Things have gone from bad to worse for Diamond Sports Group (DSG), the company that operates the Bally Sports collection of regional sports networks (RSNs) that primarily broadcast Major League Baseball, NBA, and NHL games for teams across the country. In March, Diamond declared bankruptcy, but after arguing in court this week that it should be able to pay a lower rate to maintain the broadcast rights of four MLB teams, after a two-day emergency hearing, Judge Christopher Lopez ruled that the company must pay the Minnesota Twins, Cleveland Guardians, Arizona Diamondbacks, and Texas Rangers in full “in the ordinary course of business.”
Diamond’s parent company, Sinclair Broadcasting Group (SBG), took on $8 billion in debt to purchase the RSNs from Fox in 2019, but has seen their individual and collective value decrease significantly in the four years since, exacerbated by the streaming boom that coincided with the COVID-19 pandemic. Diamond argued that because the assets were not as valuable as they once were, the company should only have to pay a portion of the rights fees in order to maintain the ability to broadcast the teams’ games.
While Lopez agreed that the rights are no longer as valuable as they were when the contracts were signed, he added, “This doesn’t mean that the contract rate and those fees under those contracts is not reasonable.”
In April, Lopez ruled that DSG could pay teams half of what it owed while the issue worked its way through the courts, that total eventually went up to 75% for the four teams at the center of this week’s emergency hearing. However, Lopez did not prescribe a specific date for which Diamond must turn over the remaining 25% of the rights fees.
Of course, there is a possibility that DSG could decide not to pay the remaining funds, as it has indicated that it would be willing to surrender the rights to teams that it could not make a profit on. Earlier this week, the San Diego Padres’ rights reverted back to Major League Baseball, who began broadcasting games on MLB.TV and across a variety of linear partners in the San Diego market.
Perhaps influenced by MLB commissioner Rob Manfred’s testimony that Sinclair executives effectively threatened the league with Diamond’s bankruptcy in order to attempt to secure the streaming rights to the then-14 teams that it had the broadcast rights for, Lopez’s ruling could have wide-reaching impacts across baseball, basketball, and hockey. As its bankruptcy proceeds, Diamond will need to determine which teams it is willing to pay the full contractual amount for and which ones it is willing to let go.
While MLB has long maintained that it would be willing to take over the broadcasting for any team that Diamond abandons — as it has with the Padres — in his testimony, Manfred also indicated that the league would be open to purchasing all of Diamonds RSNs, should the opportunity arise.
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