With A Federal Bankruptcy Court Ruling, MLB’s Days On Bally Sports Appear Numbered

Major League Baseball and Diamond Sports Group, which owns the Bally Sports branded family of regional sports networks, have been at loggerheads for some time. After testimony before a bankruptcy court, and a judge’s ruling, the days of the league being on broadcast by the networks appear numbered.

On Thursday in Houston, U.S. bankruptcy judge Christopher Lopez ruled that Diamond should pay the full value of their contracts with the Cleveland Guardians, Minnesota Twins, Arizona Diamondbacks, and Texas Rangers. Diamond had been seeking to pay less based on changes in the media rights market.

MLB released a statement shortly after, saying, “MLB appreciates the ruling from the Federal Bankruptcy Court in Houston requiring Diamond to pay the full contractual rate to Clubs. As always, we hope Diamond will continue to broadcast games and meet its contractual obligations to Clubs. As with the Padres, MLB will stand ready to make games available to fans if Diamond fails to meet its obligations.”

Lopez implored the two sides to try and reach some kind of deal on the rights saying, “I’m not asking the parties to agree, I’m asking the parties to talk.”

Good luck with that.

After all, on Wednesday MLB commissioner Rob Manfred was in the hearing and told a story that seems to exemplify the relationship between DSG and MLB.

Manfred recalled a meeting between him and Sinclair CEO David Smith. Diamond Sports Group is a subsidiary of Sinclair, so ultimately Sinclair pays the bills for Diamond. In the story, Smith reportedly said that if MLB didn’t take lower rights fees, Sinclair would drive Diamond Sports Group into the ground.

“If they don’t agree to that, I’m going to put the entity into bankruptcy, and then I’m going to selectively reject contracts,” Smith reportedly said. Manfred said in court that this reference by Smith was a form of “blackmail” to get MLB to accept less than the contract value.

The action mentioned by Smith seemed to come to fruition when they failed to meet their scheduled rights payment to the San Diego Padres, and announced on Tuesday evening that the scheduled game that day between the Padres and Marlins would be the last on Bally Sports San Diego. Knowing that the possibility that Diamond could potentially drop one or more contracts, MLB had been prepared. Even still, pulling together the contracts to carry games on DirecTV, COX, AT&T U-verse, Spectrum, Fubo, and the league’s streaming platform for a direct-to-consumer offering didn’t happen at the snap of the fingers. By 1 a.m. EST on Wed., the league announced that fans would not be left in a lurch and where to catch games that day and going forward.

Collectively, the signs all point to MLB taking back the media rights of not just the Padres. As the payment schedule for the Guardians, Twins, D-Backs, and Rangers come up, it’s quite possible that Diamond could do as they did with the Padres, and relinquish the media rights back to MLB.

But even if that isn’t the case, when contracts expire, each of 13 MLB clubs that are on the Bally Sports regional sports networks will likely walk away. It seems a matter of not if, but when.

As a matter of history, FOX originally owned the RSNs that are now branded Bally Sports. At the time of putting them up for sale, MLB was in the mix to purchase them. At the time, the league had a bidding price of approx. $9.6 billion for the 18 regional sports networks. Sinclair’s offer was $900 million higher, and they ultimately won the day. But in the hearing, Manfred revealed a significant difference: MLB would only leverage $3.5 billion in debt while Sinclair’s offer saw $8.5 billion in debt, a sum that ultimately played the primary role in DSG going into bankruptcy.

So, Lopez’s comment about the parties talking may ultimately be about MLB as a bidder willing to take on the rights that DSG currently has. Diamond may see the writing on the wall given carriage agreements with Comcast
CMCSA
and DirecTV expire in September and November leaving DSG completely exposed.