Bally Sports RSNs "reportedly preparing to file bankrupcty"

[The Gray Eagle]

Bally Sports regional sports networks are apparently heading to bankruptcy court.
The Bally Sports RSNs include broadcasts for 14 MLB teams, 16 NBA teams, and 12 NHL teams.
https://www.bloomberg.com/news/articles/2023-01-25/sports-broadcaster-diamond-faces-8-6-billion-debt-reckoning?sref=W6GJF3MS#xj4y7vzkg

America’s largest owner of local sports channels is heading toward a complex $8.6 billion debt restructuring in bankruptcy court as it stakes its future on a new direct-to-consumer streaming service.

After leveraging up to buy regional sports networks from Walt Disney Co. in 2019, Diamond Sports Group LLC is suffering from a decline in cable-TV subscribers, spurring negotiations with creditors and major sports leagues about its viability as a going concern. The outcome will have serious implications for the $55 billion world of sports-media rights: the company’s channels showcase Major League Baseball, National Basketball Association and National Hockey League games to fans from Detroit and Phoenix to San Diego.

With financial troubles mounting, the Sinclair Broadcast Group Inc.-owned firm will likely skip $140 million in interest payments due mid-February, kickstarting a 30-day grace period, according to people familiar with the matter.

This seems not good for the sports leagues.

How all this goes down matters. If Diamond, which operates under the Bally Sports brand, files for bankruptcy, it could potentially put at risk crucial broadcasting-rights revenue for the likes of MLB.
“You’re looking at a potential rewrite of the entire regional sports business on the other side of this restructuring,” said Davis Hebert, a senior telecom analyst at debt research firm CreditSights.

This seems like it could have a big impact on sports broadcasts around the country. Could the leagues not get huge payments they were counting on?

Diamond’s financial struggles are a bad omen for the industry at large, given the amount of revenue from media rights influences how much players get paid, among other things. As the cable-TV business contracts, some sports and media executives are warning that teams and leagues will need to accept smaller rights payments going forward.

Doesn't seem like good news for any teams, especially ones that just handed out big money long term contracts.
Umm...

In a bankruptcy, Diamond would have the option of ending contracts with teams, potentially cutting off crucial industry revenue while also allowing teams to reclaim their media rights. The company could also halt payments to the teams while keeping the contracts in place. If a deal is not reached, both MLB and creditors are preparing for baseball teams not to be paid, according to two people.
Another person familiar with the matter downplayed the prospect that Diamond would discontinue rights payments in a bankruptcy, adding that the company is open to bringing in teams and leagues as equity partners in any restructured entity.

I've tried watching some stuff on Bally, and the whole operation was trash-- hard to find games, crashing video, etc. Apparently they are hoping that sports fans will subscribe directly for $20 per month, but I'm skeptical that many will pay that much for what they offer.

In an attempt to reach more cord-cutters, Diamond launched a streaming service across all its markets last September that allowed people to watch games online for $20 a month without a cable subscription. It’s now considering a new streaming service that would give fans the option to pay to watch individual games, or just the last few minutes. Diamond would work with teams and league partners, like offering subscribers perks like team merchandise or game tickets.

 

[ThePrideofShiner]

Is it just the sports arm that is going bankrupt or is it all of Sinclair? Because if it is all of Sinclair, well, that is pretty fucking funny.

 

[nattysez]

Is it just the sports arm that is going bankrupt or is it all of Sinclair? Because if it is all of Sinclair, well, that is pretty fucking funny.

Just the sports arm, unfortunately.

This seems like extremely bad news for the affected teams, as I assume most of them are smaller-market teams.

Even if you use (for a fee) the home-team camera feed and have your broadcasters broadcast from the studio for road games, the cost of maintaining your own home-game broadcast setup is not, I would think, particularly cheap. And what kind of audience numbers can you expect if a team sucks and is likely to suck for a while (as with the DBacks or Reds)? This seems like it could go down a very dark path. Hopefully I'm missing something.

 

[the1andonly3003]

I guess Disney technically can't buy them, since they spun off a bunch of Fox Sports RSNs into Ballys?

 

[MuzzyField]

I guess Disney technically can't buy them, since they spun off a bunch of Fox Sports RSNs into Ballys?

Yes, Disney was required to sell the RSN's as part of the regulatory approval. The Fox RSN's + ESPN was too much for Mickey to control.

