After 10 months in bankruptcy, Sinclair regional sports networks subsidiary Diamond Sports Group finally announced a restructuring plan Wednesday, with a major assist from Amazon, that it says will keep it in business beyond this season.
Diamond's restructuring support agreement (RSA), which now awaits court approval, includes a $115 million minority investment from Amazon, per a term sheet seen by our sibling pub Broadcasting & Cable. Amazon will now see the direct-to-consumer efforts for Bally Sports regional sports network channels funneled through Amazon Prime Video. Diamond also secured a $495 million settlement with its estranged parent company, Sinclair.
But -- and this is a big but -- it's still very unclear as to whether Major League Baseball, the NBA and the NHL will continue to play ball on Bally Sports channels beyond this year.
Amid the fog and chaos of the long, arduous, vastly complicated restructuring process, Diamond forged short-term "cooperation agreements" with the NBA and NHL to keep the leagues' signatory teams in the Bally Sports fold only through their respective current pro basketball and hockey seasons, in exchange for reduced local TV rights fees payments.
In its filing to its Houston bankruptcy court Wednesday, however, Diamond stipulates that the cooperation agreement never took effect, and that it will now be superseded, with the teams on the hook for their original Bally Sports agreements.
"The Cooperation Agreement Order shall not have become effective, the terms of the NBA Term Sheet and the NHL Term Sheet conditioned on the effectiveness of the Cooperation Agreement Order shall not have gone into effect," Diamond said.
Also read: Diamond and NHL Forge Deal to Skate Through Current Season
Diamond and Sinclair reportedly believe the NBA and NHL are "open" to remaining in the Bally Sports fold. But it is even more unclear as to the fate of MLB, which under the direction of Commissioner Rob Manfred has a much more strained relationship with Sinclair.
Diamond currently has 10 MLB teams under RSN contract (the Minnesota Twins' deal just expired), but only five of those MLB clubs have coughed up their DTC streaming rights. It's believed that the MLB will reject the restructuring plan in favor of pursuing its own streaming deal with Amazon.
"We will refrain from offering [Diamond] congratulations," an MLB lawyer told Awful Announcing writer Daniel Kaplan Wednesday morning.
Also read: MLB Rejects Amazon’s $150 Million Bid to Prop Up Bally Sports (Report)
“We are thrilled to have reached a comprehensive restructuring agreement that provides a detailed framework for a reorganization plan and substantial new financing that will enable Diamond to operate and thrive beyond 2024," said David Preschlack, CEO of Diamond, in a statement. "We are grateful for the support from Amazon and a group of our largest creditors who clearly believe in the value-creating potential of this business. Diamond’s near-term focus will be on implementing the RSA and emerging from bankruptcy as a going concern for the benefit of our investors, our employees, our team, league and distribution partners, and the millions of fans who will continue to enjoy our broadcasts.”
Restructured Debt
Diamond filed for Chapter 11 restructuring on March 14 of last year, looking to offload more than $8 billion in debt tied to parent Sinclair's ill-fated purchase of 19 Fox SportsNet-branded regional sports networks in 2019. Cord-cutting and the loss of a major MVPD partner, Dish Network, had whittled margins that once superseded 50% to well under 15% for some channels.
Under the restructuring services agreement, Diamond's junior creditors will pay off most of the $650 million still owed to senior lenders, and they'll control and run the business moving forward. According to the New York Post, the Bally Sports brand will be dropped from the channels after the 2024 MLB season, and the junior creditors might eventually sell the whole concern to Amazon.
In addition to Amazon's investment, reported to be in the range of $100 million, Diamond will pocket a $495 million settlement from Sinclair, after it sued its parent over the summer, claiming it "milked" its subsidiary for management fees and other expenses.
"DSG is looking to emerge from Chapter 11 later this year with cash, a $1 billion - $2 billion line of credit and teams it feels it can lever into solid margins thanks to lower rights fees," said sports media consultant Patrick Crakes, who has serves as an advisor to the stakeholders for Diamond's unsecured debt.
Crakes also believes the leagues will fall into line once the restructured Diamond is "out and operating."
"I wouldn't be surprised to see a few teams they've let go come to them and look to do a tiered RSN deal," he told Next TV.
MLB's San Diego Padres and Arizona Diamondbacks are among the teams that were cut loose from Bally Sports amid the arduous restructuring process.
Amazon's Role
With its $100 million investment, Amazon Prime Video will become Diamond's "primary partner through which customers will be able to purchase direct-to-consumer (DTC) access to stream local Diamond channels," Diamond's release states.
This seems to indicate that, for now, Diamond's two-year-old DTC streaming platform, Bally Sports Plus, will be resold through Amazon Prime Video Channels.
Amazon has already made major investments via national live-sports rights deals with the NFL and NASCAR.
