After months of discussion of the possibility, Diamond Sports has finally relinquished a team’s rights after a non-payment. That would be the San Diego Padres, who will now have their games (beginning Wednesday with a road game against the Miami Marlins, set for a 6:30 p.m. ET/3:30 p.m. PT start) broadcast by MLB instead of Bally Sports San Diego. The broadcasts should look and sound largely similar, with Padres’ primary TV broadcasters Don Orsillo, Mark Grant, and Bob Scanlan still involved. But there are going to be big changes in how these games are distributed.
The largest change is that this will see MLB will offer their first-ever over-the-top in-market streaming offering through MLB.TV. That will be free through Sunday, June 4, but will cost $19.99 per month after that, or $74.99 for the rest of the season. Between that OTT option and deals with existing multichannel video providers, including DirecTV, AT&T, Spectrum, Cox, Fubo and more, a MLB release says this will be available to 3.26 million homes in the Padres’ broadcast territory (presumably, every home in that area that has high-speed internet, linear cable or satellite, or both), a 189 percent jump from the estimated 1.13 million homes they had before on Bally Sports San Diego. Here are some quotes on the upcoming broadcasts from a MLB release:
“As Commissioner Manfred previously stated, Major League Baseball is ready to produce and distribute Padres games to fans throughout Padres territory,” said Noah Garden, MLB Chief Revenue Officer. “While we’re disappointed that Diamond Sports Group failed to live up to their contractual agreement with the Club, we are taking this opportunity to reimagine the distribution model, remove blackouts on local games, improve the telecast, and expand the reach of Padres games by more than 2 million homes.”
“Through the power of Major League Baseball and the Padres, we are working to elevate the game broadcast experience for all Padres fans,” said Billy Chambers, MLB Executive Vice President, Local Media. “New technology, better picture quality and increased access are just a few of the items we are working on to better tell the story each and every night.”
“We have been preparing for this groundbreaking moment,” said Padres CEO Erik Greupner. “The Padres are excited to be the first team to partner with Major League Baseball to offer a direct-to-consumer streaming option through MLB.TV without blackouts while preserving our in-market distribution through traditional cable and satellite television providers. Our fans will now have unprecedented access to Padres games through both digital and traditional platforms throughout San Diego and beyond.”
It’s interesting to see this idea of MLB producing and distributing games themselves (which they have built a whole department to do) actually come to pass, and to compare and contrast the specifics to some of the reporting that’s been out there. That’s particularly true on the streaming side, where this paid plan is starkly different from what was previously suggested in pieces like Josh Kosman’s March New York Post report of “MLB to stream games for free amid looming Diamond Sports bankruptcy: sources.” (Technically, they are going to stream games for free, but only for a week.)
Of course, Kosman’s piece there was more nuanced than that headline (not unusual for that outlet). It included “Baseball Commissioner Rob Manfred will have the league take over the local broadcasts of the money-losing teams and stream them for free in their respective local markets as he negotiates with their cable companies for lower contracts, a source with knowledge of the discussions said,” but also “Even if MLB reaches deals with cable providers, it will still offer the over-the-top service for around $15 a month, the source added.” So the “free” idea was spelled out as for during negotiations with multichannel video providers (which might have taken longer after this turnover if these rights had reverted in March, as was a distinct possibility; the later transition may have helped MLB get all these deals lined up before the actual rights reversion).
But it is notable to see the price rise from a proposed $15 a month to $20 a month. That’s what Diamond charges for its Bally Sports+ OTT service, and it’s cheaper than the $25 a month charged by YES and the $30 a month NESN 360 and MSG+ are charging, so this is in line with other options. That’s still higher than that previous report had suggested, though. It is also significant to see a MLB team offering an OTT in-market streaming option through MLB.TV for the first time; that idea has long been discussed, but this is the first time it’s coming to pass.
Yes, this is less revolutionary now that so many other networks have offered full OTT in-market options. The first MLB-relevant direct-to-consumer offering came when Canada’s Sportsnet (Toronto Blue Jays) launched an OTT option in 2016, but NESN (Boston Red Sox) launched theirs last summer, as did Bally Sports+ (Milwaukee Brewers, Florida Marlins, Tampa Bay Rays, Kansas City Royals, and Detroit Tigers), and YES (New York Yankees) followed this year. But it’s significant to see the Padres joining that still-small group of MLB teams whose games can be bought in-market without a MVPD package, and to see them doing so through MLB.TV. And that suggests further similar OTT offerings may happen if and when other teams’ rights revert to them (either from non-payment from Diamond during this bankruptcy or from a conclusion to the WBD Sports RSN turnover negotiations).
The latest
The continued payments were perhaps in hopes of getting streaming rights, which Diamond has cited as a key priority. But the decision to return the Padres’ rights indicates they gave up at least there, and it will be interesting to see if they do that with other teams. The next domino to watch there is the bankruptcy judge ruling expected Wednesday or Thursday on if Diamond can unilaterally reduce its contracts with the Reds, Rangers, Guardians and Diamondbacks, teams it’s made court-ordered half payments to so far. If that ruling doesn’t go Diamond’s way, some of those rights may soon transfer as well, leading to MLB having to execute this Padres solution in other markets.
Another angle of note here is what this will mean for the Padres’ TV income. They were making $1.2 billion over 20 years from their deal with Diamond, $60 million per year. (And that was with a part-ownership stake in Bally Sports San Diego as well, which is why that RSN wasn’t part of the Diamond bankruptcy filings.) Diamond claimed to lose tens of millions a year on that deal. Now, with the club holding their own rights, they’ll only be worth what MVPDs and consumers are willing to pay.
There’s an additional revenue stream now with this OTT option, which was not available before (thanks to Diamond not having the Padres’ streaming rights, they were not included in Bally Sports+). And there are now many more households getting these games through MVPD packages. But given the increased carriage here, that’s presumably at a lower per-subscriber fee than what Bally Sports San Diego was getting . And it’s not clear how that numbers times fee math works out; that could be either an increase or a decrease in revenue depending on how much lower the fee is. Of course, even a decrease in direct broadcasting revenue can possibly be worth it for teams if it comes with increased exposure (which can boost other revenue streams, including ticket sales and merchandise), and that’s the bet the Phoenix Suns and Mercury made with their attempt to go to Gray Television/Kiswe (which Diamond sued successfully to stop, at least for now). But broadcasting revenue remains an important part of the pie.
There, the key question is that if this contract was so team-friendly and so unprofitable for Diamond, will the Padres see a big drop in revenue now that they’ve taken it over? That could be important for their bottom line, and might even affect their approach to free agency. They entered this season with MLB’s third-highest payroll, almost $249 million, so they certainly have bills to pay. We’ll see how this works out for the Padres, and if similar transitions wind up happening with other teams.
[MLB.com; photo of the Padres’ Petco Park earlier this month from David Frerker/USA Today Sports]
