Wilpon gets a reprieve from a cable company that needs him in charge

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Fred Wilpon. (Screencap via mets.com)
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The three-plus years since Bernie Madoff was revealed as a fraud have been anything but easy on Mets owner Fred Wilpon and his partners. And the challenges facing them are about to get even harder.

The partners face a March repayment for a bridge loan, taken out in November, of $40 million. Major League Baseball also expects its $25 million loan to be repaid at that time. The trial in a $386 million lawsuit brought against Wilpon and his partners by Irving Picard, trustee for the Bernie Madoff victims, is set to begin on March 19. And pre-trial motions could leave Wilpon and his partners responsible for raising a significant portion of that money before the end of February.

Meanwhile, the Wilpon group has been trying for more than a year now to raise $200 million through the sale of minority shares in the Mets (whose payroll, relatedly, has shrunk dramatically in the meantime). The sale would give them enough cash to buy some time, but it would do little to address long-term debt faced by the team and the TV network owned by Wilpon and his partners.

But in recent days, a natural ally has emerged in Fred Wilpon's efforts to hold onto the team. Rich Sandomir of New York Times reported early Friday morning that SNY, the network owned by Wilpon, would purchase four of the ten $20 million shares being sold. Those shares, plus a $20 million share set to be purchased by Steven A. Cohen, manager of the hedge fund SAC Partners, would get the Mets halfway to their goal of ten shares by the end of February.

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Put aside Cohen's investment for a moment—it is intended to be temporary, a sop to M.L.B. commissioner Bud Selig as Cohen goes after the real prize, majority ownership of the Los Angeles Dodgers. If Cohen ultimately wins that bidding, he'll need to sell his stake in the Mets. 

At first glance, the purchase of Mets shares by SNY would seem to be little more than moving the same pile of money and debt around. After all, Wilpon and his partners own the Mets; they own a majority share of SNY, too.

The potential sale actually highlights the reality that originally led David Einhorn, who all but purchased a minority stake with majority option in the Mets last year, to sincerely declare that he had no interest in the television network. Without the same owner in charge of both the Mets and SNY, the latter becomes almost worthless overnight.

Consider that last year, SNY had profits of nearly $100 million. Wilpon and his partners, who own 65 percent of the company, reaped a profit of $65 million. Comcast/Time Warner, which owns the other 35 percent of the company, earned $35 million.

But the only significant profit-driver of the company is the broadcasting of New York Mets games. SNY's principal expense is paying for those rights, and its principal reward is fees from cable and satellite companies to show SNY—fees that would disappear without SNY showing Mets games.

The problem with the SNY model is that it pays the Mets well below the current market value for showing these games. SNY paid the Mets $68 million for the rights to Mets broadcasts last year. That number is set to increase a bit over the next few years, maxing out at $83 million in 2015, when the current deal ends. Compare that to the recent broadcast deal signed by the Los Angeles Angels of Anaheim, who reaped $150 million per season for their broadcast rights.

In a bigger media market, it is likely that the Mets could earn even more than that. But merely by equaling what the Angels receive, most of SNY's profit margin would disappear overnight.

Now consider what would happen if the Wilpon group is forced to sell the New York Mets. A new owner could simply wait out the SNY contract, or alternately, could make the dissolution of that contract a condition of the sale. If Wilpon and his partners are forced to declare bankruptcy, both their majority share in SNY and the Mets could go on the auction block, likely ending up in different hands.

Any way you slice it, SNY quickly changes from a cash cow to a network without a real asset to call its own.

Now consider Comcast/Time Warner's investment in those terms. They made $35 million last year, and stand to make about that this year as well. Is putting $80 million into the New York Mets to help preserve that profit, and to preserve the possibility that the Mets remain in Wilpon's hands, a good idea? For Comcast/Time Warner, absolutely.

To get to the ten investors (and more accurately, $200 million) the Mets need to satisfy J.P. Morgan Chase and its other long-term creditors, they will probably need some people not directly vested in their long-term financial future to buy in. But the commitment of Comcast/Time Warner means there's finally a partner in tow with both deep pockets and, most crucially, an interest in keeping the Wilpon group in charge. That development alone may not save Fred Wilpon, but it gives him his best chance yet at surviving the next two grueling months and beyond.