A federal bankruptcy judge approved the NBA’s one-season agreement with Bally Sports at a court hearing today, and a similar deal with the NHL is expected as early as Friday. However, objection motions by MLB and Sinclair Broadcast Group threaten to derail the whole process that aims to keep baseball, basketball, and hockey games on Bally Sports through the end of the next baseball season.
“I get it that may blow up the entire cooperation agreement, but that’s the way the parties have set it up,” Judge Chris Lopez said toward the end of a two-hour and seven-minute hearing, on his possibly agreeing to MLB and Sinclair’s positions. The cooperation agreement is a deal between Diamond Sports Group (which operates the 19 regional sports channels under the Bally Sports brand) and its creditors as a step toward exiting Chapter 11, and through which the NBA deal was agreed.
But Sinclair, the parent company of DSG, filed a motion on the eve of the hearing saying it will be owed a quarter of a billion dollars in management fees by the end of the 2024 baseball season, and the cooperation agreement makes no account for this. Meanwhile, MLB continues to push DSG to make a decision about the media contracts for the 11 baseball teams aired on the RSNs.
While DSG’s lawyers told the court that of these 11 teams, only two had been identified to have their deals renegotiated for the 2024 season, meaning it would keep the rest as is, a lawyer for MLB said the league would be sending its own proposal to DSG shortly.
“There are three leagues, the NHL, the NBA, and Major League Baseball,” said MLB’s lawyer, James Bromley. “There is a deal with the NBA. And that’s great. We’ve been hearing that one might be coming for quite a while and there is not one yet with the NHL. We understand it’s on its way, but we have not seen it. And there is no deal with Major League Baseball. And there are a number of issues that need to be addressed.”
A lawyer for the Texas Rangers, which would appear to be one of the two teams balking at DSG’s terms, said “The statements that have been made say that the 2024 baseball season is going to be telecast and the full rights, the agreements are going to be honored. And that sounds great. But we need more than that. We need to have comfort that what’s going to happen here is that we get all the way through the 2024 season.”
Whether “full rights” are on the table seems remote. The deal DSG cut with the NBA–and likely with the NHL–trades rights fee cuts for returning the media rights to the leagues after the current season.
Judge Lopez tentatively planned a December 8 hearing to hear the MLB and Sinclair objections. However, the NBA deal expires later this month, and the NHL pact the DSG lawyers described as similar may as well.
“There is a November 30 deadline in the NBA agreement, so we are on the clock to meet that milestone to achieve effectiveness of the cooperation agreement by November 30,” a lawyer for DSG said.
Sinclair’s outside counsel, David Seligman, blasted DSG for structuring the NBA agreement like this, saying “They have effectively put a gun to their head in this cooperation agreement…So they’ve effectively created this condition where they’re putting your honor in the hot seat, if you don’t deny both these motions (Sinclair’s and MLB’s), their whole cooperation agreements falls apart. Now, I think that that’s completely inappropriate.”
Later when the gun analogy was brought up again, Judge Lopez was uncomfortable, saying, “There’s a lot of gun talk, I just want to be sensitive to all that stuff there. And I got it.”
Diamond Sports filed for Chapter 11 in March, reeling from cord-cutting and the enormous debt incurred by Sincair in buying the RSNs in 2019. DSG is also suing Sinclair for more than $1 billion arguing the parent company used its subsidiary as a piggy bank.
“And as Sinclair saw industry headwinds develop, rather than support Diamond, Sinclair didn’t just sap it dry, it sacked its subsidiary shamelessly, pillaging it for a billion and a half dollars in a year and a half,” a DSG lawyer said, “burning every other stakeholder here today, and many, many others.”
The two parties have been in mediation, but they are at loggerheads over what that dispute resolution should cover. Diamond wants it to address the subject of Sinclair’s motion, management fees. Sinclair provides back-office support for HR, office leases, insurance, and many other areas. But Sinclair wants the mediation to also address the litigation, something DSG opposes. They are next scheduled to sit down on December 7.
Sinclair’s lawyer described today as a “sad” day for DSG because it effectively means once the 2024 MLB season, it will liquidate. DSG pointed out that nothing is set in stone and alternatives could emerge, and lambasted Seligman for his “crocodile tears.”
But Seligman, who spoke for over 20 minutes, said the end of the RSNs, which televise around 37 MLB, NHL, and NBA teams, is near.
“To Sinclair folks who originally acquired Diamond, they’re kind of bummed, they’re bummed that this business that they put in a billion and a half of equity value in, is now going to be shut down,” he said. “There’s going to be people losing their jobs…Diamond’s business is going to go away.”