By: Caleb Long, Associate Editor

On Wednesday, February 15, 2023, Diamond Sports Group, the parent company to all the Bally Sports local networks, announced it would forgo the payment due on its $140 million debt. The lack of payment triggered a 30-day grace period for Diamond Sports Group, which the organization will use to figure out its financial state moving forward. While Diamond has not articulated as much, many speculate that this indicates it will be filing for Chapter 11 Bankruptcy very shortly. Since Bally Sports contracts with the NBA, NHL, WNBA, and MLB for licenses to locally broadcast 47 different professional sports teams across the country, this situation raises concerns for how these sports organizations will reach their fans with game broadcasts. The most immediate concern lies with the MLB, whose season is set to begin on March 30, 2023.

Chapter 11 Bankruptcy, frequently referred to as “reorganization” bankruptcy, does not mean that the entity filing is going out of business. According to the United States Courts’ online explanation of Chapter 11 Bankruptcy, “Usually, the debtor remains ‘in possession,’ has the powers and duties of a trustee, may continue to operate its business, and may, with court approval, borrow new money. A plan of reorganization is proposed, creditors whose rights are affected may vote on the plan, and the plan may be confirmed by the court if it gets the required votes and satisfies certain legal requirements.”

This means that if Diamond files Chapter 11, the reorganization may or may not affect its contracts with the MLB in a way that consumers will notice. Because contracting with sports organizations to provide local broadcasting is Diamond’s only business, it will most likely do everything it can to avoid losing its license contracts with the MLB and other professional sports leagues. If Diamond can manage to pay all the license payments due, nothing will change for consumers. For instance, The Athletic suggests that perhaps Diamond’s creditor could convert Diamond’s loans into equity, gobble Diamond up, and continue paying the license fees. It is well within the realm of possibilities, however, that it will have to cease license payments for at least some of the teams. Since the MLB season is beginning in the midst of Diamond’s financial struggles, the highest likelihood of non-payment of licensing fees will be to the MLB.

A stop of payment would constitute a material breach of the contract with the MLB for each MLB team’s contract for which payment was missed. In this scenario, the MLB may void the breached licensing contracts with Bally Sports networks. While that would likely be a financial hit to the MLB, the Commissioner of Baseball, Rob Manfred, said that the MLB will be prepared to provide the games themselves through the MLB Network and MLB.TV. Manfred did not say that he would be glad if Diamond Sports Group breached their contract, however, he did voice a potential silver lining—“This could mean no more blackouts!”

When professional sports leagues contract with local sports networks to broadcast the games locally, the contract includes a promise from the league that it will not digitally broadcast the games of the team that is within the territory of the applicable local network. For instance, if a Yankees fan in Los Angeles pays to watch the Yankees via MLB.TV, that fan can

enjoy every game, except the games in which the Yankees play against the Dodgers and likely the Angels, regardless of whether the game is home or away. Or, in my unfortunate case, the Cincinnati Reds’ network territory has an astonishingly far reach that extends to Nashville, TN. So, I cannot watch my team by any means.

While this blackout practice makes perfect sense and is necessary to keep MLB’s digital streaming offering from hurting local cable sports viewership, it is quite a headache for those who rely on digital streaming to watch their team. With cable subscriptions on the major decline and streaming settling in as the new normal for sports viewing, the MLB has been looking for a way to end blackouts for quite some time.

Therefore, if Diamond Sports Group materially breaches its contracts with the MLB, Rob Manfred has made it quite clear that the MLB will take the opportunity to make local games available to fans of the actual local area they are in via MLB.TV; effectively doing away with blackouts for the first time ever. The Athletic quoted Manfred expressing his feelings on the subject: “I hope we get to the point where on the digital side, when you go to MLB.TV, you can buy whatever the heck you want . . . You can buy the out-of-market package. You can buy the local games; you can buy two sets of local games — whatever you want. I mean, that is, to me, the definition of what is going to be a valuable digital offering going forward,”

It is too soon to say for sure if this is on the horizon for baseball fans. If the organization files for Chapter 11 bankruptcy, Diamond Sports Group may very well be able to reorganize, in a way that allows the licensing payments to continue, keeping the MLB bound to its agreements with Diamond. However, baseball fans everywhere ought to be crossing their fingers that that does not happen, because this could be the most beneficial breach of contract they could ever hope for.

 

 

Works Cited:

Shea, Billy & Kaplan, Daniel. “What the Bally Sports saga means for NBA, NHL, MLB broadcasts: All you need to know.” The Athletic, 17 Feb. 2023, https://theathletic.com/4219468/2023/02/17/bally-sports-rsn-nba-nhl-mlb-broadcasts/?redirected=1

Trister, Noah. “MLB: Bally network troubles could lead to end of blackouts.” AP, 16 Feb. 2023, https://apnews.com/article/mlb-sports-rob-manfred-business-a4f556cfebff72629036d0b7b3ab220a

“Diamond Sports Group.” Sinclair, Sinclair Broadcast Group, Inc., Accessed 19 Feb. 2023, https://sbgi.net/investor-relations/diamond-sports-group/

“Blackout Restrictions.” MLB.TV, Accessed 19 Feb. 2023, https://www.mlb.com/live-stream-games/blackout-mobile

Bruce, Harring. “Major League Baseball Seeks End To Local Markets Blackouts.” Deadline, 14 Jan. 2023, https://deadline.com/2023/01/major-league-baseball-seeks-end-local-markets-blackouts-1235222140/

Von Hoffman, Constantine. “Cable TV subscriptions set to drop below 50% of all US households.” Martech, 17 Mar. 2022, https://martech.org/cable-tv-subscriptions-set-to-drop-below-50-of-all-us-households/

“Chapter 11 Bankruptcy Basics.” United States Courts, Accessed 19 Feb. 2023, https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics