Major League Baseball warned the largest US local sports broadcaster that it must televise hundreds of upcoming baseball games — and pay the related fees — even though the company is in bankruptcy.
(Bloomberg) — Major League Baseball warned the largest US local sports broadcaster that it must televise hundreds of upcoming baseball games — and pay the related fees — even though the company is in bankruptcy.
Two weeks before baseball season starts, Diamond Sports Group has not said whether it will televise games for the 14 teams it has contracts with, MLB attorney James Bromley told the judge overseeing Diamond’s bankruptcy case. Through its Bally Sports brand, Diamond is obligated to broadcast an average of 150 games for each of those teams, Bromley said during a court hearing held by video on Thursday afternoon.
“We are very concerned because opening day is just two weeks away,” Bromley said. If Diamond fails to pay any of the fees associated with the games, MLB will ask US Bankruptcy Judge Christopher Lopez to take action, Bromley said.
Diamond has the money to broadcast all the basketball and hockey games left for the year under its agreements with those sports leagues, company lawyer Andrew Goldman said during the hearing. He didn’t say whether the company plans to broadcast the baseball games. The company owes the Arizona Diamondbacks about $30 million, according to court documents.
The company has the ability to keep making rights payments and broadcasting MLB games under its current contract, Diamond said in an emailed statement. The company declined to say whether all teams would be paid.
Diamond filed for bankruptcy on Tuesday in Houston, with a proposal to cut more than $8 billion in debt by giving ownership of the company to creditors.
Diamond is owned by Sinclair Broadcast Group Inc., which loaded up on debt to buy 21 regional sports networks from Walt Disney Co. in 2019 for $9.6 billion. Sinclair’s ownership stake is likely to be largely wiped out in bankruptcy, Diamond lawyer Brian Hermann said in court.
Sinclair shares fell as much as 8.7% Friday, briefly hitting $12.95, the lowest price in three years.
The company’s channels show thousands of Major League Baseball, National Basketball Association and National Hockey League games to fans from Detroit and Phoenix to San Diego.
Diamond said it plans to restructure while continuing to broadcast live sports to fans. The company borrowed more than $600 million last year to build a streaming service, because so many fans have abandoned cable television.
One key question looming over the bankruptcy case is whether Diamond and the MLB can agree on new contracts. The company could cancel some of its current MLB deals or let them expire.
In the days leading up to the bankruptcy, Diamond withheld a payment to the Arizona Diamondbacks in a bid to secure the rights to put the team’s games on its streaming service and could look to get out of other team contracts. If Diamond decides not to pay certain teams, Major League Baseball will likely try to get the local broadcast rights back.
The league has started hiring executives to produce and distribute games on its own. In that scenario, the league is considering showing games regionally instead on MLB Network in 2024 and on MLB.TV, the league’s streaming service, Bloomberg has reported. MLB.TV has about 3 million subscribers and is meant for fans who don’t live in the local market of their favorite team.
By moving local broadcasts to its own cable channel and streaming service, Major League Baseball sees an opportunity to eliminate blackouts. Such rules have prevented some fans in the team’s local market from seeing a game unless they can access the local sports channel.
Regional sports networks are under financial pressure as more people cancel their cable-TV service, depriving them of a key source of revenue. Cord-cutting has hurt Diamond’s revenue and undermined its ability to service its debt load.
Diamond planned to stake its future on its own direct-to-consumer service, which launched last year.
The company complained in court that its new service faces resistance from Major League Baseball, which denied the company the rights to stream games from nine of the 14 teams in Diamond’s portfolio.
The case is Diamond Sports Group LLC, 23-90116, U.S. Bankruptcy Court for the Southern District of Texas.
(Updates with Sinclair share price in eighth paragraph.)
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