Diamond Sports Holdings Officially Declares Bankruptcy, Major League Baseball Responds
Yesterday, as long expected and frequently discussed, Diamond Sports Holdings – the operator of the Bally Sports regional sports networks that are home to the games for 14 Major League Baseball teams – officially filed for bankruptcy. It’s been a predicted outcome for a very long time now, as the value of RSNs plummeted amid continued disruption to the cable bundle business model.
The stated plan, according to a Diamond press release, is to continue operating their RSNs as usual, while working with their creditors to reorganize, restructure their debt, and try to come out of the process a still-successful business.
Will it actually play out like that in practice? I have my doubts. We know that, in most markets, the RSN model is no longer going to work in the world of cord-cutting and streaming (at least not at the price tags broadcast rights were previously commanding). So the question will be whether teams and leagues feel like they can do better on their own, rather than accept whatever dramatically reduced rates Diamond might propose in bankruptcy. I can’t speak for the NBA and NHL, whose teams are also impacted here, but MLB has very clearly signaled an intention to take over as many broadcast operations as they can, and I would bet anything that they see this bankruptcy as the first step in a plan to centralize streaming at the local level (they already have it nationally with MLB.tv).
In short: MLB wants to have more control over all of its teams’ local broadcast rights so that it can stream all games to all fans in all markets, without blackouts, for a single price. This bankruptcy could present an opportunity for MLB to grab back the rights for 14 teams, and I don’t know that they are going to be all that eager to see the teams renegotiate with Diamond.
You can see all of that if you read between the lines in MLB’s response to the Diamond bankruptcy filing:
“Diamond Sports Group’s bankruptcy declaration today is an unfortunate development that we have been expecting. Despite Diamond’s economic situation, there is every expectation that they will continue televising all games they are committed to during the bankruptcy process. Major League Baseball is ready to produce and distribute games to fans in their local markets in the event that Diamond or any other regional sports network is unable to do so as required by their agreement with our Clubs. Having streamed live games on MLB.TV for more than 20 years and produced live games for MLB Network since 2009, we have the experience and capabilities to deliver games to fans uninterrupted. In addition, we have hired additional seasoned local media professionals to bolster our capabilities in anticipation of this development. Over the long term, we will reimagine our distribution model to address the changing media climate and ultimately reach an even larger number of fans.”
That last bit there is key. That is, again, MLB saying that it is aware of the writing on the wall, and wants to create a nationwide streaming product with all games for all fans, without any local blackouts. It’s the smart and correct long-term play, and I do hope this process with Diamond and Bally creates an opportunity to accelerate.
Of course, that would be for just 14 of the 30 MLB teams, and the league would still have to work out the financials of making games from the successful RSNs (like Marquee and the Cubs) available on such a platform. I’ve gotta believe there’s a revenue-sharing way to make it work, but it’s gonna be an absurdly complex and probably hostile negotiation. That’s the part I would not necessarily expect to happen quickly.
You might see the 14 Bally clubs (the Arizona Diamondbacks, Atlanta Braves, Cincinnati Reds, Cleveland Guardians, Detroit Tigers, Kansas City Royals, Los Angeles Angels, Miami Marlins, Milwaukee Brewers, Minnesota Twins, St. Louis Cardinals, San Diego Padres, Tampa Bay Rays, and Texas Rangers) and the 4 AT&T clubs (the Houston Astros, Pittsburgh Pirates, Colorado Rockies, and Seattle Mariners) folded in within the next couple years. The other 12 might be a trickle over many years thereafter. But for those teams – or for the Cubs at least – keep in mind that it’s highly likely that a direct-to-consumer streaming product will be launched (so local fans can go that route if they don’t want cable, and non-local fans can keep getting Cubs games via MLB.tv).
In the shorter-term, what is expected to happen is that Diamond will reject a handful of its broadcast rights contracts – the ones that are losing money – and MLB will take over those broadcast operations, reportedly streaming the games for free initially. Four teams are tentatively expected in that boat (Padres, Reds, Diamondbacks, Guardians), but there could be many more. A different report swapped in the Rangers for the Padres, for what it’s worth.
With just two weeks to go before Opening Day, the involved parties are going to have to figure out a plan to at least make sure no fans are without games – one way or another – by the end of March.