MLB Monitor Diamond Sports Group Uncertainty

Diamond Sports Group, the corporation that owns the Bally Sports networks responsible for the local broadcasts of several MLB teams, made interest payments worth about $140MM to creditors last Wednesday (Associated Press link). The decision started a 30-day window for Diamond to determine if it is able to meet its debt obligations or if it is going to default on its commitments.

The missed payment comes as no surprise, with various reports noting Diamond’s rough financial situation in recent months. If the corporation were to default and potentially file for bankruptcy, it would likely have several options: fulfill its existing contractual commitments, withdraw from the markets, or try to renegotiate its contracts at more manageable rates. Diamond has separate broadcast deals with all 14 MLB* clubs with which it has contracts; renegotiations, if things come to that, would be at a team-by-team level rather than any kind of package deal.

There is still plenty to decide about the company’s next steps. However, his precarious financial situation creates a lot of uncertainty about the stability of local television rights for the clubs that have contracts with Diamond. Commissioner Rob Manfred addressed the situation at last week’s owners meetings, noting that the league is exploring other options to ensure those teams don’t lose broadcast coverage in the market (link via ESPN’s Alden Gonzalez).

Of course, our first option would be for Diamond to pay the clubs what they are contractually obligated to pay, but because I think I’m a contingency planner by nature, we’re ready, whatever that happens with regard to diamond, make sure that. games are available to fans in their local markets,” said Manfred. “We think it will be linear in the traditional cable bundle and digitally on our own platforms, but that remains to be seen. … Our first hope is that Diamond will find a way to pay the clubs and broadcast the games as they are contractually obliged to do.

The league offers most out-of-market games to subscribers of its MLB TV package. However, the league’s platform was replaced by the clubs’ local broadcast markets, resulting in blackouts of in-market games on MLB TV. Manfred has generally indicated his desire to allow MLB TV consumers to purchase a variety of in- and out-of-market broadcasts (via Hannah Keyser of Yahoo! Sport), although that is unlikely to happen at the league level anytime soon.

MLB is already distributed in various streaming markets. The series agreed to contracts with Apple and NBC for broadcast arrangements on those companies’ respective streaming services last year. It certainly wouldn’t be surprising to see MLB engage in similar negotiations with other platforms in the coming seasons. Those contracts — paired with various postseason TV deals, including a new broadcast contract with ESPN tied to the creation of the Wild Card round in the latest CBA — highlight the kind of national revenue base the league will continue to explore outside of the field. local broadcast. However, the uncertainty with Diamond will certainly be a concern for the league office in the coming months.

Diamond first bought various regional sports networks, which were under the Fox Sports moniker, from Disney in 2019. The company is said to have taken on about $8 billion in debt to facilitate that transaction. As The Score’s Travis Sawchik explored last month, cable ownership rates have fallen rapidly over the past few years, adding to Diamond’s unexpected income. Cable rates are generally expected to continue to decline in the future due to the continued rise of various streaming platforms.

Concerns about a potential default have raised questions about player payroll for teams that rely on local broadcast fees from Diamond. It’s still too early in the process for clubs to have a firm idea if/how the Diamond case will affect player spending, although it’s certainly something those organizations are monitoring.

Cardinals chairman Bill DeWitt Jr. face the situation shortly before Diamond failed to make his interest payment on February 15, for example. “It’s a concern and a fluid situation, no question about it,” he said last week (link via Derrick Goold of the St. Louis Post-Dispatch). “Something will happen sooner rather than later. It’s a big part of our revenue stream. We have nice rights fees. The model (RSN) is at risk. We are operating as, no, it will stay, but the reality is that there will be change.

The situation is cause for concern regarding the possibility of lowering the salary cap in both the NHL and the NBA. A number of clubs in those leagues, which have fixed player spending on league revenue as part of their respective collective bargaining agreements, have broadcasting agreements with Diamond. Of course, MLB has no salary cap. The MLB Players Association has steadfastly resisted any harsh restrictions on team spending during past CBA negotiations.

Questions resurfaced over the weekend about a potential league push. MLB created an Economic Reform Committee, which the commissioner said was a response to this ongoing local television uncertainty and long-standing larger concerns about revenue disparities between franchises. However, the MLBPA is unlikely to benefit from a cap during the next round of collective bargaining negotiations in 2026. That would be true regardless of the status of local RSN contracts but it seems as likely as ever given the issues facing those cap leagues.

* The Angels, Braves, Brewers, Cardinals, Diamondbacks, Guardians, Marlins, Padres, Rangers, Rays, Reds, Royals, Tigers, and Twins are broadcast at Bally.

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