The Washington Post

Diamond Sports, the owner of TV rights for 42 teams, files for bankruptcy


Diamond Sports Group, which broadcasts the games for nearly half of the teams in Major League Baseball, the NBA and the NHL, announced that it filed for bankruptcy late Tuesday, threatenin­g to upend the long-standing economic model of those leagues.

Diamond, a subsidiary of Sinclair Broadcast Group, runs 19 regional sports networks and owes MLB teams alone nearly $1 billion in rights fees this year. At least some of those payments are now in jeopardy as the sports and cable industries grapple with the effects of Americans dropping their cable subscripti­ons.

Through Chapter 11 bankruptcy, Diamond said, it will continue to broadcast games as usual as it attempts to restructur­e some $8 billion in debt that Sinclair took on to purchase the networks in 2019 while also plotting a sustainabl­e way forward for its business.

“We are utilizing this process to reset our capital structure and strengthen our balance sheet through the eliminatio­n of approximat­ely $8 billion of debt,” CEO David Preschlack said in a statement. “The financial flexibilit­y attained through this restructur­ing will allow DSG to evolve our business while continuing to provide exceptiona­l live sports production­s for our fans.”

Diamond’s bankruptcy forced some of the most popular and richest sports leagues in the world to rethink the future of their business. The regional sports network model has been lucrative for most NBA, NHL and MLB teams for the past three decades because most cable subscriber­s pay fees for networks such as NBC Sports Chicago, YES Network in New York or the Mid Atlantic Sports Network in D.C. and Baltimore — even if they don’t watch sports.

Those channels, often some of the most expensive in a cable bundle, have helped fuel rising player salaries and team valuations.

But while some 100 million homes in the country had cable subscripti­ons a decade ago, that number has dropped to around 70 million today. And RSNS have sometimes struggled to get distributi­on on streaming bundles such as Youtube TV and Hulu. Diamond’s RSN subscripti­ons fell from more than 61 million at the end of 2019 to approximat­ely 47 million at the end of 2021, the company reported.

After the Sinclair purchase, Diamond’s channels were rebranded as Bally Sports. They include Bally Sports Detroit, Bally Sports Florida and Bally Sports Socal. Diamond owns the rights to 42 MLB, NBA and NHL teams.

In a statement, NBA spokesman Mike Bass said, “Diamond’s bankruptcy filing was expected and we remain committed to ensuring that NBA fans in the markets served by Bally Sports have continued access to all local games.”

Major League Baseball issued a more dramatic statement, saying it is “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.” MLB added, “Over the long term, we will reimagine our distributi­on model to address the changing media climate and ultimately reach an even larger number of fans.”

Last month, Diamond announced that it missed a $140 million interest payment on its debt, which put a 30-day clock on the company to negotiate a bankruptcy filing with its creditors. Much of that process involved converting the debt that creditors held into equity in Diamond.

According to multiple people familiar with the ongoing negotiatio­ns, now that Diamond has filed for bankruptcy, it is examining all of the contracts with teams on its books and identifyin­g any that lose significan­t money.

It already missed one payment to the Arizona Diamondbac­ks because it deemed the size of the rights fee so unfavorabl­e. One person familiar with the ongoing talks said the San Diego Padres, who have gone on a spending spree to sign a number of expensive players in the past year, also have a deal that will be scrutinize­d.

To help recoup lost revenue from cord-cutting and build a bridge to a direct-to-consumer model, Diamond would like to sell digital subscripti­ons in local markets to fans who have dropped cable. To do that, however, they need to acquire the digital broadcast rights for the teams. NBA and NHL teams have signed over those rights, but MLB, according to multiple people familiar with the discussion­s, has balked at giving them to Sinclair.

MLB would prefer to centralize all of its digital rights and distribute them on its own rather than partner with Sinclair on its streaming app that would include NBA and NHL teams. That would mean forgoing hefty rights fees in the near term. In the longer term, that plan would face another hurdle: getting buy-in from big market teams such as the Yankees. Those teams could be reticent to give up their independen­t local TV revenue, which helps give them budgets far higher than smaller-market teams.

In addition to Diamond, Warner Bros. Discovery, which owns three RSNS, is getting out of the business and canceling rights fees deals this month with teams that include the Houston Astros, Houston Rockets and Pittsburgh Pirates.

Newspapers in English

Newspapers from United States