MLB issues an ultimatum to Diamond Sports

In 2019, when Fox and Disney merged, the Fox Sports regional sports networks were put up for sale.

Sinclair Broadcasting outbid Major League Baseball for the then-19 Fox Sports Net channels, paying $10.6 billion. What could possibly have gone wrong?

Everything, as you surely know. Sinclair created a subsidiary called Diamond Sports to run these channels, and given the pandemic, the move away from cable/satellite to streaming, and other factors, these channels started hemorrhaging money almost right away.

Diamond filed for bankruptcy earlier this year and two MLB teams (Diamondbacks, Padres) moved away from the RSN model and their broadcasts were taken over by MLB, with both streaming and cable/satellite options. Other teams had missed payments.

Earlier this week, MLB asked the bankruptcy court handling Diamond’s case to no longer give Diamond any more extensions:

Noting that Diamond’s cash on hand has dwindled nearly 90% to just under $22 million since it entered bankruptcy in mid-March, the league said, in a joint filing with five individual clubs under the Bally umbrella, that the Sinclair Broadcast Group subsidiary has “made no progress toward reorganization and no progress in negotiations with their creditors.”

“The Debtors had the entirety of the 2023 baseball season to get their business back in order and have failed to do so,” the MLB objection filing added. “There is no reason to believe that the Debtors will finally figure out a path forward now that the NBA and NHL seasons are beginning. The Debtors should not be permitted to exploit the protection of exclusivity and the presumption of legitimacy it provides to simply stall for even more time while the entire cycle of sports seasons starts again.”

MLB told the court it was time for Diamond to “liquidate.” The company still controls the rights to 12 MLB teams: Braves, Marlins, Tigers, Reds, Cardinals, Brewers, Royals, Angels, Guardians, Rangers, Twins and Rays. The linked article says that the Braves, Guardians, Tigers, Brewers and Rangers were the clubs signing on to MLB’s objection.

Some of these teams have not received rights payments this year, or have received only partial payments of their contractually-agreed rights fees.

For their part, Diamond responded to MLB’s filing with this statement:

“Diamond disputes MLB’s misguided attempt to oppose a customary extension in a complex, multi-billion-dollar restructuring involving myriad stakeholders, with whom Diamond is making significant progress. Diamond is current in its rights payments and has satisfied its broadcasting obligations to all MLB teams under contract for the now concluded 2023 MLB regular season.”

Whether that is true or not regarding Diamond’s payments to MLB teams, I am not certain.

For now, this is a moot point for MLB teams, since the regular season is over. Some of these Bally Sports/Diamond Sports channels are currently carrying NBA and NHL teams’ games, and there’s even uncertainty about some of those — for example, the Arizona Coyotes, where Diamond ended their deal after the basketball teams in that market departed for over-the-air broadcast. The Coyotes will do the same this year. I would imagine other winter sports teams will do the same.

The sports broadcasting industry is changing at such a rapid pace, I would not be surprised if all 12 remaining teams on Diamond Sports/Bally Sports channels wind up with similar deals to the ones the Padres and Diamondbacks have by the time the 2024 season begins. The Rockies, Pirates and Astros, previously on AT&T Sportsnet channels owned by Warner/Discovery, are all going their own way in 2024.

That would leave the following teams on RSNs:

Marquee Sports Network: Cubs
YES Network: Yankees
SNY: Mets
SportsNetLA: Dodgers
NESN: Red Sox
NBC Sports RSNs: White Sox, Phillies, Giants, A’s
ROOT Sports: Mariners
Rogers Sportsnet: Blue Jays
MASN: Orioles, Nationals

All 13 of those teams have some sort of partial or full ownership interest in the channel listed, though there have been rumors that NBC Sports wants to get out of the RSN business, and it’s also uncertain what would happen to the A’s if/when their move to Las Vegas actually happens.

Commissioner Rob Manfred, at Cactus League Media Day last February in Arizona, said, regarding this topic:

Manfred said that it’s MLB’s expectation that Diamond would pay the clubs and continue as they have been, but if not: “We’ve been really clear that if Diamond doesn’t pay, for every single broadcast agreement, that creates a termination right.” The rights would thus revert to the clubs, and Manfred added, “If MLB stepped in, we would produce the games, using MLB Network, and then go directly to distributors like Comcast or Charter. and make an agreement to have those games distributed.”

This is exactly what happened with the Diamondbacks and Padres, and I am guessing it will happen with other teams as well. For now, the team-owned RSNs are doing all right, including Marquee, but I can see a day, not too far in the future, where MLB will produce most if not all local games and they’ll be available to anyone willing to pay, with no blackouts.

As always, we await developments.