If you live in the New York-New Jersey area and follow sports, no team casts a larger shadow than the New York Yankees. Since the Red Sox famously sold Babe Ruth to the Yankees in 1919, the Bombers have dominated Major League Baseball in a way no other team in any other American sport has, winning 27 World Series, 40 American League pennants and, since the advent of division play in 1969, 18 division titles. In those more than 90 years, the team has only experienced two truly fallow periods, the first, in the mid-1960s, lasted about a decade and was the result of an aging roster unreplenished with younger talent and a failure to see the ways in which the influx of African-American and Latino players was impacting the game. The second began in the early 1980s and lasted through the mid-1990s, a period of ownership drift, poor free agent signings and a lack of minor league development.
As to that first period, the Yankees ultimately re-tooled, taking advantage of the new rules around free agency to sign players such as Reggie Jackson and Catfish Hunter while developing and nurturing young talent like Ron Guidry and Thurman Munson. The Yankees most recent run began in much the same way, by cultivating its farm system and, as those players matured, surrounding them with in-their-prime free agents. The Yankees' decided revenue advantage stemmed largely from the creation of its own cable network - the YES Network, a money making enterprise that allowed the team to outbid anyone for a player they truly wanted . This model has served the Yankees well. Beginning in 1996, the team won 5 World Series titles, appeared in 2 others and only missed the playoffs once (2008).
But like bankruptcy, which someone once defined as going poor slowly and then really fast, the "Evil Empire" is about to hit the skids and experience its third prolonged stretch of failure. The reasons for this are not dissimilar to those that caused their two prior periods of mediocrity. Let's examine why the Yankees are primed for a fall:
The Spending Gap Has Shrunk: Perhaps no greater change in the baseball economy has taken away the Yankees advantage quite as much as the one-two punch of the luxury tax and regional cable deals. On the one hand, the luxury tax penalizes teams whose payrolls are above a certain threshold by requiring them to pay money back to the other teams in the league. This money improves competitors' bottom lines and creates greater financial parity. In recent years, with the death of George Steinbrenner, the team has shown less of an inclination to pay the luxury tax, curtailing its willingness to spend big money on free agents while still being locked into longer-term deals with its aging stars (more on that later).
But the bigger change is one the Yankees spearheaded - the creation of sports networks. Now, mid-market teams like the Cincinnati Reds, who 15 years ago would have lost a once-in-a-generation talent like Joey Votto to free agency, have the capacity to lock stars into long-term contracts before they becomes free agents, so the Yankees don't even get a chance to bid for their services. Other teams have done the same thing, including the Rockies (Troy Tulowitzki), Brewers (Ryan Braun) and Nationals (Ryan Zimmerman). With fewer marquee free agents available, the Yankees can no longer rely on a pipeline that at one time brought them players like CC Sabathia, Mark Texeira, Mike Mussina, Johnny Damon, Jason Giambi, Hideki Matsui and Alex Rodriguez .
An Aging (and Expensive) Roster: The Yankees roster is old - really old, especially in today's game, denuded of most forms of performance enhancer and where high level talent blossoms at every younger ages. The Yankees have produced few home grown stars since the mid-1990s, when Derek Jeter, Andy Pettitte, Mariano Rivera, Jose Posada and others came up through the minor leagues. The average age on the Yanks' 25-man roster is almost 32  and includes pitchers like Pettitte (41), Kuroda (38) and Rivera (43!), who are expected to contribute significant innings while everyday players like Jeter (39), Texeira (33) and Kevin Youkilis (34 and keeping 3B warm until A-Rod, himself 37, returns from hip surgery) are all part of the everyday line-up. While this might not have been pause for concern 15 years ago, when, for example, the Yanks let their closer leave and seamlessly plugged Rivera into that role, the team has not developed farm system depth behind its aging talent and those young players they have cultivated, like Joba Chamberlain, Phil Hughes and Brett Gardner, have not performed at a level to keep the team competitive .
The team's payroll is also bloated with long-term contracts paying players on the downside of their career a lot of money. In addition to the $114 million owed to A-Rod for the next 5 years, Mark Texeira is owed $90 million and C.C. Sabathia is owed $91 million over the next 4 years and Derek Jeter is making $17 million in the last year of his current contract. With management reluctant to spend big, the team may be reluctant to re-sign the few quality younger players they do have, like Robinson Cano and Hughes, or, in a fit of irony, get outspent by one of their rivals for them.
