Diamond Sports Group, the Sinclair subsidiary that owns the broadcasting rights of 14 MLB teams plus several NBA, NHL and WNBA teams, announced Tuesday it has filed for Chapter 11 bankruptcy.
The company, which holds more than $8 billion in debt, said it expects its Bally Sports regional sports networks “will continue to operate in the ordinary course during the Chapter 11 process,” with $425 million in cash on hand to fund the business.
Under an agreement with its creditors, Diamond will reportedly be spun off from Sinclair as a standalone company. CEO David Preschlack said he hopes the moves will allow the company to restructure for the future while continuing operations:
“We are utilizing this process to reset our capital structure and strengthen our balance sheet through the elimination of approximately $8 billion of debt. 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.”
The development remains troubling for nearly half of MLB’s teams, which typically count on payments from their RSNs for a large portion of their income.
What will MLB do if Bally networks stop paying?
DSG’s bankruptcy has been widely expected since the company announced last month it would miss a $140 million interest payment.
While DSG said it will continue broadcasting games, MLB commissioner Rob Manfred has already outlined what the league intends to do should the company start missing payments.
The plan, as Manfred explained it, would see the league try to get the games aired on local cable like usual while creating a new option for fans to stream local games, which has long been forbidden under the usual RSN structure:
“We’ve been really clear that if Diamond doesn’t pay, under every single one of the broadcast agreements, that creates a termination right, and our clubs will proceed to terminate those contracts. In the event that MLB stepped in, what we would do is we would produce the games, we would make use of our asset, the MLB Network, to do that. We would go directly to distributors — meaning Comcast, Charter, the big distributors — and make an agreement to have those games distributed on cable networks.
“We would also be seeking flexibility on the digital side, so that when you look at MLB.tv, you’d go in, you can buy your out-of-market package like you’ve always had, but you would have the option to buy up into in-market games, which I see as a huge improvement for fans.”
Basically, the league would terminate every agreement in which Bally misses payments and produce its own broadcasts, then approach cable distributors to get those games on television, while also overhauling its streaming arm by offering in-market games to fans.
Given that MLB fans have long criticized the practice of RSNs blacking out in-market streaming for MLB.tv subscribers, Diamond’s bankruptcy could be the first step the league takes toward a new system of streaming.
MLB responds to Diamond Sports Group bankruptcy
Three hours after Diamond announced its bankruptcy, MLB released a statement affirming its ability to air games for fans should the RSNs cease production.
“Diamond Sports Group’s bankruptcy declaration today is an unfortunate development that we have been expecting,” the statement said. “Despite Diamond’s economic situation, there is every expectation that they will continue televising all games they are committed to during the bankruptcy process. Major League Baseball 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. Having streamed live games on MLB.TV for more than 20 years and produced live games for MLB Network since 2009, we have the experience and capabilities to deliver games to fans uninterrupted. In addition, we have hired additional seasoned local media professionals to bolster our capabilities in anticipation of this development. 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.”
Which MLB teams are affected by Diamond Sports Group’s bankruptcy?
It was reported Tuesday by the New York Post that MLB would offer free streaming for four teams whose contracts Diamond is expected to dump in the coming days: the Cincinnati Reds, Cleveland Guardians, San Diego Padres and Arizona Diamondbacks.
In addition to those four, the following teams’ local broadcast rights are currently owned by Bally Sports networks: the Atlanta Braves, Detroit Tigers, Kansas City Royals, Los Angeles Angels, Miami Marlins, Milwaukee Brewers, Minnesota Twins, St. Louis Cardinals, Texas Rangers and Tampa Bay Rays.
MLB’s RSN problem goes beyond that group, though, as the parent company of AT&T SportsNet, the string of RSNs that own the rights of the Colorado Rockies, Houston Astros, Pittsburgh Pirates and Seattle Mariners, said last month it plans to discontinue the networks.
This problem isn’t contained to only MLB, as Bally alone has the rights of 16 NBA teams, 12 NHL teams and four WNBA teams. The timing just means baseball will be the first sport to experience the financial repercussions.