Diamond Sports Defaults on $31 Million Payment to Diamondbacks
As reported late last night by Sportico's Anthony Crupi and Barry Bloom, Diamond Sports Group did not make a $30.8 million dollar rights payment to the Diamondbacks by yesterday's deadline.
The Diamondbacks are among 14 MLB teams who's games are broadcast by DSG's regional sports networks under the brand Bally Sports. It was not unexpected that DSG would miss this payment to the Diamondbacks, as a previous deadline had been missed, but there was a two week cure period. That cure period came and went without payment being made.
The Diamondbacks entered into contract with then Fox Sports back in 2015 for a reported 20 years, $1.5 billion deal. Fox sold to Disney and then Sinclair bought the rights from Disney in 2019. DSG, a subsidiary of Sinclair, assumed the rights and operation of the RSNs.
DSG filed chapter 11 on this past Tuesday and in a bankruptcy hearing yesterday in Houston argued that it was the league's intent to broadcast games directly to fans that spurred the need to file bankruptcy. They also cited nearly 9$ billion dollars in debt and a broken business model due to the cord cutting trend. DSG desires to increase their streaming revenue, but only holds the DTC streaming rights to five of the 14 teams. The streaming rights of those five teams were obtained during negotiations as those team's deals expired and came up for renewal. MLB retains the streaming rights for the remaining nine teams. Those teams would need league approval to negotiate a deal that would assign those rights to DSG
MLB counter argued in court that it is not their responsibility to fix a broken business model and they should not be forced to surrender further streaming rights.
DSG has indicated that from among remaining nine teams whose streaming right they don't hold, there are four teams whose deals are unprofitable and are likely to "reject" the cable rights of the Diamondbacks and three other teams, (the Cleveland Guardians, Cincinnati Reds, and San Diego Padres.).
How this directly impacts the Diamondbacks and their fans is not entirely clear. The revenue hit will certainly impact the team's operations and budget, but it is something they've known was likely for a while and have been making contingency plans for.
During a recent press conference at the open of spring training, team owner Ken Kendrick reiterated Commissioner Rob Manfred's commitment that no matter the outcome, fans will be able to see the games. If Diamond/Bally defaults on the contract MLB Network will produce all of the games. He agreed with Manfred's comments reported earlier that there may be some short term loss for the team, but believes they may come out ahead in the long term. The team increased payroll this year over 20% (Kendrick said 30%) and despite the looming short term losses they are in this for the long term.
The current plan should DSG cease to broadcast games is for MLB to produce Diamondbacks games and stream them via MLB.TV. The league has already begun the process of making hires and is in the process of creating a structure capable of taking over the production of broadcasts.Should DSG pull the plug, the games would no longer be available on current cable and satellite distribution. In that case, MLB may also seek to renegotiate carriage fees for conventional distribution via cable or satellite. An over the air distribution is also possible. What the cost may be to the consumer, or whether or not there will be any disruptions is not yet clear.
