As Diamond Sports Group Drops Padres, MLB Picks Up TV And Streaming Distribution

Around 5pm ET on Tuesday, Diamond Sports Group, the runs Bally Sports San Diego, decided to drop the bomb: after the Padres finished their game that evening, they would no longer carry games, leaving fans to wonder what would happen on Wednesday.

Maybe DSG was trying to call MLB’s bluff. Mired in bankruptcy, they had been late in making their scheduled rights payment, and Tuesday marked the end of the grace period in which they could make good on their schedule. Unlike the last scheduled payment that came at the 11th hour, this time they pulled the plug.

The company then released a statement saying in part that “[w]hile DSG has significant liquidity and has been making rights payments to teams, the economics of the Padres’ contract were not aligned with market realities. MLB has forced our hand by its continued refusal to negotiate direct-to-consumer (DTC) streaming rights for all teams in our portfolio despite our proposal to pay every team in full in exchange for those rights. We are continuing to broadcast games for teams under our contracts.”

Major League Baseball has been bracing for this moment for some time and flew into action putting contracts in place and setting up streaming that will ensure that not only will those that had access before to games, the league dramatically increased the distribution footprint. For example, Hawaii, that is part of the Padres broadcast territory, has not had access to Bally Sports San Diego. Starting today, fans in the state will have access through the new distribution deal MLB has reached.

Late Tuesday it was announced that they would take over production and distribution of all San Diego Padres locally-distributed games on television and streaming through MLB.TV. All-in-all the league says distribution will increase +189% from approximately 1.130 million homes under DSG to approximately 3.264 million homes under MLB’s new model in the Padres home television territory.

Now, fans in the San Diego market can find games on DirecTV (now channel 694-3), AT&T U-Verse (now channel 781), Cox (now Yurview channel 4), and Spectrum (now channel 305). For streaming, blackouts have been lifted and fans watch games in-market live or on-demand for $19.99 per month or $74.99 for the rest of the season by registering at MLB.TV within the market. The league is making streamed games in-market free through Sunday June 4th.

“As Commissioner Manfred previously stated, Major League Baseball is ready to produce and distribute Padres games to fans throughout Padres territory,” said Noah Garden, MLB Chief Revenue Officer. “While we’re disappointed that Diamond Sports Group failed to live up to their contractual agreement with the Club, we are taking this opportunity to reimagine the distribution model, remove blackouts on local games, improve the telecast, and expand the reach of Padres games by more than 2 million homes.”

With the broadcast team employed by the Padres, continuity will continue for fans watching games starting Wednesday. Don Orsillo, Mark Grant, and Bob Scanlan will continue to serve in their existing roles, while 97.3 The Fan’s radio team will remain in place as well with Jesse Agler and Tony Gwynn Jr. calling games. The league has also retained many of the camera and production staff that were freelancers under Diamond Sports Group.

As to how the break between DSG and MLB came down, details remain thin. Clearly MLB was unwilling to simply grant streaming rights to DSG free of charge given their value. And if DSG truly has “significant liquidity,” as they stated in their statement, then why have they not been able to meet the payment schedule on time for the clubs they broadcast, let alone making some in-full?

For Diamond Sports Group, their bankruptcy is about restructuring. Having their sports media rights partners walk away doesn’t give them content to broadcast when they exit Chapter 11. To make matters worse, DSG is scheduled to address distribution contracts with Comcast
CMCSA
and DirecTV expire in September and November leaving them vulnerable to negotiate anything meaningful given their current state.

The biggest question will be, can the Padres reach the reported $60 million annually that DSG had within their contract? For this year, at least some payments were made. The league is cutting out the middleman by producing games and being the in-house advertisement broker working with Playfly. In theory, they have a shot. But given the implosion of the regional sports network model, only time will tell. Don’t believe me? Ask Diamond Sports Group how it’s going.