Diamond Sports Group, which operates Bally Sports, filed for chapter 11 bankruptcy on Tuesday.
Bally Sports is a group of Regional Sports Networks owned by Sinclair Broadcasting, which includes Bally Sports Detroit. BSD is the broadcast home for Detroit Tigers, Pistons and Red Wings games.
Diamond Sports Group said in a release Tuesday night that it expects to continue to operate during the bankruptcy process. This mean that coverage of Detroit events should not be immediately impacted.
What Diamond Sports bankruptcy means for Detroit
Diamond Sports has already secured its rights to broadcast the Detroit Red Wings and Detroit Pistons games for the remainder of the 2022-23 season.
Where there could be disruptions is in the 2023 MLB season.
Diamond had nearly $1 billion in rights payments due in the first quarter of the year, mostly to baseball teams.
The company said on Tuesday it was negotiating a restructuring agreement with debt holders that will eliminate most of its debt. Under an agreement with creditors, it would become a separate company from Sinclair Broadcast Group.
Despite the financial issues, DSG made a statement that it will continue to broadcast as the MLB season approaches.
“DSG will continue broadcasting games and connecting fans across the country with the sports and teams they love,” Diamond Sports CEO David Preschlack said in a statement. “We look forward to working constructively with our team and league partners and all DSG stakeholders throughout this process and beyond.”
Last month, MLB commissioner Rob Manfred assured baseball fans that this potential bankruptcy will not impact their ability to watch their respective teams play.
In a “worst-case scenario,” Manfred indicated that MLB would pick up streaming of the games and have them distributed to cable companies.
“In the event that MLB stepped in, what we would do is we would produce the games,” Manfred said. “We would make use of our asset, the MLB Network, to do that. We would go directly to distributors – meaning Comcast, Charter, the big distributors – and make an agreement to have those games distributed on cable networks.”
MLB facing greatest impact of Diamond Sports bankruptcy
No sport may feel the impact of Diamond Sports’ financial issues more than Major League Baseball.
With the 2023 season approaching, 14 MLB teams have broadcast agreements with Bally Sports.
About 21% of the MLB’s $10.8 billion in annual revenue stems from agreements with local networks.
Manfred said last month that Diamond told the league it intends to pay its contracts for the upcoming season.
“Obviously, our first choice would be that Diamond pay the clubs what they’re contractually obligated to pay them, but because I guess I’m a contingency planner by nature, we are prepared no matter what happens with respect to Diamond to make sure that games are available to fans in their local markets,” Manfred said.
Loss of Bally Sports Detroit could benefit local fans
The financial issues for Diamond Sports Group could actually become a benefit for Detroit pro sports fans.
Due to high subscriber fees from Bally Sports, they have been blacked out by numerous streaming providers. That includes DISH, Sling, YouTube TV and Hulu.
Bally Sports does offer an online streaming service in Bally+. That allows viewers to watch Tigers, Pistons and Red Wings games directly through the streaming app. However, it does cost $19.99 a month or $189.95 a year.
Still, the service hasn’t generated the kind of revenue Bally Sports was hoping.
Forbes reports that household cable subscribers nationwide have dropped from 103 million to 66 million over the past 10 years.
Combine those two things with blacked out providers, and its clear Diamond Sports isn’t getting the ad revenue it needs to sustain itself.
With Bally Sports on the decline, it could open the door for Detroit sports broadcasts to become more accessible to the general public.
“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,” MLB said in a statement late Tuesday night. “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.”
If the agreements with Bally Sports are terminated, the franchises could seek new agreements with a different broadcast company. That could eliminate some of the blackouts that have been in effect for Michigan cable and streaming customers.
How Diamond Sports got to verge of bankruptcy
According to the Associated Press, Diamond Sports missed a $140 million interest-only payment on the company’s $8.6 billion debt. The missed payment began a 30-day grace period where Diamond Sports Group can negotiate with creditors and restructure its debt.
Diamond owns a total of 19 Regional Sports Networks (RSNs) under the Bally Sports label. Those networks have the rights to 42 professional sports teams. Included is the Detroit Tigers, Detroit Pistons and Detroit Red Wings.
The 42 teams have all benefited from lucrative broadcast revenue as part of the agreements with the RSNs. With Diamond Sports looking to restructure debt, it could put these franchises in financial difficulty. There could be declines in payments or termination of the contractual agreements entirely.
S&P Global Ratings reports that Diamond Sports owes around $1.8 billion in rights fees to its teams in 2023. There is also an additional $600 million in interest payments that will be due.
According to Forbes, Diamond Sports has $585 million in reported cash.
Sinclair Broadcast Group bought the RSNs from Walt Disney for $10.6 billion in 2019. The Department of Justice required Disney to sell the networks in order for its acquisition of 21st Century Fox’s film and television assets. Sinclair borrowed $8.6 billion to acquire the RSNs.
