Bally Sports files for bankruptcy
The Sinclair Broadcast Group subsidiary, which operates regional sports networks for the Reds and 13 other Major League Baseball teams, says it "will continue broadcasting games."
The Cincinnati Reds — and its fans — were thrown a curveball two weeks before Opening Day when the parent of the team's TV broadcaster, Bally Sports Ohio, filed for Chapter 11 bankruptcy protection late Tuesday.
Diamond Sports Group LLC — a subsidiary of Sinclair Broadcast Group, which holds TV rights to 14 of the 30 MLB teams — says it "will continue broadcasting games and connecting fans across the country with the sports and teams they love," said Diamond CEO David Preschlack in the bankruptcy announcement.
However, the Reds' TV picture isn't clear. The New York Post says Bally could cut ties with the Reds and three other teams. Bally pays the Reds about $50 million in rights fees, according to the Cincinnati Business Courier.
Bally "is 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 contacts and ads," the New York Post says. The four teams are the Reds, Cleveland Guardians, San Diego Padres and Arizona Diamondbacks, the paper says citing a confidential source.
Diamond didn't make a rights fee payment to the Diamondbacks last week "since it had yet to obtain streaming rights for the team," a company spokesman told CNBC.
Diamond pays about $1.8 billion in annual rights fees to 14 MLB clubs; 16 National Basketball Association teams including the Cleveland Cavaliers, and 12 National Hockey League teams including the Columbus Blue Jackets, according to Forbes.
Diamond said Tuesday it has $425 million of cash on hand to fund its business and restructuring, and that it "expects that its Bally Sports regional sports networks will continue to operate in the ordinary course during the Chapter 11 process." Diamond asked for a 30-day grace period from creditors on Feb. 15 after failing to make a $140-million cash interest payment on its $8 billion of debt. The grace period was to expire March 17.
Major League Baseball Tuesday night promised fans that they'll see games on TV this season.
"Despite Diamond's economic situation, there is every expectation that they will continue televising all games they are committed to during the bankruptcy process," MLB said Tuesday, according to ESPN. "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."
MLB Commissioner Robert Manfred told the Associated Press last month that "you should assume that if Diamond doesn’t broadcast, we'll be in a position to step in. Our goal would be to make games available not only within the traditional cable bundle but on the digital side, as well."
Sinclair bought the old Fox Sports Ohio and 20 other Fox regional sports networks from Disney in August 2019 for $9.6 billion. Disney, which owns ESPN, was required to sell off the Fox sports regionals when it purchased 21st Century Fox's TV and film assets. The bankruptcy negotiations with creditors also would separate Diamond from Sinclair, which owns almost 200 TV stations including WKRC-TV and Dayton's WKEF-TV (Channel 22) and WRGT-TV (Channel 45).
Last September, the company launched the Bally Sports+ streaming service for its 19 regional sports networks with the Cavaliers and Blue Jackets — but not the Reds. At the time, Bally Sports only had streaming rights for five of its 14 cable TV baseball teams (Detroit Tigers, Kansas City Royals, Miami Marlins, Milwaukee Brewers and Tampa Bay Rays). And Bally Sports didn't have a streaming deal with Major League Baseball for the 2023 season.
Diamond's bankruptcy — and Warner Bros. Discovery plans to get out of broadcasting deals with the Pittsburgh Pirates, Colorado Rockies and Houston Astros — could accelerate MLB's long-term plans for controlling the local TV and streaming rights for all teams, according to ESPN.
Forbes has reported that MLB could consider "a direct-to-consumer model via streaming. The league is considered the gold standard for sports streaming with the experience gained from hosting MLB.TV Premium, the league's out-of-market streaming service."
MLB produces games for its MLB Network cable channel and its MLB.TV streaming services. Currently MLB offers only out-of-market streaming to protect Bally Sports and other rights holders' telecasts on each team's regional cable providers. MLB could offer in-market streaming for a higher price, according to reports.
"A potential upside for consumers" would be MLB lifting the local blackout policy, "which according to MLB is their No. 1 customer complaint," Forbes says.