MLB asks bankruptcy court to rush Diamond Sports decisions on media contract
Why are the NBA and NHL not as concerned?
MLB and five of its teams painted a negative picture of what could happen if a bankruptcy court does not force Diamond Sports Group to choose whether to keep or reject the regional sports channel company’s media deals with 11 league teams (technically it's 12 but the Minnesota Twins deal expires at the end of the postseason).
“Although MLB was able to fill the void created by the unexpected rejection of two telecast rights agreements during the 2023 season, MLB cannot establish a new business with viable economics on a more industry-wide basis in a similarly ad hoc manner,” the league argued in a new motion before the court. The five teams that signed on to the motion are the Cleveland Guardians, the Atlanta Braves, the Texas Rangers, the Milwaukee Brewers and the Detroit Tigers.
Diamond, which operates the Bally Sports Regional Network, walked away from contracts with the San Diego Padres and Arizona Diamondbacks during the regular season, following the RSN company’s Chapter 11 filing on March 14. That still leaves the 11 teams, and MLB argues it needs to start planning for 2024 now.
As sympathetic as that argument is, it is strange that a similar plea has not come from the NHL and NBA, whose seasons are underway (preseason in basketball). The NBA and NHL have not raised objections to DSG’s move to extend its deadline for submitting a reorganization plan to the court, a document that would force the company to declare which teams it is jettisoning.
But MLB used terms like “loitering” and “lingering” to describe Diamond’s seven-month stay thus far in Chapter 11. MLB has had a contentious relationship with Diamond long before the Chapter 11 filing. While the NBA and NHL collectively granted DSG digital rights, MLB fought this tooth and nail. That is in part because MLB seeks to build its own local media operation.
DSG last month asked the court for another two-month extension into November for its reorganization plan. That is still roughly three months before spring training, so it would seem that might be enough time to handle team media contracts that are rejected (MLB stepped in for Diamond with hours to spare before the first Padres games broadcast after DSG walked away)
But MLB argues Diamond has already had enough time:
“After nearly seven months of chapter 11 protection, one extension of exclusivity and more than one month of court-ordered mediation, the Debtors still have no plan of reorganization and no go-forward business plan. It is now clear that the Debtors have never been in a position to achieve the requisite consensus to adopt a viable strategy. This was true before the March 2023 Petition Date. It was true when the Debtors first moved to extend exclusivity on July 11, 2023. It remains true today.
“The Debtors had the entirety of the 2023 baseball season to get their business back in order and have failed to do so. There is no reason to believe that the Debtors will finally figure out a path forward now that the NBA and NHL seasons are beginning.”
MLB even accused Diamond of already knowing which MLB team media contracts it will terminate.
Part of Diamond’s issue is it needs to secure long-term distribution agreements with carriers like DirecTV. But those two cannot even agree on what the satellite carrier owes for past fees, well enough new for new deals https://awfulannouncing.com/local-networks/diamond-sports-directv-diamondbacks-padres-bally-sports.html.
MLB is asking the court for two things. One is to deny the plan of reorganization deadline extension (my understanding of how this works needs some help. On September 29, a day before the then September 30 deadline, DSG asked for an extension. No formal order came down from the court, but here we are as if it had)
The second action MLB is asking is for the court to compel DSG to decide which contracts it is keeping.
“Without certainty from the Debtors, MLB is left in an untenable situation: invest tens of millions of dollars to further build out its telecast capabilities in the event the Debtors reject additional Clubs’ Telecast Rights Agreements without the immediate prospect of distributor revenue to offset these costs, or run the risk of failing to develop a sufficiently robust contingency plan to service every Club that may require MLB to support the telecast of its games.”
My guess is the bankruptcy court judge will again reject MLB’s push to rush DSG to make up its mind about which contracts to retain. The bankruptcy rules are designed heavily tilted in favor of the debtor. But this stands to be an entertaining fight along the way.
Diamond Sports Group’s representative emailed this statement following this post publishing:
“Diamond disputes MLB's misguided attempt to oppose a customary extension in a complex, multi-billion-dollar restructuring involving myriad stakeholders, with whom Diamond is making significant progress. Diamond is current in its rights payments and has satisfied its broadcasting obligations to all MLB teams under contract for the now concluded 2023 MLB regular season.”