Manfred: MLB has broadcast plan if DSG bankrupt

    ESPN baseball reporter. Covered the L.A. Rams for ESPN from 2016 to 2018 and the L.A. Angels for from 2012 to 2016.

PHOENIX, Ariz. — The impending bankruptcy of Diamond Sports Group, the company that owns Ballys’ 19 regional sports networks, will not impact fans’ ability to watch their favorite teams play, Major League Baseball commissioner Rob Manfred said Wednesday, adding that the sport would pick up streaming in a worst-case scenario.

Diamond Sports Group, a subsidiary of Sinclair, announced Wednesday that it would skip February’s $140 million interest-only payment and thus enter into the 30-day grace period that will probably lead to a bankruptcy filing, an expected yet monumental development throughout the professional sports landscape. MLB, with 14 teams that pull in substantive revenue through regional sports contracts with Diamond Sports Group, could be severely impacted.

Manfred, speaking at the onset of spring training, hopes teams will continue to be paid their rights fees while the process plays out.

“Obviously we want all of our broadcast partners to be successful,” Manfred said. “We don’t want them to have financial difficulties, and we have been spending a lot of time and effort trying to work with them, figure out where they are. Obviously our first choice would be that Diamond pay the clubs what they’re contractually obligated to pay them, but because I guess I’m a contingency planner by nature, we are prepared no matter what happens with respect to Diamond to make sure that games are available to fans in their local markets.

“We think it will be both linear in the traditional cable bundle and digitally on our own platforms, but that remains to be seen. As I said, our first hope is that Diamond figures out a way to pay the clubs and broadcast the games like they’re contractually obligated to do.”

Sinclair, through Diamond Sports Group, purchased the RSNs from FOX for $10.6 billion in 2019. But the company initially borrowed more than $8 billion to make the purchase and hasn’t come close to generating the amount of revenue it anticipated, due largely to the rate at which customers have been cutting the cord on cable throughout America.

As of the third quarter of 2022, Diamond Sports Group reported a net loss (after accounting for interest payments) of $1.2 billion. The company pays somewhere in the neighborhood of $2 billion in rights fees on an annual basis and made debt payments of about $415 million in the first nine months of 2022.

Diamond wrote in a release Wednesday that it “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.” A financial restructuring, which would reportedly finish in May or June, would wipe out the firm’s existing equity and convert most of its debt into equity stakes in a new company, putting creditors in charge.

Diamond Sports Groups’ unraveling could open an opportunity for MLB to take control of all its rights and potentially end blackouts once and for all, which has long been a central focus for the league. But going direct-to-consumer would not allow MLB to match the money it currently generates through the cable model.

“Not in the short term,” Manfred said.

It could, however, be a short-term fix while the dust settles on Diamond Sports Group’s restructuring. If the company misses any payments to teams, those teams would then have the option of terminating their contracts, Manfred said.

“In the event that MLB stepped in, what we would is we would produce the games. We would make use of our asset, the MLB Network, to do that. We would go to directly to distributors – meaning Comcast, Charter, the big distributors – and make an agreement to have those games distributed on cable networks. My expectations is that as part of the negotiation, there would be a negotiation over price. And that probably gets back to the question about, you know, what the economics would look like, but we would also be seeking flexibility on the digital side.”

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