Diamond Sports Group has yet to reach a restructuring resolution with its creditors as the National Hockey League (NHL) and National Basketball Association (NBA) seasons commence. While local broadcasts within Major League Baseball (MLB) are complete for the 2023 campaign, the league is taking initiative to ensure it does not find itself in an inauspicious situation once Opening Day arrives next year. After Major League Baseball Commissioner Robert D. Manfred Jr. emphatically rejected a proposal to grant Diamond Sports Group coveted direct-to-consumer (DTC) broadcast rights from Sinclair executive chairman David Smith, the subsidiary declared Ch. 11 bankruptcy shortly thereafter.
The league wants to eliminate ambiguity heading into next season, wherefore it filed a motion with the bankruptcy court to gain clarity on how the company would operate heading into the new year. This motion also included five clubs that are broadcast – and were paid – by Diamond Sports Group through the 2023 season: the Atlanta Braves; Cleveland Guardians; Detroit Tigers; Milwaukee Brewers and Texas Rangers.
“The Debtors have had nearly seven months to formulate a viable plan of reorganization, and yet they have made no progress toward reorganization and no progress in negotiations with their creditors,” the league stated in the motion. “Instead of progressing towards a compromise with their creditors and finding a path out of bankruptcy, since the Petition Date, the Debtors have elected to pick costly and time consuming fights with other third parties.”
MLB states that Diamond Sports Group already knows which agreements it will likely reject in 2024, and also shared that it recognizes that the company has reached out to several clubs, indicating that they are not part of their future plans. Diamond, however, has yet to substantiate the conversation with a subsequent contract rejections, complicating matters and harming its rightsholders, according to the league.
“The Debtors’ conduct therefore smacks as an attempt to leverage the protections of Ch. 11 for improper purposes,” the league said. “There is no question that the Debtors have had sufficient time to reach their decisions, and it is time for them to formally and publicly make their decision clear.”
Diamond Sports Group was supposed to have a restructuring plan submitted for review on Oct. 11, but the company was unable to come to a resolution and requested an extension through and including Dec. 31, 2023. If the Sinclair subsidiary receives its wish, these complex and imperative proceedings could continue into the new year. Major League Baseball argues that the litigation has been both expensive and expedited, and that there has been no progress. Moreover, the premise of exclusivity, it claims, is being used as a “bargaining chip” and puts pressure on the league and its member clubs as it prepares for the new year.
“After nearly seven months of Ch. 11 protection, one extension of exclusivity and more than one month of court-ordered mediation, the Debtors still have no plan of reorganization and no go-forward business plan,” the league stated in the motion. “It is now clear that the Debtors have never been in a position to achieve the requisite consensus to adopt a viable strategy.”
Diamond rejected contracts for the San Diego Padres and Arizona Diamondbacks last season, power it possessed under bankruptcy law, and the league was ready to step in and produce the games. Moreover, those teams received at least 80% of the rights fees owed to them throughout the season.
Within its motion, the league expressed that it expects another team to lose its regional broadcasting rights by the end of the World Series. While that club was not identified, it should be noted that the Minnesota Twins’ pact with Bally Sports North expires immediately upon the conclusion of the 2023 World Series.
If the motion from Major League Baseball is successful, Diamond would have five days to finalize its plans for the 2024 regular season. Furthermore, the league feels that if the company is unable to do so, it would interpret it is a blunt rejection of the deal. MLB believes that the longer the company is in bankruptcy, the less likely a resolution is reached. Court records demonstrate a decline of almost 90% of cash on hand, which equates to under $22 million.
“Diamond disputes MLB’s misguided attempt to oppose a customary extension in a complex, multibillion-dollar restructuring involving myriad stakeholders, with whom Diamond is making significant progress,” Diamond Sports Group said in a statement. “[Diamond] is current in its rights payments and has satisfied its broadcasting obligations to all MLB teams under contract for the now concluded 2023 MLB regular season.”
“The Debtors’ time is up,” the league stated. “There is simply no justification for a further extension of exclusivity. Parties-in-interest should not be compelled to wait endlessly as the Debtors continue to hope that a magic solution will appear.”
