News item, as reported by Awful Announcing:
The Diamond Sports Group, the Sinclair-owned subsidiary that operates the Bally Sports RSNs, continues inching closer to bankruptcy.
Per Bloomberg, Diamond could skip an interest payment of $140 million due in February, which would result in a 30-day grace period and could lead to a restructuring and Chapter 11 bankruptcy.
This would appear on its surface to be a shocking development. Sinclair bought the regional Fox Sports networks less than four years ago in a highly-leveraged transaction that involved Sinclair bringing on nearly $10 billion in debt.
As you know, the TV landscape has changed significantly in those few years. Cord-cutting has accelerated, meaning that these networks have had to embrace streaming as a way to keep viewers. Sinclair rebranded the Fox Sports channels as “Bally Sports” and recently created some over-the-top streaming services in various markets for cord-cutters, as I noted in this article here a couple of weeks ago.
The potential bankruptcy, though, could have impact beyond just viewership, as noted in the Bloomberg article quoted in Awful Announcing:
In a bankruptcy, Diamond would have the option of ending contracts with teams, potentially cutting off crucial industry revenue while also allowing teams to reclaim their media rights. The company could also halt payments to the teams while keeping the contracts in place. If a deal is not reached, both MLB and creditors are preparing for baseball teams not to be paid, according to two people.
Another person familiar with the matter downplayed the prospect that Diamond would discontinue rights payments in a bankruptcy, adding that the company is open to bringing in teams and leagues as equity partners in any restructured entity.
The article goes on to quote a Diamond executive as saying “The idea of rejecting MLB contracts is unequivocally false.” But this is quite the fluid situation and obviously things could change. The note about “bringing teams and leagues as equity partners” is something that’s likely to become reality as time goes by.
This is why, as noted in this Sports Business Journal article detailing MLB’s hiring of Billy Chambers as Executive Vice President, Local Media:
This hire is the clearest sign that MLB has decided that it needs to take a more active role in producing and distributing its games. Baseball execs believe that it will gain control over many of those rights controlled by Diamond Sports, which has been mired in financial troubles and last month installed former ESPN and NBC Sports exec David Preschlack as CEO. MLB expects it will get control of other rights — ones held by Comcast and Warner Bros. Discovery — soon after. MLB already has started looking into creating a national product that would combine its local rights with its out-of-market Extra Innings package — an effort that would do away with blackouts.
As I mentioned above, things are moving more quickly than ever in the broadcast industry, and MLB has a way to go to catch up. What’s described above — “a national product that would combine its local rights with its out-of-market Extra Innings package” — seems the likely endgame here, which would theoretically allow anyone to watch any game no matter their location (for a price, of course).
We haven’t heard any reports lately, but the Cubs have been rumored to want to start an over-the-top streaming service that would carry the games broadcast by Marquee Sports Network. That could still happen as early as this year. Remember, as I explained in this article, that would give you all of Marquee’s programming, but only if you are in the Cubs market territory. Out-of-market folks would only get live games.
In any case, Sinclair’s Diamond Sports Group declaring bankruptcy could accelerate the process of MLB games becoming more widely available through streaming. Even this idea has potential pitfalls, as Craig Calcaterra pointed out in his Substack newsletter today:
The Chapter 11 filing will allow the company to renegotiate broadcast deals with teams who partner with Bally Sports. That’s almost certainly going to lead to reduced payments, at least in the short run, and possibly in the long run too. Alternatively — or in addition — Major League Baseball, the NBA, and/or NHL may have to step in and assume an ownership stake in the networks in lieu of payment. Or they could simply say no and take back their broadcast rights, forfeiting payments, and go it on their own with streaming or something. The problem for MLB, of course, is that its fan base is a lot older than that of the other sports and selling the idea of 100% in-market streaming to the 50-70 year-olds who have been tuning in on the old Zenith with the remote provided by the cable company for the past several decades is gonna be hard.
We could be entering turbulent times for MLB broadcast rights. As always, we await developments.