Diamond Sports Group Files Suit Against Parent Company Sinclair Broadcasting in Fight to Remain Solvent During Bankruptcy
It has been a difficult year for Diamond Sports Group (DSG), not only did the broadcaster officially file for bankruptcy protection in March, but since then, it has forfeited the rights to broadcast San Diego Padres and Arizona Diamondbacks games and is increasingly raising the ire of Major League Baseball commissioner Rob Manfred who would like to see his league take over all of the rights held by the embattled regional sports network (RSN) provider.
While DSG has been going through the process of trying to establish a new sustainable — and eventually profitable —business model, it has filed multiple motions and petitions in court, but it’s the latest filing that might be the most surprising.
NextTV is reporting that on Wednesday, paperwork was filed in the Houston bankruptcy court overseeing the proceedings that indicate that DSG is suing its parent company Sinclair Broadcast Group (SBG) and multiple members of its executive team. Named in the suit are SBG chairman David Smith, CEO Christopher Ripley, and other execs. Also included in the suit is Bally’s Corp., the gambling and entertainment company that purchased the naming rights to the Diamond Sports RSNs.
This suit was reportedly filed in conjunction with another one which was brought against JP Morgan Chase & Co. DSG is looking to regain upwards of $190.2 million that Sinclair paid to JP Morgan in February, as Diamond was preparing to enter into bankruptcy proceedings. The payment nearly completely repaid the financial institution for its $1.025 billion investment that helped Sinclair purchase the RSN networks in 2019.
As NextTV’s Daniel Frankel explains, DSG is arguing that it is unfair to force all other creditors to bare the brunt of the company’s bankruptcy while JP Morgan essentially has been repaid in full. Earlier this month, Manfred said that — thanks to a ruling by bankruptcy judge Christopher Lopez — baseball clubs had received 94% of the monies that they were contractually owed, but once the bankruptcy process is finalized, the company will essentially be owned by its creditors.
This is far from the first indication that the relationship between Diamond and Sinclair has soured. In December, DSG removed all Sinclair leadership from its board and essentially blocked the company from having any input into its day-to-day operations. Reportedly, Diamond is also suing Sinclair over the fact that even though DSG was saddled with $8 billion in debt, SBG profited over $100 billion thanks to the naming rights deal with Ballys’ Corp. So while there was certainly money coming in and going out thanks to the RSNs, Diamond has been forced into the unenviable process of either restructuring or closing up shop at the end of the bankruptcy process.
It is clear that Major League Baseball would prefer to exit all of its business relationships with Diamond Sports Group, and that is still a possibility. While DSG has said that it is done shedding unprofitable contracts with teams, as linear viewership continues to decline, the RSN business is moving more and more toward streaming. However, the company only has the rights to stream five Major League teams — the Detroit Tigers, Kansas City Royals, Miami Marlins, Milwaukee Brewers, and Tampa Bay Rays — meaning that its future in broadcasting baseball is in serious doubt. And since the sizeable inventory of baseball games in the otherwise sports-free summer months generally keeps RSNs functioning as year-round businesses, if the company is not able to repair its relationship with Manfred and his league, Diamond Sports, the Bally Sports channels, and Bally Sports+ might not be long for this world.
Bally Sports+
Bally Sports+ is a direct-to-consumer streaming service that offers live games for those who want access to your local Bally Sports RSN without subscribing to a cable or satellite package.