Collapse of Regional Sports Networks (Diamond Sports Group files bankruptcy, Warner-Discovery looking to leave business, Xfinity drops Bally)

[eddygee]

I will say this, though. Most of us who like talking about realignment and schedule matrices and the like, it's because we are sports fans AND while the world is chaos our brains crave order and reason. That's why everyone wants divisions in nice tidy boxes. (You should see college conference realignment talk, people who post about it are ALWAYS trying to make perfectly symmetrical grids of power conference teams!).

So someone seeing the Big Four sports, hockey having four divisions; there's four time zones and four TV networks... It's really not surprising they're hoping for a symmetrical situation. That's kind of to be expected.




Also, apparently, MLB is totally prepared to step in and distribute games themselves via regional cable AND streaming if Bally's can't.

MLB prepared to take over local TV broadcasts from Sinclair

About $1 billion of Major League Baseball's revenue is at risk if a cable television company fails to make payments for local broadcasting rights to 14 teams, and the sport is preparing to take over telecasts. “I think you should assume that if Diamond doesn’t broadcast, we’ll be in a position...

www.yahoo.com

John Ourand of SBJ has a very detailed reporting on his podcast that of course MLB wants to do it but it's not that simple as MLB just taking the rights. The reporting is legally under a bankruptcy filing Diamond Sports has options of not paying while they restructure off debt and do a current analysis of current market value of rights vs what the deals were signed for.

Ourand's reporting from his sources is that while the inevitable legal maneuvering moves through courts it could take 1 1/2 to 2 yrs for a cleared bankruptcy. He reiterated that while MLB obviously wants the rights back to the Bally rights of its teams, they are at the whims of this potential bankruptcy proceedings.

Finally he says Ballys ultimately doesn't want to go through the Bankruptcy procedure to sell but restructure. They run a fine line of making sure they stay viable without fracturing a relationship with a future partner they'll have to do business with. Also said even if they take the rights and go some hybrid DTC option they'll have the issue of the ultimately money being much less that the traditional RSN model. Teams have been told to prepare for pain.

Alot of these reports are one sided reporting from these leagues.

 

[MMC]

 

[rsteen]

Ourand's reporting is from his sources is while the inevitable legal maneuvering moves through courts it could take 1 1/2 to 2 yrs for a cleared bankruptcy. He reiterated that while MLB obviously wants the rights back to the Bally rights for its teams they are at the whims of this potentially bankruptcy proceedings.

So could Bally block the local rights for up to 2 years even if they stopped producing local broadcasts? That's crazy.

 

[mouser]

So could Bally block the local rights for up to 2 years even if they stopped producing local broadcasts? That's crazy.

Unlikely. Bankruptcy courts can be very complex, but usually apply a doctrine of equity for all of the involved parties.

It would be very unfair financially to the NHL/MLB teams if the bankrupt Sinclair/Bally not only fails to provide the contracted service (broadcasts) but also prevents any other entity from providing those broadcast services for the affected NHL/MLB teams during the bankruptcy proceedings.

 

[eddygee]

So could Bally block the local rights for up to 2 years even if they stopped producing local broadcasts? That's crazy.

No they'll still produce but the payments will be either none or severely limited while it's in bankruptcy proceedings. My understanding from Ourand those proceedings aren't a quick thing.

Example think the Sears/Kmart Bankruptcy of the mid to late 2000s into the 2010s that seemed like it took forever restructuring debt and eventually Kmart going the way of the Dodo years later.

As far as it sucking for the teams yes it does BUT reality there is equal blame to go around. The average normal revenue point that teams could afford to pay their players without inflated unsustainable National/Local TV deals was probably about 20 yrs ago. But teams AND...networks got fat on the hog with ever increasing rights deals thanks to what they assumed would be a never ending source of revenue from regional sports fees and retrans fees.

