One of the big debates around the ongoing Diamond Sports (parent organization of the Bally Sports-branded regional sports networks) bankruptcy has been if the company would opt not to pay teams and return their rights. Now, it looks like that might actually happen. And the San Diego Padres could be the first domino to fall there.
John Ourand of Sports Business Journal reported Monday that as per what he’s hearing from sources, “there’s a good chance” Diamond may not make their next payment to the Padres by the end of the grace period for it (Tuesday, May 30). If that comes to pass, that would lead to the rights reverting from Bally Sports San Diego to the team. And that would lead to MLB actually implementing its much-discussed plan to broadcast games locally itself. Here’s more from that piece:
From what I’m hearing, there’s a good chance that Diamond will miss that Padres payment next week, potentially the first time Diamond would have walked away from a contract. No decision has been made. But such a move would send the team’s rights to MLB.
Here’s why: More than two months into bankruptcy, Diamond appears to be no closer to working out streaming deals with any of the nine teams that have not relinquished those rights. Sources suggest that stalemate has pushed Diamond closer to keeping the contracts that make money and walking away from the ones that don’t.
Diamond told MLB that it will commit to pay the full rights fee over the lifetime of those nine team contracts in exchange for their direct-to-consumer rights, sources said.
Those streaming rights have been a big source of contention. Diamond has been able to obtain league-wide rights for the NBA and NHL, but not MLB. When they soft-launched over-the-top service Bally Sports+ last June, they only did it for the five networks where they had MLB streaming rights (Bally Sports Detroit, Bally Sports Kansas City, Bally Sports Florida, Bally Sports Sun and Bally Sports Wisconsin). They launched Bally Sports+ nationwide in the fall, but without gaining any further streaming rights.
Diamond has cited that lack of streaming rights as a key factor in their need to file for bankruptcy. And a report from ESPN’s Alden Gonzalez in March, shortly after that official bankruptcy filing, said Diamond planned to use the bankruptcy proceedings as a way to not only try to obtain streaming rights for the other nine MLB teams they have local rights to, but also “shed the contracts of its less-profitable teams,” with a lack of streaming rights being cited as a factor in which teams they’d keep. Now, it looks like that may be starting with the Padres.
That idea of non-payment has had quite the back-and-forth history during these discussions. Back in December, Josh Kosman of The New York Post wrote that “Diamond’s slew of unprofitable broadcasting contracts will likely be rejected” in bankruptcy proceedings, claiming that half of their MLB contracts were unprofitable. Diamond pushed back on that at the time and called Kosman’s report “unequivocally false,” but it’s received some significant buttressing since then, including that aforementioned report from Gonzalez.
And Kosman reported in March that Diamond was “expected to use the bankruptcy proceedings to reject the contracts of at least four teams to which it pays more in rights fees than it collects back through cable contracts and ads.” There, he specifically cited the Diamondbacks, Padres, Cleveland Guardians, and Cincinnati Reds.
(Interestingly, the larger focus of that piece was a report that MLB would stream the games of any teams they regain rights to “for free.” There hasn’t been a lot else on that front, with most reports (including Ourand’s this week) focusing on the idea of MLB continuing local broadcasts on paid linear TV with the existing announcers (largely team employees) and broadcast personnel (largely freelancers). But it would certainly be a big change if they did wind up streaming games for free.)
Since then, all four of those teams (plus the Minnesota Twins and Texas Rangers) have wound up with missed or delayed payments. Last month, the bankruptcy court ordered Diamond to make 50 percent payments to the Twins, Rangers, Guardians, and Diamondbacks, and they did. They also made a payment to the Padres at the end of March (at the end of a grace period), and one to the Reds earlier this month (also at the end of a grace period). So there have been a lot of “Diamond might miss the end of a grace period and return rights” stories to date that haven’t yet seen that actually happen, and this may be another there. But it’s certainly notable to see someone as plugged-in as Ourand now describing “a good chance” of a Padres’ rights reversion.
[Sports Business Journal; exterior shot of the Padres’ Petco Park on May 21 from David Frerker/USA Today Sports]
