.
The YES network was borne out of a partnership struck in 1999 between the Yankees and the Nets basketball franchise. The Yankees, whose business operation has been led by Randy L. Levine, its president since 2000, formally took over the project in 2004 and sold a 49 percent stake to Rupert Murdoch’s 21st Century Fox in 2012. A second deal, in 2014, gave the Murdoch company control of the company and left the Yankees with a 20 percent stake.
The Walt Disney Company, the new owner of most 21st Century Fox assets, is managing the current deal as part of its plan to sell YES along with 21 other regional sports networks. The sell-off of those properties was a condition of the Justice Department’s approval of Disney’s $71.3 billion acquisition of the 21st Century Fox assets last summer.
The companies involved in the deal declined to comment on Friday.
Media rights to sports franchises are incredibly lucrative, but their value on traditional cable systems has waned as fewer people are willing to pay for traditional TV. A large part of the upside in sports rights now comes from streaming. For Amazon, owning a piece of YES could be a boon to its Prime program (which costs $119 a year), especially if that membership included access to those games. That, in turn, could add more revenue, as Prime members tend to buy more on Amazon than casual online shoppers.
Amazon’s motivation becomes clearer when considering the fact that growth in the number of Amazon Prime members in the United States has slowed recently. It hit 97 million members last year, up from about 90 million in 2017, according to an estimate from Consumer Intelligence Research Partners.
Amazon already streams “Thursday Night Football” on Prime, for which it had paid $50 million for one N.F.L. season. The company renewed that agreement in April for two more years in a deal worth $130 million, a 30 percent increase.
With the rise of streaming, regional sports networks have found themselves in a tricky position. They are effectively the middlemen of sports rights; they get money from cable and satellite companies to carry the networks, but they, in turn, have to pay sports leagues for the rights to broadcast the games. Lately, cable and satellite companies have tried to pay less to carry these networks, given the decline in subscribers — but the sports teams are set to receive contractual rate increases every year.
Unlike broadcast rights, which are controlled by the teams, local streaming rights are controlled by Major League Baseball. YES, and other regional sports networks, has the rights to show games online through the 2019 season, but how those rights will be controlled going forward is unclear. That could dampen the long-term value of regional sports networks. YES, however, could benefit from the fact that it is partly owned by the Yankees. M.L.B. has been trying to extract more lucrative terms from internet and broadcast companies for streaming, like the N.F.L. does, and it could end up granting those rights to the clubs themselves to help stoke new deals.
Disney, along with AT&T and NBCUniversal, plans an aggressive move into streaming by the end of this year. Its deal for most of 21st Century Fox was a keystone to that plan. Fox’s regional sports networks would have become the “perfect complement” to Disney’s ESPN, the company’s chief executive, Robert A. Iger, said when announcing the deal in December 2017. But the Justice Department disagreed, and the two companies did not challenge the condition on the merger imposed by the government. Disney already has a sports streaming app called ESPN+ that has more than two million subscribers and will become an integral part of the company’s larger streaming strategy.
Disney’s acquisition has not formally closed yet, and the company has 90 days after the merger is official to sell the sports channels. The company already has approval from shareholders and regulatory bodies in the regions in which it operates.