It got to a point where somewhere along the line like with baseball where the empty bleacher shots you see no longer mattered. As teams were getting paid ever increasing rights fees regardless even in the face of decreasing interest and attendance.

This is going to end up as a restructuring a market reset. No matter what comes after this it will result in fewer rights fees and sunsetting of some of those huge deals signed 10 yrs ago. We have a unsustainable model. Only hope is for these big streamers like Amazon/Apple to ride in and save the day with money that traditional TV is running out of.

 

[AlwaysSunnyInTampa]

So what happens now? Bally ceases to exist and now we all have to stream the games? This wouldn't be such a damn problem in Tampa if Bally wasn't so exclusive to like 1 cable provider in an area that has like 4 options

 

[joelef]

No they'll still produce but the payments will be either none or severely limited while it's in bankruptcy proceedings. My understanding from Ourand those proceedings aren't a quick thing.

Example think the Sears/Kmart Bankruptcy of the mid to late 2000s into the 2010s that seemed like it took forever restructuring debt and eventually Kmart going the way of the Dodo years later.

As far as it sucking for the teams yes it does BUT reality there is equal blame to go around. The average normal revenue point that teams could afford to pay there players without inflated unsustainable National/Local TV deals was probably about 20 yrs ago. But teams AND...networks got fat on the hog with ever increasing rights deals thanks to what they assumed would be a never ending source of revenue regional sports fees and retrans fees.

It got to a point where somewhere along the line like with baseball l the empty bleacher shots you see no longer mattered. As teams were getting paid ever increasing rights fees regardless even in the face of decreasing interest and attendance.
to a point with some leagues like baseball with the empty bleacher shots it no longer mattered.

This is going to end up as a restructuring a market reset. No matter what comes after this it will result in fewer rights fees and sunsetting of some of those huge deals signed 10 yrs ago. We have a unsustainable model. Only hope is for these big streamers like Amazon/Apple to ride in and save the day with money that traditional TV is running out of.

Well here comes ads on jerseys

 

[joelef]

No they'll still produce but the payments will be either none or severely limited while it's in bankruptcy proceedings. My understanding from Ourand those proceedings aren't a quick thing.

Example think the Sears/Kmart Bankruptcy of the mid to late 2000s into the 2010s that seemed like it took forever restructuring debt and eventually Kmart going the way of the Dodo years later.

As far as it sucking for the teams yes it does BUT reality there is equal blame to go around. The average normal revenue point that teams could afford to pay there players without inflated unsustainable National/Local TV deals was probably about 20 yrs ago. But teams AND...networks got fat on the hog with ever increasing rights deals thanks to what they assumed would be a never ending source of revenue regional sports fees and retrans fees.

It got to a point where somewhere along the line like with baseball l the empty bleacher shots you see no longer mattered. As teams were getting paid ever increasing rights fees regardless even in the face of decreasing interest and attendance.
to a point with some leagues like baseball with the empty bleacher shots it no longer mattered.

This is going to end up as a restructuring a market reset. No matter what comes after this it will result in fewer rights fees and sunsetting of some of those huge deals signed 10 yrs ago. We have a unsustainable model. Only hope is for these big streamers like Amazon/Apple to ride in and save the day with money that traditional TV is running out of.

I don’t think it was an “ unstainable” model it was just to heavily tied into cable . I don’t think these leagues and teams ever expected streaming would get to the point we’re it has replaced cable

 

[rsteen]

What's the cap impact of this likely to be?

 

[KevFu]

John Ourand of SBJ has a very detailed reporting on his podcast that of course MLB wants to do it but it's not that simple as MLB just taking the rights. The reporting is legally under a bankruptcy filing Diamond Sports has options of not paying while they restructure off debt and do a current analysis of current market value of rights vs what the deals were signed for.

Ourand's reporting from his sources is that while the inevitable legal maneuvering moves through courts it could take 1 1/2 to 2 yrs for a cleared bankruptcy. He reiterated that while MLB obviously wants the rights back to the Bally rights of its teams, they are at the whims of this potential bankruptcy proceedings.

