The bankrupt regional sports channel network Bally Sports agreed last year to pay as much as $78.9 million to the San Diego Padres for ceasing payments on their contract, according to a copy of the then confidential agreement included as an exhibit in a motion for the federal judge overseeing the case to approve it.
The Padres were one of two MLB teams Bally Sports terminated their RSN contracts through the Chapter 11, which parent Diamond Sports Group filed in mid March 2023 after years of losses from cord cutting and acquisition debt. The other was the Arizona Diamondbacks.
The Padres filed an arbitration claim on June 3, 2023 that sought an award of $162 million, according to the settlement agreement, following the May 31, 2023 DSG termination of the broadcast contract. The two parties then agreed to mediation before retired federal judge Jay Gandhi in July 2023.
The parties shortly after struck a deal that stipulated an initial payment to the Padres of $10,496,366, and then a second payment totaling 62.5% of the assets of the liquidated San Diego RSN, a sum not to exceed $68.3 million.
DSG declined to comment, as did MLB. As part of the settlement, all parties agree to drop any current or prospective litigation.
“In recognition of the risks, uncertainty, and expense of further litigation, among other factors, each of the Padres and RSNCo exercised its business judgment to resolve their dispute, which the Parties believe reflects a reasonable compromise of the Padres’ claim for breach of contract asserted in the Demand, when taking into account all relevant facts and circumstances,” the settlement agreement said. RSNCo is the corporate entity partially owned by DSG that operated the RSN.
Bally Sports San Diego was a joint venture between the Padres and Diamond (technically it still is as the venture still must be shuttered through the bankruptcy process). In court filings in the case, Diamond described the San Diego RSN as “unable to generate sufficient revenue to independently support the rights fee payments under its telecast rights agreement with the Padres and to pay other operating expenses. The Debtors therefore had, when necessary, funded RSNCo to make up for the deficiency, including by extending $20.5 million in aggregate principal amount of loans to RSNCo during the 2022 MLB season”
As a result of those loans, DSG negotiated into the settlement that when the Padres get their first payment, Diamond itself will receive $3,297,819.
The disclosures come on the eve of tomorrow’s Disclosure Statement hearing, in which the parties will run through projections for the slimmed down DSG as it looks to exit bankruptcy by the end of the year. The NBA and NHL filed motions last week expressing concerns about DSG’s efforts to extend the bankruptcy process into the ‘24-25 seasons. While their complaints, as well as a different one from MLB, are on the agenda, federal bankruptcy court judge Christopher Lopez approved the four-month extension today (April 16). Each of the leagues worry the bankruptcy exit plan may not be realistic, especially given DSG has yet to reach distribution agreement extensions with two of its largest distributors: DirecTV and Comcast.
It’s unclear whether the Diamondbacks have had any confidential litigation process ongoing. In its March 2023 Chapter 11 petition, DSG listed the Diamondbacks as an unsecured creditor owed $30,871,752 because of missed payments pre-petition. That would not include future payments owed on the team’s media contract, just what had not been paid as of the date of filing.
At the time of the bankruptcy filing, DSG owned rights to 14 teams, and stopped paying four of them. But Judge Lopez ruled DSG either had to walk away from the deals or continue paying. Bally Sports plans to broadcast the remaining 12 teams’ games for the 2024 season.
In total Bally Sports broadcasts 38 NBA, NHL and MLB teams. It also has stakes in the YES Network and Marquee, which DSG is selling as part of the bankruptcy.
