Diamond Sports Group, the Sinclair subsidiary that controls regional sports networks for 42 teams in Major League Baseball, the National Hockey League and the National Basketball Association, announced it filed for Chapter 11 bankruptcy Tuesday night, three days after filed earlier. Entered into a 30-day grace period with creditors.
As part of a news release, Diamond, which has more than $8 billion in debt, said it “intends to use the proceedings to restructure and strengthen its balance sheet” and that the RSN “will continue to operate in the normal course” during the Chapter 11 process.” The company said it has $425 million in cash to continue operating its business during the process.
MLB, whose teams derive significant revenue from their RSN deals with companies like Sinclair, is most directly affected by Diamond’s situation, given that its season begins in less than three weeks. Diamond holds the rights to 14 major league teams and must continue to pay their rights fees; Otherwise, the teams would be free to break their contracts, at which point MLB could take over the broadcasting duties.
At this point, Diamond has paid off all of his teams except the Arizona Diamondbacks, with whom he recently entered a contract waiver period. Other Diamond-owned teams that run their broadcasts under the name Bally include: Detroit Tigers; Miami Marlins; The Cleveland Guardian; Kansas City Royals; St. Louis Cardinals; Minnesota Twins; Cincinnati Reds; San Diego Padres; Los Angeles Angels; Atlanta Braves; Texas Rangers; Tampa Bay Rays; and the Milwaukee Brewers.
MLB released a statement Tuesday night calling the bankruptcy declaration an “unfortunate development” but reassuring fans they would not miss their team’s games this season.
“Despite Diamond’s financial condition, there is every expectation that they will continue to broadcast all of the games they are committed to during the bankruptcy process,” the statement said. “Major League Baseball stands ready to produce and distribute games to fans in its local markets if Diamond or any other regional sports network is unable to do so in accordance with their agreements with our clubs.”
The statement cited MLB’s experience with live game streaming on MLB.tv and the creation of games for MLB Network as evidence of its ability to “deliver games seamlessly to fans.”
“We think it will be linear in a traditional cable bundle and digitally on our own platform,” said MLB commissioner Rob Manfred. , “But that remains to be seen.”
Sinclair, with Diamond acting as a backer, bought the RSNs from Fox in 2019 after Disney was forced to sell them for $10.6 billion. In the process, however, the company took on roughly $8 billion in debt, putting itself in a precarious position due to cord-cutter rate hikes.
Hira, which initially began its grace period after giving up interest-only payments of $140 million to creditors in mid-February, announced on Tuesday that it would now separate its business from Sinclair and become a standalone company. During the bankruptcy proceedings, Diamond’s debt will convert to equity for its secured creditors.
The goal, a source familiar with the situation said, is for the company to acquire streaming rights for all 14 of its major league teams to broadcast games through both a linear cable model and a direct-to-consumer platform. At the moment, Diamond only has the rights to stream games for five teams. It would have to negotiate with the other nine MLB, but MLB had previously been hesitant to sign additional rights to a company that had yet to prove itself financially sustainable.
Diamond’s filing was made through the US Bankruptcy Court for the Southern District of Texas. In a statement, Diamond CEO David Preslak wrote that the restructuring process “will allow [Diamond] To grow our business while continuing to provide exceptional live sports productions for our fans.”
“With the support of our creditors,” Preslack said, “we expect to execute a quick and efficient reorganization and to emerge from the restructuring process as a stronger company.”
Diamond’s hope to build a sustainable business, a source said, is to promote its Bally Sports+ streaming platform, ideally making it a way for fans to buy tickets and merchandise, place bets and read about their teams. By creating a one-stop shop. Diamond holds the streaming rights for all 16 of its NBA teams and all 12 of its NHL teams, but only a third of its MLB teams.
Through the restructuring process, Diamond is widely expected to eliminate the contracts of its less-profitable teams. Not being able to obtain the direct-to-consumer rights, which was the reason he entered a grace period with the D-Backs, will be a factor in which teams he chooses to hold onto.
MLB’s long-term goal, a source familiar with the league’s thinking said, is to control rights to all of its teams under one umbrella, a situation that could eliminate the blackout issues that have plagued the game in recent years. Diamond’s bankruptcy proceedings — in addition to Warner Bros. Discovery, which airs the Pittsburgh Pirates, Houston Astros and Colorado Rockies, notified the teams that it would soon undergo a liquidation — marked the beginning of that process.
In the short term, MLB will broadcast games of teams that terminate their contracts with Diamond through both its MLB.tv application and yet-to-be-determined cable channels. In anticipation of such a development, MLB announced in early March that it had created a new local media department headed by Billy Chambers, Sinclair’s former chief financial officer.
All team broadcasts, the sources said, are expected to continue as normal at the start of the season as Diamond is expected to continue broadcasting games while teams go through the court process to be released from their contracts after defaulting payments. The question is which teams will shed Diamond — the New York Post previously reported that the D-Backs, Reds, Guardians and Padres would be among them — and then how MLB will approach the situation.