Judge Tells Diamond Sports and MLB, NBA, NHL to Compromise or He Will Issue Final Ruling
The judge’s patience with Diamond continues, much to the chagrin of Major League Baseball representatives.
Tuesday’s bankruptcy court hearing between Diamond Sports Group (DSG) and the various sports leagues that partner with it played through all the greatest hits of the proceedings. MLB lawyers got upset, Diamond’s representatives asked for patience, and Judge Christopher Lopez scheduled yet another hearing to see if the issues could be resolved ahead of the July 29 confirmation hearing for DSG’s reorganization plan. The NBA, NHL, and MLB requested the hearing because they feel they can’t ascent to the reorg plan without concrete details about Diamond’s contracts with distributors like Charter Communications and Cox, but they got a disappointing answer from Judge Lopez regarding the information in those contracts, which are protected by non-disclosure agreements.
Key Details
- Judge Lopez told the NHL, NBA, and MLB to try and resolve issues with Diamond on their own.
- Diamond has offered financial projections to the three leagues, but there is a lack of trust that those projections will be accurate.
- A new hearing has been set for Friday, at which Judge Lopez may be forced to make an ultimate decision.
The hearing on Tuesday was essentially a request for Judge Lopez to force Diamond to turn over sensitive information about its carriage contracts with cable and satellite companies like Charter Communications, Cox, and DIRECTV. In their petition, the three leagues said that they couldn’t move forward with plans for their broadcasting futures without the information. However, because much of what they want to know is protected by non-disclosure agreements, Lopez would have to order Diamond to turn them over.
The judge was reluctant to do so, saying multiple times in the proceedings that he didn’t want to “hamstring” Diamond ahead of the July confirmation hearing. Instead, he encouraged the leagues to compromise with Diamond and work out a solution that would make sense for everyone before a new hearing slated for Friday to discuss other discovery issues. If they are unable to do so, Lopez said he’d make a final call himself.
“If you leave it up to me, I’ll make the tough call,” Lopez said. “People may not like the call, but I’ll make it. I can assure everyone Friday morning I’ll make all the decisions if you leave it up to me, so I really encourage the parties to think about it.”
Representatives for cable companies present at the hearing made sure that their objections to revealing any details about their contracts with Diamond were known.
“This information is extremely sensitive information, and allowing it to be disclosed to competitors and the leagues would have a substantial impact and harm,” the counsel for Charter said.
Why Are Sports Leagues So Insistent on Getting Carriage Info?
If the NBA, NHL, and MLB are to grant their ascent to Diamond’s bankruptcy reorg plan, the three have to be sure that the broadcaster will be able to meet financial commitments to the teams it holds broadcast rights for. Otherwise, they could soon find themselves in a position similar to MLB teams in 2023, many of whom had to swallow smaller rights fee payments from Diamond or be dropped by the company to find a new broadcaster mid-season.
Diamond has offered its financial projections for the next three years to try and calm the leagues, but the numbers don’t instill much confidence. They show Diamond losing around 5 million linear subscribers by 2026, and overall revenue is expected to shrink 24% over the same period. MLB officials have made it clear that they don’t have a lot of faith in these numbers, and did not show much deference to Judge Lopez’s assertion that they could learn more of what they wanted to know at a deposition scheduled for July 10.
“I respectfully disagree with Your Honor,” said MLB attorney James Bromley. “In prior depositions, we were simply told, ‘Absolutely not.’ ‘Absolutely not’ is not an acceptable answer.”
Operators who partner with Diamond have said that they’d agree to show leagues aggregate revenue statements that don’t break out the money generated team-by-team. Judge Lopez would also approve of such a disclosure, but whether that will be enough for the NBA, NHL, and MLB remains to be seen. NBA and NHL lawyers, as usual, took a less adamant stance than MLB representatives, saying they would try to compromise and come back to the judge if they still could not get satisfaction.
So, the can has been officially kicked until Friday, when Judge Lopez could hand down an important ruling regarding the information buried in Diamond’s carriage contracts with distributors. That late-week hearing will also see the judge address whether cable companies will have to disclose the “most favored nations” clauses in their contracts and whether Prime Video’s deal to provide Diamond with financing and distribute its RSNs digitally if it leaves bankruptcy will be handed over to MLB officials or not.
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