Finally he says Ballys ultimately doesn't want to go through the Bankruptcy procedure to sell but restructure. They run a fine line of making sure they stay viable without fracturing a relationship with a future partner they'll have to do business with. Also said even if they take the rights and go some hybrid DTC option they'll have the issue of the ultimately money being much less that the traditional RSN model. Teams have been told to prepare for pain.

Alot of these reports are one sided reporting from these leagues.

I'll have to take a listen.

I think that MLB's primary concern is going to be #1 - the games need to be on for local fans, first and foremost. They can figure out the money later, but most fans aren't going to understand the nuances of bankruptcy law and who's fault things are; and not having games in local markets loses fans, period.

MLB can't afford the carriage disputes, let alone just "no games on TV" in 14 markets.

 

[eddygee]

What's the cap impact of this likely to be?

Who knows there are guys here like @mouser who seems far more plugged in. No doubt this new cane fast. It's always sort of been talked about but more in a kick the can down the road way yeah like one day this will happen.

The hope is not to have this turn into sort of a sports RSN version of the 2008 economic collapse where one goes under and others with interest or stake even at a minor level feel the ripple effect and it dominoes over to other RSNs. Keep it at 14 and not 25.

 

[rsteen]

Quite a few of the non-Bally RSNs are owned or part owned by the teams. NESN, MSG, Altitude Sports, NBC Washington, I think Philly and Chicago have ownership stakes in their RSNs, Root Sports is part owned by the Mariners. I guess that's probably good in terms of keeping the dominos from falling

MLB can't afford the carriage disputes, let alone just "no games on TV" in 14 markets.

The NHL already has had issues doing that in Denver and Tampa.

 

[RangerBoy]

 

[Lt Dan]

Woah

(Preface, I am a legless idiot)

Does reevaluating mean that they are looking elsewhere when their current deals expire?
or
that they are able to opt out?

 

[Yukon Joe]

Woah

(Preface, I am a legless idiot)

Does reevaluating mean that they are looking elsewhere when their current deals expire?
or
that they are able to opt out?

So of course this is going to depend on the specific language of the deals between the teams and the RSNs.

But (VERY GENERALLY) speaking if you enter into a contract where you pay for ongoing services, if one party stops paying the other party has the option of declaring that to be a material breach of contract and declare the contract over. Or, the other party can sue to try and force compliance with the contract. Or they can just negotiate.

Here though - the RSNs aren't reneging on their payments to the teams - they're reneging on their debt payments. So it wouldn't sound like the teams would be able to say the RSNs are in a material breach. Things would presumably continue as normal for the teams as the RSNs go through bankruptcy.

 

[Lt Dan]

So of course this is going to depend on the specific language of the deals between the teams and the RSNs.

But (VERY GENERALLY) speaking if you enter into a contract where you pay for ongoing services, if one party stops paying the other party has the option of declaring that to be a material breach of contract and declare the contract over. Or, the other party can sue to try and force compliance with the contract. Or they can just negotiate.

Here though - the RSNs aren't reneging on their payments to the teams - they're reneging on their debt payments. So it wouldn't sound like the teams would be able to say the RSNs are in a material breach. Things would presumably continue as normal for the teams as the RSNs go through bankruptcy.

A dumb question (for anyone) that this answer reminded me of

I was watching a Tom Petty documentary and during the recording of Damn the Torpedos that he was technically bankrupt and (I am paraphrasing here) that with bankruptcy that certain contracts become null and void and he used that leverage to renogotiate his deal with his record label a the time

When Petty’s label, Shelter Records, was sold to the much larger MCA, Petty voiced his grievances about the deal. He complained about the way his contract was to be transferred, claiming he didn’t want to be “bought and sold like a piece of meat.”

