It was just a matter of time until this happened:

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MSG Network sues Yankees over cable contract
JULY 14, 2000


NEW YORK -- Madison Square Garden Network has sued the New York Yankees, claiming that owners of the baseball club are trying to destroy the cable network and steal its right to broadcast Yankees games.

In papers filed Friday in Manhattan's State Supreme Court, MSG says Yankees owners are violating contractual rights that MSG "bargained for carefully and paid for handsomely" in a $500 million deal in 1988. That deal expires at the end of the current baseball season.

Court papers say that in a letter dated July 5 the Yankees made MSG a "sham" offer that would, among other things, call for MSG's cable TV network to be swallowed up by a new broadcast network called Newco.

The Yankees' offer, court papers say, would force MSG to buy into Newco, pay its start-up costs, and abandon telecasts of other teams which include the New York Knicks, Rangers and Liberty.

MSG says the Yankees wanted an answer within seven business days of July 6 or the club would finalize talks with Newco, which does not yet exist and which will be 95 percent owned and controlled by the Yankees.

Harvey Schiller, chairman of the holding company that controls the Yankees' broadcasts and other enterprises, called YankeeNets, did not dispute MSG's description of the offer, and he said they have a right to match it.

"That's called competition," Schiller said. "In America that's allowed. Not only that, it's encouraged and legally protected."

But MSG claimed the offer violates its contractual "right of last refusal," which gives MSG the right to try to match the club's last offer from a third party for the right to carry Yankees games, court papers say. MSG contends that Newco is really the Yankees, and does not constitute a third party.

In 1988, when the Yankee deal was signed, MSG Network had about 2 million subscribers and revenues of about $39.6 million, but in 1999, the network had 7.6 million subscribers and earned some $219 million, court papers say.

MSG is asking the court for a permanent injunction to keep the Yankees from closing a deal with any other television carrier and to declare that MSG has the right to meet and beat any offer the Yankees get.

MSG failed in its attempt to receive a temporary restraining order, but the Yankees agreed to give the network a two-week extension to match the IMG deal.

Howard Rubenstein, a spokesman for the Yankees, the club "carefully followed the terms and conditions of the their agreement with Madison Square Garden. The plaintiff is way off base. We are reserving further comment until we study their papers."