Diamond Sports Group is in the process of trying to restructure its $8.6 billion in debt as it tries to find a way to escape Ch. 11 bankruptcy. As the proceedings continue, the future of the regional sports networks is becoming a concern for many sports leagues and fans, pointing to how the Sinclair, Inc. subsidiary dropped the local rights for the San Diego Padres and Arizona Diamondbacks during the Major League Baseball season.
According to a report from the New York Post, the company is working on a deal with the NBA that would cut the nearly $600 million it pays for annual rights fees by 20% for the next two seasons. Within these negotiations though, the NBA reportedly wants all of its local rights back after the 2024-25 season, coinciding with the expiration of the national contract with The Walt Disney Company and Warner Bros. Discovery.
A source told the Post that NBA Commissioner Adam Silver plans to sell the streaming rights for the league to a technology company, such as Amazon, beginning in the 2025-26 season. MLB Commissioner Robert D. Manfred Jr. testified in bankruptcy court earlier this year that Sinclair executive chairman David Smith threatened to declare bankruptcy and selectively reject contracts if the league did not grant it direct-to-consumer broadcast rights to strengthen the Bally Sports Plus app.
When Manfred decided to stand firm and shot down his proposal, Smith followed through with what he said, the very threat of which prompted the league to create a local media department prepared to broadcast these games. Manfred stated that the league is ready to produce and disseminate local game broadcasts for the 14 teams that currently remain on Bally Sports regional networks. The deadline for debtors to object to the relief within the motion to compel, which was filed earlier in October, was recently extended to Wednesday, Nov. 6 at 5 p.m. CST.
Sinclair is also reportedly exploring a purchase of Diamond Sports Group outright, offering $850 million in partnership with Bally’s Corporation independent director Soo Kim to regain control over the subsidiary. At the moment, Diamond Sports Group is responsible for airing local games on regional sports networks for 39 teams across MLB, the NBA and NHL. Since the bankruptcy filing, it also lost rights to the Phoenix Suns, Phoenix Mercury and Arizona Coyotes, prompting the closure of Bally Sports Arizona. Sinclair currently has ownership over 185 television stations in 86 markets and is being viewed as a “last gasp” to keep RSNs broadcasting on local television.
Diamond Sports Group is reportedly seeking another extension from Nov. 29, 2023 to Jan. 29, 2024 to come to terms on and finalize a restructuring plan. The subsidiary is utilizing mediators from the U.S. Bankruptcy Court in the Southern District of Texas to try to come to a resolution in its attempt to reorganize. At the moment, Diamond is suing Sinclair and alleging $1.5 billion in fraud through misconduct related to “fraudulent transfers of assets, unlawful distributions and payments, breaches of contracts, unjust enrichment and breaches of fiduciary duties.”
As part of a potential purchase, Sinclair would want Diamond to drop the lawsuit, which claims that Sinclair took money from the subsidiary to fulfill its own needs despite having knowledge of its insolvency. Moreover, Sinclair claimed that Diamond would not emerge from its bankruptcy in response to the lawsuit several months ago.
The offer has reportedly been presented to junior creditors of Diamond Sports Group, which accrue approximately $8 billion of the outstanding debt. The faction will need to determine whether or not to accept the deal, which would result in a sizable loss since the debt has a trading value of around four cents on the dollar.
The Bally Sports-branded group of regional sports networks was originally purchased by Sinclair from The Walt Disney Company after the latter acquired Twenty-First Century Fox. Under an antitrust-related divestiture by the U.S. Department of Justice in 2019, it was asserted that if Disney did not sell these assets, it would result in higher prices for cable sports programming licensed to multichannel video programming distributors (MVPDs) around the country.
