The local sports broadcaster is trying to overcome MLB resistance to its streaming plans
(Bloomberg) — Diamond Sports Group LLC, a cable TV programmer expected to file for bankruptcy shortly, withheld a TV rights payment to the Arizona Diamondbacks in a move that could foreshadow the major changes ahead in the business of local sports broadcasting.
The largest US owner of local sports channels is preparing to file for bankruptcy as soon as next week after a wave of people canceling their cable-TV subscriptions undermined its ability to manage its debt load. Its plan for emerging from that process depends in large part on a new streaming service to reach those cord cutters, but to make it attractive to baseball fans, it needs the rights to stream games from all the teams it currently broadcasts on cable. Major League Baseball has resisted the plan, and Diamond has only gotten the rights from a few teams.
The shape of local sports broadcasting hinges on Diamond’s ability to emerge from bankruptcy with its streaming plan intact. If Diamond stops paying certain teams because it can’t get those streaming rights or can no longer afford them, teams and leagues may start selling those rights to other media companies or showing games on their own platforms to try to make up the revenue it once got from Diamond.
The tactics with Arizona’s baseball team highlight the urgency for Diamond to present creditors with a workable business plan to see it through its bankruptcy and beyond. The company has the cash to pay the Diamondbacks, and its creditors supported withholding the payment, according to a person familiar with the matter who asked not to be named discussing a private matter.
“We’ve been making our right payments to teams with the exception of the Diamondbacks where we have exercised a contractual grace period in order to maximize flexibility, especially given that we do not have DTC rights,” a company spokesperson said, referring to the rights to stream games. “We are continuing to broadcast games and are operating our business as usual.”
The company has until March 17 to pay the Diamondbacks, according to a person familiar with the matter. If the payment isn’t made by then, MLB could take the TV channel owner to court and get its local broadcast rights back, the person said.
Diamond airs Major League Baseball, National Basketball Association and National Hockey League games to fans in cities such as Detroit, Phoenix and San Diego. Its bankruptcy could not only affect how fans watch games, but also how players get paid, since media rights payments help with players’ salaries.
Major League Baseball has been anticipating that it will get local broadcast rights back if Diamond’s financial troubles prevent the company from paying teams. 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, the person said. 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 games to its own cable channel or streaming service, Major League Baseball sees an opportunity to eliminate blackouts, the person said. Such rules have prevented some fans in the team’s local market from seeing a game unless they can access the local sports channel.
Diamond, owned by Sinclair Broadcast Group Inc., has struggled under a massive debt load taken on with its acquisition four years ago of regional sports networks from Walt Disney Co. Shrinking revenue from declining cable-TV subscribers and rising payments to sports teams have crimped profits.
In February, Diamond missed about $140 million of bond interest payments that were due, and the company is weighing a bankruptcy filing in the coming weeks, Bloomberg previously reported.
(Adds details on payment schedule in sixth paragraph, background from first)
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