When MCA wouldn’t surrender the contract, Petty took action. He financed his next record himself, racking up over $500,000 in studio costs. Then he refused to release it. He declared bankruptcy in order to force the label to void his contract, which it did. Shortly afterward, Petty signed back on with MCA under more favorable terms.

Tom Petty once battled his record label over $1 and changed the music industry for good

Tom Petty's willingness to stand up to his record label set an important precedent.

www.cnbc.com

would that also apply here? for the teams?

 

[MMC]

Diamond Sports Group will miss a $140M interest payment tomorrow that will trigger a 30-day grace period before filing for bankruptcy on March 15, but several NHL and NBA teams are still cutting deals with Diamond’s Bally Sports RSNs. The Lightning signed a rights deal with Bally Sports Sun earlier this month, sources said. Sources added that the Hurricanes and Ducks are close to finalizing extensions with Bally Sports South and Bally Sports SoCal, respectively. The Clippers renewed a deal on Bally Sports SoCal just before the regular season started, while the offseason saw the Pelicans extend with Bally Sports New Orleans and the Pacers cut a deal with Bally Sports Indiana. Teams are opting to cut these deals for several reasons. In a best-case scenario, the clubs hope they will continue to be paid for their rights even through a bankruptcy. In a worst-case scenario, these teams think it is better to be paid even for a couple of months. There is still no alternative that would pay as much for rights as RSNs.

MLB TEAMS YET TO RE-SIGN: The deals also show that the NBA and NHL are more willing to work with Diamond Sports than MLB. No MLB team has renewed a deal with Bally Sports RSN since 2021. No deal has come up since then, but teams all have stayed away from signing extensions. All eyes are on the Twins to see what that team does with its rights, as their deal with Bally Sports North ends after the 2023 season. The biggest question is whether it will head into bankruptcy with a restructuring plan in place. Diamond needs the NBA and NHL to be on board for this kind of restructuring deal to be put in place. MLB involvement would make this plan even stronger. The alternative is what is known as a free-fall bankruptcy, where nobody -- not Diamond, not its creditors, not the teams, not the leagues -- has control over the outcome or the timing.

 

[MMC]

 

[Taro Tsujimoto]

NHL board of governors meeting shortly.

 

[Golden_Jet]

I wonder the effect on the cap , this would have.

 

[Jumptheshark]

I wonder the effect on the cap , this would have.

NHL and NHL GMs had a phone meeting today

 

[KevFu]

A dumb question (for anyone) that this answer reminded me of

I was watching a Tom Petty documentary and during the recording of Damn the Torpedos that he was technically bankrupt and (I am paraphrasing here) that with bankruptcy that certain contracts become null and void and he used that leverage to renogotiate his deal with his record label a the time

Tom Petty once battled his record label over $1 and changed the music industry for good

Tom Petty's willingness to stand up to his record label set an important precedent.

www.cnbc.com

would that also apply here? for the teams?

This is completely OT, but did that doc include the story of the meeting where his lawyers and the record company and their lawyers were talking, and he was just bored and started cleaning his fingernails get mentioned?

That story is epic, because apparently he didn't think anything of it at the time; he just pulled out his pocket knife to clean under his fingernails...

And his guys tell him later that the record execs saw him with the knife out and thought he was a total badass, said "this guy is NOT someone to Eff with" and gave him everything he wanted.

 

[Takuto Maruki]

What makes me curious is the potential of the elimination of blackouts, and the ripple effects, that effect Canadian teams and specifically Rogers/Bell. Because it's clear that the same sort of desire to see blackouts eliminated exists up here, but considering the fact that the oligarchy of telcos has a lot of fingers in the sports pie, how much longer can blackouts survive in Canada? I imagine that SN specifically, but also TSN, want people to continue to use their (frankly, terrible) services as the only option legally, especially if they are fans of their local teams.

 

[mouser]

Good map of all the affected sports teams:

 

[Headshot77]

Props to MLB for seemingly being ahead of the curve on this one and being ready to produce their own content at a moments notice.