With Sinclair's Diamond Sports Group subsidiary controlling the regional sports network fates of 16 Major League Baseball teams, a painful restructuring wrought by the subsidiary's likely bankruptcy will have a major impact on a TV source that supplies 20% to 30% of MLB's total revenue.
But even in a worst-case scenario, where Diamond enters Chapter 11 without a restructuring plan and the local TV rights of MLB teams are tied up in bankruptcy for a protracted period, baseball will manage to get its three outs.
Indeed, according to an observer of the league's economics, Baseball Prospectus writer Daniel R. Epstein, MLB will be just fine, generating record revenue of around $10.8 billion in 2022.
"MLB will continue to thrive financially even if they take a hit on RSNs," Epstein wrote.
Certainly, a restructuring that allows the 19 Bally Sports RSNs to duck out of deals with teams could be disruptive to those franchises in the short term.
Some Major League teams in the Sinclair/Diamond's Bally Sports tent hold an ownership stake of 20% or more in their respective channels, such as the Los Angeles Angels, San Diego Padres and St. Louis Cardinals. And some teams collect a greater percentage of their overall revenue from their Bally Sports licensing contract than others.
Given MLB's historically pioneering acumen in regard to live streaming, as sportswriter Maury Brown noted in Forbes Monday, the league could find a solution for its suddenly local-TV-bereft teams in the form of direct-to-consumer streaming.
Added Epstein, "If there’s one thing [MLB Commissioner] Rob Manfred does well (loath as I am to compliment him), it’s negotiate lucrative media contracts," noting the $115 million-a-season national TV rights deal the league signed with Apple for "Friday Night Baseball" last spring.
However, despite having plenty of resources to quickly move past the disruption cause by the fading pay TV ecosystem -- not to mention Sinclair's avarice and mismanagement -- baseball, Epstein said, will likely be "crying poor" as it looks for reasons to justify raising ticket prices, lowering player salaries and leveraging taxpayer money for stadium builds and renovations.
"If history is any indicator, RSN uncertainty will give them an excuse to take out their imaginary financial frustrations on everyone in their blast radius," Epstein added.
Sinclair paid $10.6 billion in 2019 to acquire 19 former Fox Sports channels, which are now branded as Bally Sports. Sinclair, which set up its Diamond subsidiary to manage it all, also co-owns channels operated by the New York Yankees and Chicago Cubs.
Beyond the culpability of dismissing the obvious erosion of the linear pay TV ecosystem before entering that huge Fox deal, Sinclair chose to conduct a ruinous spree of stock buybacks instead of paying off its debt.
"The amount of money they invested in their own stock through the two buyback initiatives is a little more than the amount their subsidiary, Diamond, owes to teams for broadcasting rights," Epstein wrote.
Buybacks, of course, enhance the compensation outlook for Sinclair CEO Chris Ripley and other top-level Sinclair managers, offering investors in the words of Epstein, "the illusion of success."
Takeaway: Nobody is going to come away looking good in this debacle.
