PHOENIX (AP) — Commissioner Rob Manfred said Major League Baseball is prepared for whatever happens to the financially troubled company that owns regional broadcast rights for 14 teams after Diamond Sports Group skipped about $140 million in interest payments due Wednesday.
The missed payments by the parent company of 19 Bally Sports regional networks started a 30-day grace period that could be the prelude to a bankruptcy filing, possibly leading to changes in how televised games are made available to viewers. MLB hopes any upheaval leads to an end of local blackouts.
“The company intends to use the 30-day grace period to continue progressing its ongoing discussions with creditors and other key stakeholders regarding potential strategic alternatives and deleveraging transactions to best position Diamond Sports Group for the future,” Diamond said in a statement.
Diamond is a subsidiary of Sinclair Broadcast Group Inc., and its regional networks broadcasts games of 14 MLB, 16 NBA and 12 NHL teams.
Manfred said Diamond has told MLB it intends to pay its baseball teams, but he called it an “unfolding story” that could change.
“We are prepared no matter what happens with respect to Diamond to make sure the games are available to fans in their local markets,” he said. “We think it will be both linear in the traditional cable bundle and digitally on our own platforms, but that remains to be seen.”
Diamond said as of Sept. 30 it had debt of $8.674 billion. It has nearly $1 billion in rights payments, mostly to baseball teams, due in the first quarter this year.
“Our Bally RSNs have been negatively impacted by elevated levels of subscriber erosion which we believe was influenced in part by shifting consumer behaviors resulting from media fragmentation, the current economic environment and related uncertainties,” Diamond said in its financial statement for the quarter ending Sept. 30. “These factors are expected to have a negative impact on future projected revenues and margins of our Bally RSNs.”
Sinclair Broadcast Group bought the regional sports networks from The Walt Disney Co. for nearly $10 billion in 2019. Disney was required by the Department of Justice to sell the networks for its acquisition of 21st Century Fox’s film and television assets to be approved.
If Diamond Sports Group doesn’t pay its MLB teams, Manfred said the clubs will terminate their contracts with the company.
“We’ve been really clear that if Diamond doesn’t pay under every single one of the broadcast agreements, that creates a termination right, and our clubs will proceed to terminate those contracts,” Manfred said.
“In the event that MLB stepped in, what we would do is we would produce the games, we would make use of our asset with the MLB Network to do that, we would go directly to distributors, Comcast, Charter, the big distributors, and make an agreement to have those games distributed on cable networks,” he added. “We would also be seeking flexibility on the digital side so that, when you look at MLB.TV, you could buy your out-of-market package like you always had but have the option to buy up into in-market games, something the fan has never had before, which I see as a huge improvement for fans.”
Manfred said he sees a future for regional sports networks in cable bundles, but smaller than it was in its heyday.
“It’s really important for the game to preserve the economics in the remaining RSN cable bundle while developing a digital alternative that has more flexibility and gives us better reach in terms of getting to fans who want to watch and don’t have the ability to watch,” he said.
If MLB does take over distribution from Diamond, Manfred said it would not be able to replace 100% of the revenue in the short term. Increasing distribution is MLB’s goal.
“Blackouts are the kind of opposite side of the coin of reach,” he said. “We need to deliver product to fans who want to watch on platforms that they customarily use at a realistic price. That is our No. 1 priority.”