A day after Sinclair Broadcast Group’s regional sports network subsidiary, Diamond Sports Group, made the bombshell decision to simply walk away from a billion-dollar contract with a Major League Baseball franchise, top executives and lawyers for the company appeared in a Texas bankruptcy court Wednesday, where they engaged in what was described by one reporter as a "vitriolic" standoff with Major League Baseball Commissioner Rob Manfred.
Amid the acrimony, Diamond made a bombshell disclosure: The direct-to-consumer streaming service that's at the heart of the conflict, Bally Sports Plus, only has around 203,000 paying customers attached to it, nine months after its national rollout.
In testimony Wednesday, Diamond CEO David Preschlack confessed that the figure was only 55% of his subsidiary's goal. (Doing the math, at $20 a customer, the service is generating only around $36 million in annual revenue. This is probably not enough dough to dent the interest payment on over $9 billion of Bally Sports debt.)
Described as “bobbing back and forth” on the witness stand, meanwhile, Manfred seemed to make no effort to hide his disdain for Sinclair executive chairman David Smith, who he said tried to blackmail MLB into forcing its teams into playing ball with Bally Sports Plus.
Wednesday’s “marathon” hearing was well covered by The Athletic's David Kaplan, among few other sports media writers. It was held to adjudicate a petition filed by MLB.
Diamond has paid four of the league's teams — the Arizona Diamondbacks, Cleveland Guardians, Minnesota Twins and Texas Rangers — only 75% of what it owes the clubs for 2023. And it’s waiting for the bankruptcy court to restructure the money-losing deals it has with those teams to “market value” before it pays more.
Diamond also hopes that the restructuring will result in all 13 remaining MLB teams under the Bally Sports RSN umbrella signing their DTC rights away to Bally Sports Plus, so that Diamond can offset Bally Sports revenue declines from cord-cutting and other factors.
Currently, Diamond has all of its NBA and NHL team partners signed onto its Plus streaming service, and it has rights for five MLB teams. After walking away from the San Diego Padres on Tuesday, it continued Wednesday its “passionate pursuit” of streaming rights from the eight remaining MLB teams under the Bally Sports umbrella that it still hasn’t locked into DTC deals.
As he has for years, Manfred continues to want nothing to do with Bally Sports Plus. He was in court Wednesday to ask Judge Christopher Lopez to cut the Diamondbacks, Guardians, Twins and Rangers loose from Bally Sports if Diamond won't pay the full freight of their respective local-TV licensing contracts.
And as Kaplan describes it, Manfred's testimony revealed two entities who don't like each other very much.
Manfred recalled — not so fondly! — a visit from Sinclair’s Smith in New York during an undisclosed time period.
Quoted by The Athletic, Manfred testified, “And Mr. Smith, you know, said, ‘You know, we want these rights.’ And I said, ‘Well, you know, unfortunately, sometimes people want things they’re not going to get and you’re not getting these rights.’ And he said to me, ‘So let me tell you what’s going to happen.’ He says, ‘I put $2 billion into the purchase of these RSNs … so what I’m going to do is I’m going to keep this going long enough until I get my $2 billion out, OK? And then I’m going to start squeezing your clubs to take their rights fees down, OK, in order to make sure that I stay profitable in the RSN business. And if they don’t agree to that, I’m going to put the entity into bankruptcy, and then I’m going to selectively reject contracts.'”
Under its Chapter 11 status, Sinclair’s Diamond unit on Tuesday severed its 20-year, $1.2 billion deal with MLB’s San Diego Padres, citing the club's unwillingness to participate in Bally Sports Plus.
The MLB has stepped in to prop up distribution of a new Padres channel on DirecTV, Charter Communications, Cox Communications and Fubo, as well as present Padres games on MLB.TV DTC streaming. This arrangement started Wednesday evening.
As for Manfred's testimony, we won't aggregate too much more from Kaplan, who stood on the front lines for the duration, and who made it pay off with the best read you’ll have all week. Here’s that Athletic link again.
There’s a part in here where, under cross-examination, Diamond's attorney tries to hammer home the Sinclair talking point that Diamond now functions almost an entirely separate entity from its station group parent, Sinclair.
Manfred smacked that one away like an 83 MPH hanging curveball.
And he had some stern John Dutton-esque closing remarks for Diamond, Sinclair ... and Smith.
“But let me tell you, every time you threaten to reject the contract … we’re going to be there to stand up those broadcasts for clubs so that our fans are not deprived of their games. OK, so if you think the leverage is fans are going to be screaming, you’re wrong, because we’re going to be there to stay in those games," Manfred added.
The court is expected to take a few days before ruling on MLB's motion.
