A U.S. Bankruptcy Court in Texas overseeing the Chapter 11 restructuring of Sinclair Broadcast Group’s regional sports networks subsidiary, Diamond Sports Group, has told Diamond to pay half of what it owes to four of the five Major League Baseball franchises to which it had previously withheld TV rights payments for the just-started 2023 baseball season.
The unpaid balances, U.S. Bankruptcy Judge Christopher Lopez said, will be rendered next month, after the restructuring process resets the individual team fees Diamond must pay.
Teams mentioned in Lopez’s order include the Arizona Diamondbacks, Cleveland Guardians, Texas Rangers and Minnesota Twins. The judge hasn't yet addressed a fifth as-yet unpaid team in Diamond's Bally Sports RSN umbrella, the Cincinnati Reds.
Diamond missed its April 17 deadline to pay the Reds, but it still has until May 1 to render the bill under a grace period.
Sportico and Law 360 were among the first to report on the court's payment order.
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In his order, Lopez said he was not concerned about the financial stability of the clubs, but rather wanted the process to adhere to restructuring norms, where debtors are ordered to “pay the uncontested and reserve for the disputed portion of it.”
With Bally Sports continuing to show the unpaid teams’ games on its regional sports channels, Major League Baseball had petitioned the court to cut the clubs loose from their TV contracts and let them stream their own games.
Judge Lopez asked both MLB and Diamond to reconvene on May 10. His order seems to forestall the Diamondbacks, Guardians, Rangers and Twins on following through on threats to work with MLB and start their own telecasts.
Also read: Bally Sports Bankruptcy: The Cincinnati Reds Become Latest MLB Team to Get Stiffed By Sinclair
However, the Reds do remain a threat to do just that. According to a report published earlier this week by Sports Business Journal, the Reds are perhaps best positioned to self-broadcast, given that, unlike the other affected clubs, the Reds own a portion of the RSN that shows their games, Bally Sports Ohio, and thus have access to the production infrastructure, including the play-by-play and color announcers.
The Sports Business Journal outlined a very possible scenario, in which the Reds commence self-broadcasting on Saturday, May 6, for their game against the Chicago White Sox. The team could use the Apple TV Plus Friday Night Baseball national broadcast of the May 5 Reds-White Sox game to promote its new broadcast arrangement.
Diamond Sports Group entered Chapter 11 on March 15, looking to trade equity for around $8 billion of debt relief.
Sinclair paid $10.6 billion in 2019 to acquire 19 erstwhile Fox Sports RSNs, which had deals with 14 MLB clubs ... and margins at the time of around 50%.
Those margins are now well under 20%, given the impacts of cord-cutting and spiraling sports-licensing costs, and Sinclair/Diamond is losing money on a number of individual team deals. It’s leveraging bankruptcy to renegotiate those contracts, with the understanding that it would be very hard for MLB and its teams to replace the lost TV revenue on their own.
