Securing a long-term renewal with DirecTV has always been crucial for Diamond Sports Group’s ability to exit from Chapter 11 bankruptcy proceedings. The satellite carrier is one of the largest distributors of Diamond’s Bally Sports Regional Networks, which has 19 regional sports channels.
The talks, however, are not going well clearly based on a Diamond filing Tuesday night. The parties are fighting over not just what a new deal would look like, but what is owed–or not–from the expiring one currently in effect.
The filing is heavily redacted, so how much DSG claims DirecTV owes is not disclosed, nor the precise rationale. But what is not blacked out fills in some of the dispute.
That revolves around the Arizona Diamondbacks and San Diego Padres, two teams for which DSG terminated their contracts midseason. DSG’s RSNs broadcasted 49 Padres and 91 Diamondback games before cutting ties.
Now, logically it would seem fair that DirecTV not pay for the remaining games on the two clubs’ schedules. But reading between the redactions, it appears DSG is arguing that is not what the contract says.
“DIRECTV has no basis for withholding any portion of the payments due to the Debtors under the parties’ contract,” DSG wrote in the motion. “Faced with this reality, and unable to point to any contractual provision entitling it to relief, DIRECTV instead seeks to resort to supposed “equitable” remedies that would permit it to withhold payments owed under the contract. No legal or equitable principle, however, entitles DIRECTV to re-write its contract with the Debtors.”
What exactly the contract says about how to account for missed games is spelled out in the redacted parts of the motion, which notes DSG supplied 1,987 MLB games to DirecTV. Citing this figure suggests perhaps that the broadcaster needed to make good on a total number of contests across its channels.
DirecTV though has been doing its own calculations and deducting the pro-rata amounts before its payments to DSG, according to last night’s motion.
“Beginning in July 2023, DIRECTV began underpaying the Debtors (now, in the amount of more than REDACTED), on the ground that REDACTED for the failure by the Debtors and their affiliates to televise certain San Diego Padres games. Then, beginning on September 29, 2023, DIRECTV underpaid the Debtors by more than REDACTED on the ground REDACTED that for the Debtors’ failure to televise certain Arizona Diamondbacks games.”
In a bankruptcy, there is an automatic stay on contracts, meaning the parties can not change the terms without the approval of the court. After filing for Chapter 11 in March, DSG cut the fees it owed four MLB teams, which sparked an angry legal battle with MLB. In late May, the bankruptcy judge ruled DSG could not alter the contracts and ordered full payment.
Here, DSG is asking for a similar order from the judge to enforce the stay, which in their apparent interpretation of the DirecTV contract, would result in full payment for the Diamondbacks and Padres games even though they were not aired.
DirecTV and another distributor, Comcast, reportedly agreed to a short-term renewal recently, though for how long is unclear.
This is not the first time DirecTV has come before the court. In early August, the satellite carrier warned the court it was not anywhere close to a renewal, in response to an issue over when DSG’s plan of reorganization is due.
“Yet, despite the fact that the Debtors’ Distribution Agreements with DIRECTV terminate by their terms later this year, the Debtors’ renewal discussions with DIRECTV have barely begun,” the satellite carrier argued in the early August motion. “Even agreements on preliminary matters related to such renewal discussions, such as alignment on cost-based reductions for loss of specific teams’ rights, have thus far not been reachable.”
Fast forward more than two months and the sides still have not reached agreement on “preliminary matters” on reductions for loss of the Diamondbacks and Padres games.
When DSG entered Chapter 11, it had deals with 14 MLB teams. The contract with the Minnesota Twins expired at the end of the regular season, so that would mean it has 11 teams remaining under contract.
DSG also has 15 NBA teams and 12 NHL clubs under contract. It recently severed ties with the Arizona Coyotes. The NHL season began Tuesday and the NBA campaign starts October 24, with the DSG reorganization plan currently due next month.
That plan could see DSG reject more contracts deemed uneconomic.
