Major League Baseball Commissioner Rob Manfred could be taking a stand against Diamond Sports Group and its business tactics.
The Sinclair Broadcast Group subsidiary, embroiled in Chapter 11 bankruptcy, made its scheduled media rights payments to the Minnesota Twins and Cleveland Guardians. Even so, the company is continuing to yearn for coveted direct-to-consumer broadcast rights. In an ongoing renegotiation with the Arizona Diamondbacks, the company would receive a 20% discount and streaming rights in a five-year pact. Diamond Sports Group is viewing the deal to be more attractive to its own interests.
Over the ensuing four years, the price floor would diminish and a larger discount would be realized by Diamond Sports Group – all of which was first reported by Josh Kosman of the New York Post. Yet Major League Baseball Commissioner Robert D. Manfred Jr. has the ability to veto media rights deals – and he is reportedly considering wielding that power.
Manfred, who has been critical in implementing various rule changes across the sport this season, participated in a contentious meeting between him and Sinclair Broadcast Group executive chairman David Smith before the company declared bankruptcy. In the meeting, Smith told Manfred that if Diamond not receive direct-to-consumer broadcast rights, it would begin to urge clubs to lower their media rights fees.
When Manfred ardently jilted the proposal, Smith threatened bankruptcy so he could selectively reject contracts, evinced by the San Diego Padres recent separation from Bally Sports San Diego. The company, which oversees Diamond Sports Group and the Bally Sports-branded regional sports networks, has been trying to fortify its Bally Sports Plus app. Diamond Sports Group executive officer David Preshlack testified in the hearing that the app has only reached 55% of its internal goal.
Moreover, the company may need to liquidate (Chapter 7 bankruptcy) sometime in the next year if Manfred does not assist in the restructuring, especially with outstanding senior debt. This senior debt, which involves larger shares of capital and shorter maturity periods, are typically secured with liens against collateral assets. Filings with the U.S. Securities and Exchange Commission stipulate criteria that would necessitate the immediate remuneration of these notes should the company not garner solvency.
Major League Baseball could assume the local broadcasts for the Arizona Diamondbacks from Bally Sports Arizona should the deal not be completed. At the moment, Major League Baseball is paying 80% of the revenue afflicted teams would have received from their media rights deals to ensure competitive balance, funding that partially comes from the owners. Some team owners are not going to support the arrangement past this season, and it could lead Manfred to reconsider declining the proposal.
Renegotiating ongoing broadcast deals seldom occurs once terms have been agreed upon, but the reorganization (Chapter 11 bankruptcy) could necessitate it. Last season, Diamondbacks games averaged 20,000 viewers and the team was paid $68 million, the 13th-highest figure among the 30 major league teams. The team, owned by Ken Kendrick, generated a $30 million operating profit (EBITDA) in 2022 after experiencing a loss in 2021.
While the Diamondbacks as an organization seem to be preferential towards Diamond Sports Group in entertaining a lower deal and ceding streaming rights, the decision will ultimately come down to Manfred. In anticipation of the company operating in this way, Manfred established an incipient local media department within Major League Baseball, headed by Billy Chambers. Moreover, he has been frequently saying that the league is ready to step in if needed.
The Diamondbacks are the only Major League Baseball team the company owes money to that has not been paid. In a recent hearing, a U.S. bankruptcy judge ruled that Diamond Sports Group must pay the full value of its television contracts to the four teams afflicted – the Diamondbacks, Cleveland Guardians, Minnesota Twins and Texas Rangers. At his press conference from All-Star Week in Seattle, Manfred said he believes the league has been paid 94% of rights fees teams were owed by Diamond.
Both sides will enter a bankruptcy court hearing on July 17 where a new proposal is expected to be presented. The hearing was supposed to take place in late June; however, it was postponed amid progress from both sides. As a result, Bally Sports Arizona has continued to broadcast Diamondbacks games despite not receiving its scheduled payment.