 

[the1andonly3003]

I doubt Comcast wants to grow NBC Sports RSNs. It might have to go private. Guess they can't just shut down.

 

[Petagine in a Bottle]

Just in general, I wonder what the long term prognosis for the RSN’s are, it can’t be good. The number of cable subs is in precipitous decline and going direct to consumer can’t come close to making the lost revenue back. A world where everyone isn’t subsidizing the 20% or so who watch these channels isn’t good for the sport, is it? It seems like everyone assumes that the TV revenue will just keep increasing because it always has….but isn’t every sport that relies on local rights and revenue (so everyone but the NFL) in potential trouble down the road?

 

[Rico Guapo]

Diamond may be a unique example in the world of RSNs given the initial transaction was heavily debt financed leaving the company vulnerable to even modest declines in revenues and cash flows.

 

[joe dokes]

Appears to be a rare Baseball Prospectus freebie:

Sinclair Prioritizing Buybacks Over Baseball Hurts Fans the Most - Baseball ProspectusBaseball Prospectus

 

[Philip Jeff Frye]

Doesn't this just open the door for Amazon or Apple or whomever to start acquiring local broadcasting rights?

 

[nattysez]

Doesn't this just open the door for Amazon or Apple or whomever to start acquiring local broadcasting rights?

This was what I was getting at above - are we sure all of those rights packages are actually moneymakers for the broadcaster? Does paying for the broadcast rights, plus building and maintaining the infrastructure to broadcast 162 games plus pre- and post-game shows, actually make economic sense? Are enough people watching Reds games to make that investment worthwhile?

Amazon's not bidding for Diamondbacks TV rights unless it thinks it's a moneymaker.

 

[Max Power]

Just in general, I wonder what the long term prognosis for the RSN’s are, it can’t be good. The number of cable subs is in precipitous decline and going direct to consumer can’t come close to making the lost revenue back. A world where everyone isn’t subsidizing the 20% or so who watch these channels isn’t good for the sport, is it? It seems like everyone assumes that the TV revenue will just keep increasing because it always has….but isn’t every sport that relies on local rights and revenue (so everyone but the NFL) in potential trouble down the road?

Right. This is an obvious conclusion to everyone who pays even a little attention to cable subscriptions and live TV viewing numbers. It seems like professional sports leagues didn't want to believe it and just pretended the money train would keep on rolling.

But even if revenue collapses, team values follow, and salaries go with them, there will still be millions and millions of dollars for everyone involved. If the Red Sox are suddenly worth $2 billion instead of $6 billion and superstar players have to get by on $10 million a year instead of $40 million, I think everyone will be fine.

 

[8slim]

This was what I was getting at above - are we sure all of those rights packages are actually moneymakers for the broadcaster?

Nope. For example, Diamond is spending $60 million/year for Padres rights. They're taking a bath, that's a ludicrous amount for that market given it's small size and the rate of cord cutting.

RSNs have really been hurt by most live streamers (YouTube TV, Sling, etc) not picking up the local RSNs. Those services have been mitigating the declines among cable and satellite providers for the national networks, but not for the RSNs.

I don't think any tech company is interested in acquiring local rights on a market-by-market basis. Amazon did that for a small package of games with the Yankees, but it was a test, and the landscape has changed a lot in just the year since that happened.

Ultimately these rights need scale to make them work. Not sure how that happens unless the leagues bundle all "local" rights into one package and license them that way. Basically the MLB.tv approach, but for in-market along with out-of-market.

 

[Hoya81]

https://www.sportsbusinessjournal.com/SB-Blogs/Newsletter-Media/2023/01/30.aspx
Sports Business Journal reporting that Ballys tried to get MLB to give them referral fee for any tickets or merchandise purchased via links on the Ballys platform and asked MLB to let them offer a variety of streaming packages (late innings or weekends only games) as they were having financial problems and MLB said no.

 

[ifmanis5]

Looks like Peacock wants a piece of the messy MLB pie.
View: https://twitter.com/bcbeat/status/1620865117687799808

Peacock Pitches 2023 ‘MLB Sunday Leadoff” Schedule @rtumstead30 @MultiNews @ThisIsNextTV @peacock #baseball

 

[MuzzyField]

NBC/Peacock already has this piece of the MLB pie. It's year 2 for Peacock doing MLB Sunday Leadoff. This just announces the 2023 schedule.

