by On Tuesday, Diamond Sports Group, which operates the Bally Sports branded regional sports networks, filed … [+]
Late Tuesday afternoon, Diamond Sports Group, which operates 14 regional sports networks under the Bally Sports brand in the U.S., filed for Chapter 11 bankruptcy in an effort to restructure and eliminate about $8 billion in debt. The move was expected before Friday. Diamond is owned by Sinclair Broadcast Group
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With the MLB, NBA and NHL all affected by bankruptcy, questions have swirled about what happens next. In a statement, Diamond said it will “use the processes to restructure and strengthen its balance sheet while continuing to deliver quality live sports productions to fans across the country. They added that they “will continue to operate as usual during the Chapter 11 process.”
MLB released a statement shortly after Diamond’s Chapter 11 filing.
“Today’s bankruptcy filing by Diamond Sports Group is an unfortunate development that we expected,” MLB’s statement said. “Despite Diamond’s financial condition, there is every expectation that they will continue to televise all of the games they have committed to during the bankruptcy process. Major League Baseball stands ready to produce and distribute games to fans in their local markets in the event that Diamond or any other regional sports network is unable to do so as required by their agreement with our Clubs.”
The league added that they have been broadcasting live games for 20 years and producing live games for MLB Network since 2009, saying, “We have the experience and capabilities to deliver games to fans without interruption. In addition, we have hired additional experienced local media professionals to strengthen our capabilities in anticipation of this development. In the long term, we will iterate our distribution model to address the changing media climate and ultimately reach an even greater number of fans.”
While Bally will still be available, the ability to pay royalties to all of their sports partners is unclear. According to his report NY Post, Diamond wants to dump the contracts of four MLB teams as part of the bankruptcy. Those teams include the Cincinnati Reds, Cleveland Guardians, San Diego Padres and Arizona Diamondbacks who Diamond claims are running in the red. Royalty payments have been paid in full and on time to all Bally partners, with the exception of the Diamondbacks who were paid on time but are in a grace period.
Broadcast teams at Bally are likely to remain
One question that fans have been asking is whether the broadcast teams will remain in place as the Bally Sports RSNs go through Chapter 11. Although the broadcast teams are not specifically mentioned, it is expected that they will remain. As part of Tuesday afternoon’s statement, David Preschlack, CEO of Diamond said, “We deeply appreciate the hard work and commitment of our employees, who remain focused on producing the high-quality sports games our fans have come to expect.”
For now, Blackouts remain an open question
While MLB has said it could eventually go direct-to-consumer with streaming and remove blackouts to reach the maximum audience, for now the focus is only on the four clubs Diamond wants to divest from. While the games are expected to be streamed for free, there is no word on whether the blackouts will be lifted for them.
What’s up with YES Network and Marquee?
In addition to Diamond owning 14 RSNs, they are also involved in two others: YES Network, which broadcasts New Yankees and Brooklyn Nets games, and Marquee, home of the Chicago Cubs. Diamond is a 20% minority in YES and is a joint partner in Marquee with a 50% equity stake. Diamond said the bankruptcy process to restructure its 14 RSNs is outside of those partnerships.
What about AT&T?
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While the sheer number of RSNs owned by Diamond has garnered the most attention, Time Warner Discovery has said it is seeking to exit the regional sports network business. Currently, three MLB teams are shown on these networks: the Astros, the Pirates, and the Rockies.
Multiple reports said the Houston Astros and Rockets want to buy AT&T Sportsnet Southwest where they have strong distribution deals with Comcast
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As for the Pirates and Rockies, all MLB executives said negotiations with Warner Bros. Discovery did well. It looks like the two are frontrunners to eventually join the four teams MLB will take over.
What happens after that?
With the NBA and NHL seasons over, the games appear to be covered by the Bally Sports RSN as the restructuring unfolds. For MLB, they will continue to max out their current contracts. The tipping point will be when the contracts expire or if other RSNs come under similar pressure to the Bally Sports nets. As noted, the payment to the Diamondbacks did not arrive on the scheduled date, but is still within the grace period. It’s just the D-Backs, but the scenario could happen with other clubs. If a payment is lost entirely, the league will have to work through the courts to win the rights back. In all cases, the league will make the games available for streaming. While it was reported via the NY Post that the games could be free, that would only be in some emergency scenario — the league is keen not to leave fans unable to watch. But that would only be in an emergency situation and a subscription model would be the most likely option.
Payment schedules are different for all teams in all sports that have agreements with Bally Sports RSNs. Agreements reached regarding royalty fees, advertisers, distribution and ultimately total subscriber numbers will stay on track for payment. Most critical is at the end of the year when Diamond will need to renegotiate transportation agreements with many distributors. What happens then could change the landscape. For sports leagues that do business with Diamond, they can actually form contingency plans and wait and see what happens.
