Diamond Sports Group Faces Uncertainty as Bankruptcy Deadline Looms

Diamond Sports

Diamond Sports Group, the owner of 19 regional sports networks under the Bally Sports brand, is facing a critical deadline in its bankruptcy case as it tries to restructure its debt and secure new deals with the leagues and teams it broadcasts.

Diamond Sports

Bankruptcy Extension Granted

Diamond Sports Group filed for Chapter 11 bankruptcy protection in March 2021, citing the impact of the Covid-19 pandemic and the cord-cutting trend on its business. The company, which is an unconsolidated and independently run subsidiary of Sinclair Broadcast Group, acquired the portfolio of networks from Disney for $10.6 billion in 2019, which included roughly $8 billion in debt.

The company has been negotiating with its creditors and other stakeholders to restructure its balance sheet and reduce its debt load. It has also been seeking to renegotiate some of its media rights deals with the teams and leagues it broadcasts, arguing that they are overpriced and unsustainable.

On Friday, August 11, 2023, U.S. Bankruptcy Judge Christopher Lopez granted Diamond Sports Group an 80-day extension to work on its restructuring plan, pushing the deadline from August 14 to November 2. The judge said he was encouraged by the progress made by the company and its creditors, but warned that he would not grant any further extensions.

NHL Threatens to Terminate Contracts

However, not all parties are happy with Diamond Sports Group’s bankruptcy process. The National Hockey League (NHL), which has 12 teams whose games air on the Bally Sports networks, told the court that it might seek emergency relief if the negotiations do not resolve quickly. The NHL said it was concerned about the quality and availability of its broadcasts, as well as the potential impact on its fan base and revenue.

The NHL said it has the right to terminate its contracts with Diamond Sports Group if the company fails to make full payments or breaches other obligations. The league said it has not received any payments from Diamond Sports Group since April 2021, and that it has been subsidizing some of the production costs for the broadcasts.

The NHL also said it has not agreed to any of the proposed terms for a new deal with Diamond Sports Group, which would involve a significant reduction in the rights fees and a shift to a revenue-sharing model. The league said it was willing to continue negotiating, but that it would not accept any deal that would harm its interests or those of its teams and fans.

NBA and MLB Await Outcome

The National Basketball Association (NBA) and Major League Baseball (MLB), which have 16 and 14 teams respectively whose games air on the Bally Sports networks, have not taken any legal action against Diamond Sports Group yet, but they are closely monitoring the situation. Both leagues have expressed their support for their teams and their desire to maintain their relationships with Diamond Sports Group.

However, both leagues have also indicated that they have the right to terminate their contracts with Diamond Sports Group if certain conditions are not met. For example, MLB has said that it can end its deals with Diamond Sports Group if the company fails to pay four of its teams – the Arizona Diamondbacks, Cleveland Guardians, Texas Rangers and Minnesota Twins – in full by August 15. MLB has also said that it can take over the production and distribution of San Diego Padres games if Diamond Sports Group does not resume payments to the team.

The NBA and MLB have also said that they have not agreed to any of the proposed terms for a new deal with Diamond Sports Group, which would also involve a significant reduction in the rights fees and a shift to a revenue-sharing model. Both leagues have said that they are open to negotiating, but that they would not accept any deal that would undermine their value or their fan engagement.

Future of Regional Sports Networks

The outcome of Diamond Sports Group’s bankruptcy case could have a major impact on the future of regional sports networks (RSNs), which have been struggling to cope with the changing media landscape. RSNs have traditionally relied on high carriage fees from cable and satellite providers to fund their expensive rights deals with teams and leagues. However, as more consumers cut the cord and switch to streaming services, RSNs have seen their subscriber base shrink and their revenue decline.

Some RSNs have tried to adapt by launching their own streaming platforms or partnering with existing ones. For example, Bally Sports has launched Bally Sports+, a streaming service that allows fans to watch games without a cable or satellite subscription. However, these efforts have faced challenges such as limited distribution, high pricing and technical issues.

Some analysts have suggested that RSNs need to rethink their business model and explore new ways of delivering sports content to fans. For example, some RSNs could consider offering more personalized and interactive features, such as customized highlights, statistics and social media integration. Some RSNs could also consider diversifying their content portfolio and offering more non-sports programming, such as documentaries, podcasts and esports.

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