Wasn't a Sox game at Fenway the inaugural effort last year for this brunch-fest?

 

[Lose Remerswaal]

NBC/Peacock already has this piece of the MLB pie. It's year 2 for Peacock doing MLB Sunday Leadoff. This just announces the 2023 schedule.

Wasn't a Sox game at Fenway the inaugural effort last year for this brunch-fest?

Same day the B’s had a 1pm or noon start. Met a friend at Sonny McLain’s for breakfast. And lunch.

 

[Hoya81]

https://awfulannouncing.com/sinclair/diamond-bally-sports-rsns-skipped-payment-bankruptcy.html
Diamond skipped their most recent debt payment, expected to file Chapter 11 in March

 

[The Gray Eagle]

Craig Calcaterra had some interesting info on this on his substack today (this post is free, no paywall):

First he linked this part of an article on Sportico:

While Diamond Sports Group appears set to default on $140 million in interest payments, a move which is expected to trigger a bankruptcy filing in the coming weeks, its 19 Bally Sports properties aren’t the only RSNs feeling a financial pinch. According to multiple league, finance and network sources, the three AT&T SportsNet brands in recent weeks have handed over lighter-than-expected envelopes to their respective MLB franchise partners.
An executive with direct knowledge of the RSNs’ financial dealings confirmed to Sportico that the AT&T outlets in Denver, Houston and Pittsburgh submitted their most recent rights payments to their MLB clubs in a timely fashion, although the disbursements were not commensurate with the contracted rates. The teams impacted by the shortfall are the Colorado Rockies, Houston Astros and Pittsburgh Pirates.
The precise amount of the funds withheld is not known but is said to be significant enough to have catalyzed concerns about the long-term viability of the three networks.

According to Yahoo, these 14 teams have Bally RSNs showing their games:
Arizona Diamondbacks, Atlanta Braves, Cincinnati Reds, Cleveland Guardians, Detroit Tigers, Kansas City Royals, Los Angeles Angels, Miami Marlins, Milwaukee Brewers, Minnesota Twins, San Diego Padres, St. Louis Cardinals, Texas Rangers and Tampa Bay Rays.

I'm surprised to see the Padres on that list. They are throwing around a lot of money lately for a team whose local TV revenues are up in the air. Most of the others are "small market" teams whose owners don't try that hard to win.

Add in the AT&T teams-- Colorado, Houston and Pittsburgh-- and that's 17 MLB teams whose TV coverage and revenue is up in the air right before spring training.

In response to this, Rob Manfred said yesterday that, “we are prepared, no matter what happens . . . to make sure the games are available to fans in their local markets.” He added that If Bally’s doesn’t make the required payments — which it almost certainly won’t — clubs will terminate their contracts with it and that MLB would produce games and would try to arrange for cable and satellite distributors to air them.

The apparent plan mentions cable and satellite distributors carrying the games, with no mention of streaming. And if this happens, local blackouts will surely continue.

This plan to maybe suddenly produce games and also suddenly try to get cable and satellite companies to pay to air them seems like... wishful thinking. Unless they are already working on this plan and making progress. But even if they are, surely there will be a big loss of revenue from this? That's what Calcaterra suggests, and Manfred apparently agrees:

Which is to say that (a) it will be a mess, and people will have a hard time watching their teams in the short term; and (b) even if MLB does arrange for alternatives, there will be a really big hit to revenue in the short term and possibly longer. Indeed, Manfred admitted that if Bally files for bankruptcy, he does not expect that the clubs and the league can simply replace the lost RSN revenue currently owed in the short term.
This seems like a massive problem that will cause tremendous disruption in both business terms and in the fan experience. I have no idea why it still remains a story that, basically, only sports business people are covering. I predict it will be national news, like, beyond the sports page, within a couple of months at the outside.

Hey maybe this is a short term revenue advantage for the Red Sox. And the Yankees, Dodgers, Mets, and the other teams who have stable local TV revenues. Even so, it can't be good for MLB overall.

 

[kenneycb]

It's a short-term advantage but the same dynamics will be hitting the Red Sox, Yankees, etc. sooner rather than later.