Lastly, because free agency is not as fruitful as it once was, the team can't afford to miss on trades like the one it made last year, moving top catching prospect Jesus Montero to the Mariners for starting pitcher Michael Pineda, who has yet to throw an inning for the team due to injury. The limited number of tradable minor league players also hampers the team's ability to pull off larger trades, like the one the Nationals made for Gio Gonzalez before the beginning of last season. The Nats, who had built one of the best farm systems in the league, were able to offer the Athletics four quality prospects in exchange for Gonzalez, a young lefty who had already shown flashes of brilliance but the A's were not going to be able to sign long-term. The Nats not only got an outstanding young pitcher, but by immediately signing him to an extension, are keeping Gio off the free agent market until 2016. The Yankees simply do not have the players to pull of a deal like that one.
The upshot is that the Yankees are pinched on both ends. Their major league roster is littered with expensive contracts for past-their-prime players, but the farm system is devoid of the type of talent that the team could use to replace them. The lack of tradable prospects also impairs the team's ability to get younger, proven, major league talent and because teams can now lock up their best players before they become free agents, the Yankees can't outbid its rivals for them.
Other Teams Have Caught Up: Te Yankees have been a virtual shoo-in for the playoffs since 1995, but its competitive gap, which reached its apex in 1998, when the team went a jaw dropping 125-50 (regular season and post season) in its romp to the World Series, has narrowed considerably. Small market teams like the Marlins and Rays have made runs to the World Series with young players not yet at their peak, while other teams like the Rangers, Cardinals, Giants and Tigers have mixed young and old to stay competitive. Still other teams like the Phillies, Angels and Red Sox have cribbed the Yankees model and spiked payroll to reach (and win) the World Series. Still others, like the Nationals and the Blue Jays, who pulled off a massive off season deal to bring in major league stalwarts like Jose Reyes and Mark Buerhle, are loaded with rosters featuring players nearing their peak and locked into contracts that will keep much of their rosters together for the next few years .
When you put all these factors together, the logical conclusion is that not only will the Yankees near two decades of dominance end, but the team may not be particularly competitive for the next few years. The team's starting pitching is old, its bullpen mediocre and its everyday roster dotted with players earning big money on the downside of their careers. No team will take on, say, A-Rod's near $30 million a year contract and Jeter, at 39, and coming off a broken ankle, cannot be expected to perform as he once did. But more distressing for Yankees fans should be the fact that neither short- nor long-term solutions are in the offing. Free agency is no longer a reliable method of replenishing its roster and its spending advantage is not what it once was. The Yanks farm system is ranked somewhere between 10th and 15th out of 30 teams, but not every prospect pans out and few are close enough to major league ready to make an impact in 2013, or 2014 for that matter. Meanwhile, rosters in Anaheim, Detroit, Tampa Bay, Texas, and Toronto all look better on paper and younger teams like Baltimore and Oakland are also ripe for sustained playoff contention.
Yankees fans should be prepared for the fact that the team will struggle to make the playoffs, not just this year, but for the foreseeable future, as the Bombers make the pivot away from being an old, slow team to a young, faster one capable of another run of dominance. Unsurprisingly, few tears will be shed outside of the greater New York metropolitan area.
 Rupert Murdoch's FOX empire just bought a 49% stake in YES that values the channel at $3.8 billion. http://www.bloomberg.com/news/2012-11-20/news-corp-to-buy-49-of-yes-network-with-option-for-80-stake.html
 I know, A-Rod was not technically a free agent signing; however, when he was dealt to the Yankees, only one other team had the financial wherewithal to absorb his $25 million a year contract. Regardless, had A-Rod stayed in Texas for the addition year or two before his opt out, the Yankees would have still been only one of two teams able to afford his services.
 Ironically, two of the established stars the Yankees could have relied on to bridge talent gap, Rafael Soriano and Russell Martin, both opted not to re-sign with the Yankees.
 For example, the Nationals essentially have their major league roster for 2014 *and* 2015 already locked up: http://articles.washingtonpost.com/2013-01-15/sports/36384639_1_nats-mike-rizzo-division-series