(New York Post) Talks for MLB, the NBA and NHL to acquire the nation’s dominant owner of regional sports networks are faltering — raising the likelihood of a bankruptcy filing that could hasten a nationwide migration of sports fans away from cable TV, The Post has learned.
As exclusively reported by The Post, Diamond Sports Group — which operates 21 Bally Sports-branded regional sports networks, or RSNs, that account for more than half the local broadcast markets around the country — has been in talks this fall to sell itself to the sports leagues for as much as $3 billion including debt.
But Diamond — a unit of Sinclair Broadcast Group — surprised investors on Nov. 28 by slashing its outlook for this year’s profitability in half as cord-cutting continues to dog the industry. Accordingly, the leagues no longer are willing to pay a premium in a buyout — and creditors are instead bracing to take their chances in bankruptcy court in the first half of next year, according to sources close to the talks.
That means Diamond’s slew of unprofitable broadcasting contracts will likely be rejected — and its decades-old, cable-TV-based business model will go out the window as deals are cut to stream lives games online, sources said. MLB could potentially step in as a temporary platform next year, but the streaming rights are expected to eventually end up with Big Tech companies like Apple, Amazon and Facebook, sources said.
Diamond Sports Group operates 21 Bally Sports-branded regional sports networks, or RSNs, that account for more than half the local broadcast markets around the country.Bally Sports
“Right now, there is chaos. But we’ll be able to look back and say this is when a large tech company really entered the regional sports market,” an MLB team owner told The Post, asking not to be identified by name. “Right now, there is a large amount of people who don’t see games in their home markets. That’s not good for the sports leagues.”
Tech companies during the past few years have made inroads into live sports streaming. Amazon Prime, which hosts a handful of New York Yankees games exclusively, cut the biggest deal yet with a September deal to air NFL “Thursday Night Football” all season. Facebook and Apple TV+ also have acquired exclusive rights to some MLB games.
But a Diamond bankruptcy could open the doors for new level of dealmaking — and some insiders hope it will change the way people consume sports for the better. Many younger fans can’t watch games now because they don’t have cable, and some cable providers don’t even carry sports, the MLB owner griped.
“Ultimately, it will be one device everywhere,” the team owner predicted. “Twelve years from now it will be all three sports all the time and on one channel.”
Diamond, for example, is currently locked into a money-losing contract to pay the San Diego Padres $60 million a year through 2032, two sources said.Getty
Diamond has the rights to 14 Major League Baseball teams like the St. Louis Cardinals; 16 National Basketball Association franchises including the Miami Heat; and 12 National Hockey League teams including the Detroit Red Wings. None of the New York City teams are on Diamond networks, though Diamond owns a minority stake in the YES Network.
Creditors are expected to use the courts to reject Diamond’s slew of unprofitable contracts with teams, where it has long been paying more for media rights than it gets from cable distributors and advertisers to broadcast their games.
Diamond, for example, is currently locked into a money-losing contract to pay the San Diego Padres $60 million a year through 2032, two sources said. Most of Diamond’s MLB contracts are unprofitable, while maybe half its NBA deals are losing money and a handful of its NHL agreements are in the red, according to a source.
Insiders warn it could be a bumpy spring for teams and sports fans alike if the talks don’t go smoothly. MLB is preparing to arrange new media contracts with teams Diamond rejects in bankruptcy and to directly air their games in their local markets, two sources said. Presently, MLB airs out-of-market games nationally but has no local rights.
“They feel they can get the games up and going quickly. However, they cannot tell us it is 100% guaranteed,” a source close to the situation said.
Diamond’s soured talks with the leagues have surprised sophisticated investors including hedge fund Angelo Gordon, which this fall owned some of the Diamond debt and was hoping for a sale to MLB, according to a source close to the situation. It has now sold its investment at a loss and is no longer involved, the source said.