March 29, 2023

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Diamond Sports Planning to file for bankruptcy; MLB plans to stream games for free temporarily

Diamond Sports Group, the company that owns 14 regional sports networks from Bally Sports, is expected to file for bankruptcy on March 17, according to a report by Josh Kosman from the New York Post. The schedule will be awkward for Major League Baseball since the 2023 season opens on March 30, but the league plans to step in and air the games itself.

It was reported some time ago that Diamond is in financial trouble and they stopped paying interest worth nearly $140 million to creditors last month. MLB Commissioner Rob Manfred said at the time that the league was monitoring the situation, hoping Diamond would make its payments but also make contingency plans. It was later reported that the university had hired several former RSN executives for its newly created local media division, apparently to obtain a position to take over broadcasting duties when necessary.

The problem stems from continued cord cutting as fewer customers pay for cable packages these days, opting instead to use streaming services. This results in lower revenue from advertising sales and cable contracts, creating situations where RSN pays teams more rights fees than they can recoup from those revenue streams. According to Kosman’s report, there are at least four teams where Diamond plans to reject contracts via bankruptcy proceedings. The teams in question are the Reds, Diamondbacks, Guardians, and Padres, with San Diego’s deal currently $20 million in the Reds on an annual basis.

The report goes on to indicate that MLB’s plan is to take over those teams’ local television broadcasts, as well as air them for free in those local markets while negotiating lower-end deals with cable companies. It is not yet clear if fans in opaque markets will be able to access those streams in the short term. If deals are struck, the league plans to offer a premium service for around $15 a month. As Kosman notes, that’s less than some of the other streaming deals the Red Sox charge $29.99 per month. The league has also already tried to acquire the rights to all 14 teams currently controlled by Diamond but has been denied. These clubs are the Angels, Braves, Brewers, Cardinals, Diamondbacks, Guards, Marlins, Padres, Rangers, Rays, Reds, Royals, Tigers, and Twins.

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A similar situation arose with Warner Bros. Discovery, which owns AT&T SportsNet and is a minority owner of Root Sports. It was reported last month that Warner was planning to exit the RSN business, which would have implications for the Rockies, Astros and Pirates, but not the Mariners. Warner owns only 40% of Root Sports Seattle and the Mariners own the remaining 60%. Kosman’s report indicates that the league plans to acquire those broadcasts eventually as well, but not by Opening Day.

This is a fluid situation and a lot of the details are still being worked out, but a potentially big change is approaching how Major League Baseball gets its broadcasts to its fans. Most out-of-market games are available to paying subscribers via MLB TV, though these RSN deals always predate, resulting in blackouts that prevent fans from watching their home club on the platform. Many fans have criticized the way these blackouts are enforced, with some subscribers saying their homes are covered in various overlapping zones of blackout. Iowans, for example, often complained that they couldn’t watch games featuring the Cubs, White Sox, Cardinals, Twins, Royals, or Brewers. This is an extreme example but it highlights the kinds of problems in the current system. Manfred has expressed interest in moving to a new system that would allow customers to purchase broadcasts no matter where they are, though it is unclear how long such a model would take to build.

When this new system is implemented, it will also have implications for the teams’ finances. These RSN deals have always been an important source of revenue for the club which now seems to be running out. Streaming will introduce new revenue streams, of course, and it has already happened. The league has previously agreed lucrative deals with streaming platforms such as Apple and NBC and may strike others in the future.

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At the moment, the immediate concern appears to be making sure broadcasts continue for the 2023 season. Kuzman reports that the league plans to retain existing local broadcasters for any broadcasts it takes over and there does not appear to be any current concerns of missing games. Assuming the league is successful in all of these plans, fans likely won’t notice much difference in their baseball consumption here this year, but the field could be wide open for changes in the future.