After 20 hard, contentious months in Chapter 11 bankruptcy, Diamond Sports and its 16 regional sports channels will come out intact after a federal judge approved this morning the plan to re-emerge as a slimmed down and nearly debt-free company.
The once high stakes hearing today to approve or reject the plan lost its tension when MLB dropped its objections, as three teams–the Braves, Angels and Tigers–inked deals with within the last 24 hours.
“This management team has done nothing short of a miracle to get us to where we are today,” Brian Hermann, a lawyer for Diamond, told the court. “They have worked incredibly hard over the last 20 months to stand up a business that is essentially a new business. They have evolved this business from a traditional cable linear business into what is going to become a combination linear and digital business.”
The new FanDuel Sports Network will have 16 RSNs with a total of 13 NBA teams, eight NHL squads and six MLB ones. That is down from the pre-Chapter 11 figures of 19 RSNs and more than 40 NBA, NHL and MLB teams. But a big change is Diamond will have digital rights for all the teams moving forward, which will be available to consumers through Amazon.
Here is the current list of teams that will see its games air on FanDuel Sports Network after the company has successfully emerged from Chapter 11 bankruptcy:
- NBA: Atlanta Hawks, Charlotte Hornets, Cleveland Cavaliers, Detroit Pistons, Indiana Pacers, Los Angeles Clippers, Memphis Grizzlies, Miami Heat, Milwaukee Bucks, Minnesota Timberwolves, Oklahoma City Thunder, Orlando Magic and San Antonio Spurs.
- NHL: Carolina Hurricanes, Columbus Blue Jackets, Detroit Red Wings, Los Angeles Kings, Minnesota Wild, Nashville Predators, St. Louis Blues and Tampa Bay Lightning.
- MLB: Atlanta Braves, Los Angeles Angels, Miami Marlins, St. Louis Cardinals, Detroit Tigers and Tampa Bay Rays.
According to financial projections filed during today’s hearing, Diamond expects streaming revenue to rise from $63 million this year to $580 million in 2027. Meanwhile, revenue from linear is estimated to decline from $1.85 billion this year to $1.08 billion in 2027, underscoring the secular change in the pay-TV universe as viewers abandon traditional TV for digital.
A key component of the Chapter 11 plan was reducing the fees paid to sports teams, which had benefited for years from the subscriber rich pay-TV universe. Those fees were no longer sustainable in the world in which subscribers were fleeing cable and satellite. According to Diamond’s financial projections, payments to sports teams will decline from $1.5 billion this year to $953 million next year, and $982 million by 2027.
Lawyers for Diamond boasted the company was now set to survive, with the Amazon deal, new distribution contracts, the naming rights with FanDuel and reduced rights fee payments.
“This is a spectacular day for the debtors from where we started, and allows many of the RSNs to air a year-round product,” said Andrew Goldman, a lawyer for Diamond.
Whether it is true this is a landmark day is of course to be determined. Selling local team media via streaming is still largely a new and untested business. Diamond’s outgoing parent company, Sinclair, had dismal results with its direct to customer product for the RSNs.
Diamond estimates it will have half a million streaming subs by the end of the year, and 2.8 million by 2027, while linears subs will decline over that period to 16.7 million from 22.6 million. Diamond also plans to sell games individually, so it’s not clear if the subscriber estimates include just full season or also per game buys.
Judge Chris Lopez noted how hard the 20 months were, as Diamond at one point had planned a wind down of its operations and testily battled MLB throughout over its plans.
“This was no layup,” Lopez said, caving in to the sports metaphor.
And Lopez got emotional at the end, tying the hundreds of personal bankruptcies he sees to the outcome of the Diamond case.
“I think about them all today, you’re going to save a lot of jobs,” he said. “There’s going to be a lot of folks who may not understand what technical terms we use today… they’re going to get a paycheck now. There’s going to be somebody who’s going to turn on their television and be able to watch the Detroit Tigers play, and that’s really important. It sounds not important, but it’s important if you’ve had a stressful day and you want to root for your team and go home and enjoy the game with family. And hardcore fans are hardcore fans, and they want to see their teams play, and rooting for it is just as much a part of the American experience as anything else.”
Lopez ruled on one objection, from the U.S. Trustee over a technical bankruptcy concern. He ruled against the Trustee and shortly after approved the Chapter 11 plan.
