A bankruptcy hearing originally scheduled for Wednesday afternoon pursuant to the ongoing Ch. 11 case of Diamond Sports Group was postponed. Major League Baseball is trying to receive clarity on the situation surrounding the 11 teams slated to be broadcast by the Sinclair, Inc. subsidiary operating Bally Sports-branded regional sports networks. Sources told the New York Post the league has offered Diamond Sports Group a deal that would reduce the media rights fees it pays for three out of these 11 teams in the 2024 season. MLB would then subsequently receive digital rights for teams under contract with Diamond in 2025.
The hearing has now been rescheduled for next Friday, Jan. 19, an extension granted as discussions with Amazon reportedly continue. Amazon’s Prime Video platform is the home of NFL Thursday Night Football games, recently achieving a 24% increase in viewership (average of 11.86 million viewers per game) compared to its inaugural 2022 season. Additionally, the platform had the exclusive local television media rights to 20 New York Yankees games last season, along with broadcasts of WNBA and Overtime Elite games.
Major League Baseball Commissioner Rob Manfred testified last year in a bankruptcy court about a contentious meeting that took place surrounding the media rights. David Smith, Sinclair Broadcast Group executive chairman, purportedly requested the company acquire direct-to-consumer broadcast rights from the league to strengthen its Bally Sports Plus app.
When Manfred declined the proposal, he said that Smith told him the company would begin to press clubs to diminish rights fees to make sure the company stays profitable in the RSN business. If this venture proved to be unsuccessful, the venture would then enter bankruptcy and begin selectively rejecting contracts. Over the summer, Diamond Sports Group terminated its deals with both the San Diego Padres and Arizona Diamondbacks, but MLB was ready with its local media department to assume production and dissemination responsibilities.
Although Sinclair counsel previously predicted that the Diamond business would go away, the RSN operator expects to continue broadcasting through the 2024 MLB season. The company came to agreements with both the National Basketball Association and National Hockey League that reverts the media rights back to the leagues at the conclusion of the season.
MLB is asking for clarity with its regular season approaching, part of the rationale behind its filing to compel assumption or rejection of telecast rights agreements. There is an enigma surrounding the television homes for the Cleveland Guardians, Minnesota Twins and defending World Series champion Texas Rangers in 2024 since Diamond is reportedly only willing to broadcast them under revised deals.
Amazon is reportedly exploring a potential investment in Diamond Sports Group, having conversations with the company about its future. Yet it was reported by the New York Post that MLB recently rejected a deal that would have granted Amazon streaming rights for 11 of its teams over multiple seasons, something the league was unwilling to concede. Manfred also reportedly stated that it would need to be involved in a digital deal, especially since Diamond only has streaming rights to five MLB teams – the Detroit Tigers; Kansas City Royals; Miami Marlins; Milwaukee Brewers and Tampa Bay Rays.
Before the new year, MLB issued a court filing conveying that the Debtors needed to be prepared to assume or reject the telecast rights agreements prior to Dec. 31, 2023. The league has emphasized that there has been a continued theme during proceedings that the Debtors are “just ‘one step’ away from a breakthrough.” At this point though, the league is searching for clarity ahead of the year so it can make necessary preparations and ensure competitive balance. There have reportedly been residual effects on spending this offseason related to the bankruptcy case, evidenced in a report from NextTV surrounding payroll cuts by the Minnesota Twins.
Senior lenders of Diamond Sports Group are owed approximately $650 million and have a desire for the company to cease operations after the 2024 MLB season and sell profitable media contracts to other networks, according to sources within the New York Post report. Conversely, junior lenders – owed a collective $8 billion – want to reportedly pay off the senior lenders and ensure that the company continues its business. These junior lenders are also reportedly involved in settlement talks taking place between Diamond and its parent company over a lawsuit that alleged Sinclair engaged in misconduct wherefore it illicitly obtained $1.5 billion.
If a financial settlement is reached between Sinclair and Diamond, junior creditors would then look to use the proceeds and potential windfall from a new Amazon deal, along with other cash and receivables from Diamond, to completely remunerate senior creditors, according to sources within the Post report. From there, the junior creditors would reportedly assume the business and look to improve its future standing amid a changing media marketplace.
