What we learned from today’s Chapter 11 hearing in the long-running Diamond Sports Group case: The parent of Bally Sports Regional Networks is at an impasse with Comcast over distribution; the NBA, NHL, and MLB each don’t believe the company has a viable business plan; and July 29 is shaping up as at last the do-or-die date to finally end this madness over the RSN giant’s fate once and for all.
DSG, home to 17 RSNs, filed for Chapter 11 in March 2023 after years of cable cutting and debilitating interest payments on billions of dollars in debt stemming from parent Sinclair’s 2019 purchase of the sports TV chain.
Rather than pursue a wind-down of operations, DSG reached an agreement with Amazon in January to invest and stream games before filing a plan of reorganization. It has the backing of lenders and debt holders, but clearly not the three leagues.
“We still have substantial concerns about the viability of the debtor’s business plan,” said James Bromley, MLB’s outside counsel. “We anticipate filing an objection.”
Similarly, the NBA’s outside counsel Vincent Indelicato chimed in, “The urgency, Your Honor, has been heightened by what we view and I think … as a very clear absence of any information today that would suggest to us that these debtors can achieve a viable business plan.”
And not to be outdone, the NHL’s outside counsel Shana Elberg said, “Time is of the essence, we do not yet have the answers we need from the debtors or a workable go-forward business plan.”
The leagues have a variety of concerns. First, they want economic details on the distribution deals struck with Charter, DirecTV, Cox, and Fubo. And they want information on just how impactful the loss of Comcast has been (the parties failed to renew last month).
“Our negotiations with Comcast are currently at an impasse,” said Joe Graham, an outside counsel for Diamond. “While we remain open to further negotiation, at this time, based on Comcast’s intransigence to negotiate off their current position, the company has little choice, but to explore alternatives to Comcast.”
Even the judge overseeing the case, Chris Lopez said, “Whether Comcast is essential to the deal or not, I don’t know.”
To this end, MLB has reached a discovery agreement with DSG and will begin depositions next month.
“Under the agreement that we have just reached this morning with baseball, they won’t even get the final document productions from us with respect to our projections until the end of June, with depositions to follow the second week in July,” said Andrew Goldman, another outside counsel for DSG. “They have concerns about feasibility, and we assume that they will continue to, those concerns are probably more well-founded once they have seen what we have produced. And once they’ve had a chance to quiz our clients about those in depositions.
“While we appreciate Major League Baseball’s concerns, we view them as speculative and premature,” he said in what is polite legal speak for get lost for now.
MLB’s Bromley, recognizing the slight, quickly interjected, “The speculation right now is really more on the debtor’s fronts than on MLB’s front. Based on current information, we have zero comfort and zero information about the viability of the business going forward. If the debtors are able to produce information by the end of the month, it changes our mind. That’s great. We are not confident of that, but we are certainly willing to see what they produce.”
DSG told the court it has distribution deals “representing approximately 84% of our historic revenue.” That though does not mean these new deals will produce the same amount of revenue, especially if the channels are moved to a paid cable tier.
DSG has deals with 12 MLB clubs for the rest of the seasons (and nine of those moving forward) and is negotiating with the NHL and the NBA about televising the 2024-2025 season. Both the NBA and NHL are worried about running out of time to arrange alternative broadcast arrangements if DSG falls through.
“[T]he start of the 2024 25 NBA season is fast approaching, there’s a lot that will need to get done well ahead of the season to properly produce, distribute, and market games if Diamond cannot reorganize in a business model that makes them a reliable partner that will make it all the way through the entirety of the NBA season,” Indelicato said. “To put that into context, Judge, we’re talking about approximately 70 games per team across 15 different teams. You just simply can’t launch an entirely new production, distribution, and marketing system, Your Honor, for approximately 1,000 games, in that many geographies overnight, just simply cannot be done.”
The plan confirmation hearing, originally scheduled for June 18, is now July 29, a date Judge Lopez said he planned to stick with. But he rebuffed the NBA’s overture for further hearings before then.
DSG also disclosed in the hearing it has inked a new naming rights partner to take over for Bally and would file an approval motion with the court in the coming weeks.
