Diamond Sports must pay four MLB teams in full, bankruptcy judge says

Diamond Sports, the owner of regional sports networks, was ordered this week by a bankruptcy judge to make full media rights payments to four Major League Baseball teams.

Diamond, which runs a portfolio of 19 networks under the Bally Sports brand, filed for bankruptcy in March, seeking to not only restructure its debt load but also reset some of its media rights deals with teams to reflect so-called market rates in the wake of rampant cord-cutting.

The company had been looking to cut down the payments owed to four MLB teams — the Arizona Diamondbacks, Cleveland Guardians, Texas Rangers and Minnesota Twins — which caused it to go toe-to-toe with MLB officials in bankruptcy court this week. Diamond had already paid the teams up to 75% of the payments owed earlier in its bankruptcy, court papers show.

If Diamond doesn’t make the remainder of the payments owed to the teams, those teams can walk away from their contracts with the company, a judge ruled.

The decision comes after MLB earlier this week announced it would begin producing and distributing San Diego Padres games on pay-TV bundles and its MLB.TV streaming service after Diamond stopped making payments to that team. The in-court matter didn’t affect the status of the Padres situation.

“MLB appreciates the ruling from the Federal Bankruptcy Court in Houston requiring Diamond to pay the full contractual rate to Clubs,” an MLB spokesperson said in a statement on Friday. “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.”

The judge’s ruling came after a two-day hearing that included testimony from MLB Commissioner Rob Manfred and showcased the tensions between the league and Diamond Sports.

A Diamond spokesperson said in a statement on Friday that in keeping with the bankruptcy judge’s orders, “we look forward to engaging with MLB and our team partners to negotiate a go-forward rights package that works for all parties and positions Diamond for long-term success.”

In particular, Diamond has been pushing to hold the direct-to-consumer streaming rights to all MLB teams that air on its networks. Currently Diamond has deals with all of its NBA and NHL teams, and a handful of MLB teams for the streaming rights.

The proliferation of consumers cutting their traditional pay-TV bundles in favor of streaming services has weighed on the regional sports network business. Last year, Diamond launched its streaming response with Bally Sports+.

Diamond pays fees to 42 teams across MLB, NBA and NHL in order to broadcast the bulk of the local games in their markets.

During the hearing, a Diamond executive said Bally Sports+ had 203,00 subscribers, representing 55% of the subscriber goal for the company, The Athletic reported.

Diamond is also facing a more than $8 billion debt load, stemming from Sinclair Broadcast Group‘s $10.6 billion acquisition of the networks in 2019.

Diamond is now an unconsolidated and independently run subsidiary of Sinclair.