 

[ifmanis5]

Commish today: If it all goes to shit, we'll do it ourselves.
View: https://twitter.com/dannyfrankel/status/1626331687629225984

Rob Manfred effectively outlines "next steps"

MLB's Rob Manfred: If Bally Sports Doesn't Pay, We'll Terminate the Teams' RSN Agreements and Broadcast the Games Ourselves

"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," the commissioner 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, the MLB Network, to do that. We would go directly to distributors -- meaning Comcast, Charter, the big distributors -- and make an agreement to have those games distributed on cable networks," Manfred added.

 

[nattysez]

This plan to maybe suddenly produce games and also suddenly try to get cable and satellite companies to pay to air them seems like... wishful thinking. Unless they are already working on this plan and making progress. But even if they are, surely there will be a big loss of revenue from this? That's what Calcaterra suggests, and Manfred apparently agrees:

Agreed - this seems like an incredibly tough lift, even if they were able to buy all of the equipment from Sinclair and somehow quickly enter new contracts with all the necessary personnel.

 

[John Marzano Olympic Hero]

I have no doubts that Rob Manfred is going to fuck this up and make things worse for baseball fans.

 

[mauidano]

If this leads to the ridiculous nature of blackouts going away I am all for it. Blackouts are the stupidest thing ever in 2023. Even stupider when you live in the middle of the freaking Pacific Ocean.

 

[DontTauntOrtizMe]

If Bally Sports San Diego goes tits up can we get Don Orsillo back?

 

[Max Power]

The apparent plan mentions cable and satellite distributors carrying the games, with no mention of streaming. And if this happens, local blackouts will surely continue.

Manfred said yesterday that if MLB takes over broadcasting, it will include streaming and they'll try to eliminate the blackout rules.

If Bally RSNs go bankrupt, MLB has ‘opportunity to fix this blackout problem,’ says Rob Manfred - The Athletic

 

[Harry Hooper]

From Jon Couture:

All amid a new schedule with less divisional play and more interleague, with every team facing every other, every season.

Brief aside: That last one has its reasons, but more than anything, it’s a big step toward Rob Manfred’s long-desired destination of adding two teams and a geographic realignment of a 32-team MLB that’ll destroy the last vestiges of the American and National Leagues you grew up with. Can’t wait for the quickly expanding implosion of the regional sports network model to be cited as a reason he had to do it.

It’s a lot, and that’s just for those of us who see it coming. Jayson Stark recently reported one word kept coming up in talks about the sport’s short-term future: [Expletive] show.

 

[Petagine in a Bottle]

It's a short-term advantage but the same dynamics will be hitting the Red Sox, Yankees, etc. sooner rather than later.

I am sure it already is. The number of NESN subs clearly isn’t what it was 5-10 years ago.

All these teams with huge long term deals are anticipating revenue growth…with cable subs declining (which isn’t going to reverse), how does that happen?

 

[Blizzard of 1978]

If Bally Sports San Diego goes tits up can we get Don Orsillo back?

Maybe. I don't remember where I read it, but it was reported that the Padres get paid $60 million a year from Bally Sports until 2032. That might explain why they been signing all these big contracts.
Also on a non- baseball note this bankruptcy will affect about over 20 NBA and NHL teams. This could end up a major disaster for a lot of sports teams and their fan bases. Looks like Boston, NY and Philly teams will weather this storm better than most.

 

[Ale Xander]

I am sure it already is. The number of NESN subs clearly isn’t what it was 5-10 years ago.

All these teams with huge long term deals are anticipating revenue growth…with cable subs declining (which isn’t going to reverse), how does that happen?

Stadium, gaming, and uniform ads?

 

[John Marzano Olympic Hero]

I am sure it already is. The number of NESN subs clearly isn’t what it was 5-10 years ago.

All these teams with huge long term deals are anticipating revenue growth…with cable subs declining (which isn’t going to reverse), how does that happen?

Pro teams are still going to be profitable. They are just not going to be stupid profitable. Like Ale said there’s uniform ads, gambling money, teams are buying real estate around their stadia, there’s national TV money and a bunch of revenue sources that I’m not thinking of right now.

Not to mention the free money municipalities, other than Oakland, fall over themselves to give to billionaires.

Having said this, I cynically assume that a majority of owners will use this as a way of trying to roll back payroll now and in the next collective bargaining discussions. Because that’s what these dudes do.

“If this continues, I’m going to be broke,” says the person worth billions of dollars.