Sinclair/Diamond Sports bankruptcy watch

[comish4lif]

https://www.sportico.com/business/media/2023/phoenix-suns-local-media-deals-1234720912/

Suns going with free tv

Not so fast...

https://www.cnbc.com/2023/05/10/phoenix-suns-judge-halts-bid-to-exit-diamond-sports-network.html#:~:text=The%20Phoenix%20Suns'%20move%20to,network%20owned%20by%20Diamond%20Sports.

[HalfSmokes]

Bankruptcy court is where property rights go to die. There is a right of first refusal, but they can’t possibly match because part of the deal is number of households the games will be available ton

[nfotiu]

https://www.sportsbusinessjournal.com/SB-Blogs/SBJ-Unpacks/2023/05/30.aspx

Padres are the first team to lose their TV deal.   MLB will produce their games.   

[welch]

The Athletic has a story. Summary:

Diamond Sports Group will not broadcast San Diego Padres games after Tuesday, with the media company expected to miss its rights fee payment by Tuesday night’s deadline. Here’s what you need to know:

- Diamond Sports said in a statement to The Athletic that it “decided not to provide additional funding to the San Diego RSN that would enable it to make the rights payment to the San Diego Padres during the grace period.” The company said it is continuing to broadcast games for teams under its contracts.

- Bally Sports San Diego — the San Diego RSN and broadcaster of Padres games — is not part of Diamond’s bankruptcy filing since it is a joint venture between the Padres and Diamond Sports. Therefore, Diamond cannot argue against it in bankruptcy court and there are no bankruptcy law protections that can overcome a missed payment.

- The missed payment by Diamond Sports means that media rights are expected to revert to the Padres, with MLB expected to produce the team’s game in Miami on Wednesday.

Perhaps it’s a coincidence that this news emerges on the eve of Wednesday’s mega-hearing in bankruptcy court where Diamond will argue it should pay four teams less than the contracted rate because of changing economic conditions. And maybe it’s not a coincidence as Diamond’s lawyers are sure to use the Padres as proof the RSN contracts are too rich.

The Padres broadcaster is a joint venture with the team and Diamond and is therefore not under the bankruptcy. As a result, Diamond could not just cut the Padres’ fee and rely on the automatic stay that applies to all contracts under a bankruptcy. One source, who has advised some of the creditors, believes Diamond is sending a message to MLB with the move, as if to taunt them with how much the Padres are losing. This source texted: “The question to ask is, ‘What is MLB doing?’ I mean they just cost the Padres a bunch of money without a clear way to replacement.

[nfotiu]

Padres payroll including CBT is over 300 million.  Now they have no tv money and no prospects to get anywhere near the 80 or so million they were getting from Bally's.   Forbes had them losing 50 million last year, and have to be looking at losing over 100 million/year going forward.   How long is Seidler going to be willing to let that go on?   And to pile on, the team is 8 games out already.

[JCA-CrystalCity]

Padres payroll including CBT is over 300 million.  Now they have no tv money and no prospects to get anywhere near the 80 or so million they were getting from Bally's.   Forbes had them losing 50 million last year, and have to be looking at losing over 100 million/year going forward.   How long is Seidler going to be willing to let that go on?   And to pile on, the team is 8 games out already.

they almost have to trade soto at this point to restock and cut costs. I'm assuming they are in the max bracket, so it's probably a $30 million savings.

[imref]

So who can offer San Diego a package for Soto like the one they sent us? Obviously teams like the Yankees, Blue Jays, Mets, and Dodgers would be prime landing spots.

[HalfSmokes]

Padres payroll including CBT is over 300 million.  Now they have no tv money and no prospects to get anywhere near the 80 or so million they were getting from Bally's.   Forbes had them losing 50 million last year, and have to be looking at losing over 100 million/year going forward.   How long is Seidler going to be willing to let that go on?   And to pile on, the team is 8 games out already.

It's almost like bankruptcy law in the US has been twisted into a corrupt joke. Diamond was spun off to declare bankruptcy to get better deals on existing contracts. At no point was Sinclair actually in danger of bankruptcy

[nfotiu]

It's almost like bankruptcy law in the US has been twisted into a corrupt joke. Diamond was spun off to declare bankruptcy to get better deals on existing contracts. At no point was Sinclair actually in danger of bankruptcy

Yeah, it's some shady crap that they were able to maneuver that.

It would seem hard to believe that the bankruptcy court would agree to reduce fees without offering the teams to back out of the deal.   Even if they do agree to a break even price, then that price is going to drop significantly in a couple more years.   

[machpost]

So it looks like Padres games will be available in-market from MLB.TV for $19.99/month or $74.99 for the season (not sure if this is a prorated number or not). Surely that price will appeal to those who are paying for cable just to get the games.

[nfotiu]

So it looks like Padres games will be available in-market from MLB.TV for $19.99/month or $74.99 for the season (not sure if this is a prorated number or not). Surely that price will appeal to those who are paying for cable just to get the games.

I saw that too.  74.99 sounds pretty good for a full season.   20 a month is probably too high for everyone but avid followers, so likely won't produce a significant revenue stream.  I see they are on all the legacy carriers that had the RSN, so they are still likely trying to protect that revenue stream, which is unfortunate.   

$20/month would sound better if it got you all the games.   Instead you need some cable channels, Peacock, Apple TV, and maybe some others for the national games and playoffs.   Also if you have a few local sports teams you watch, like hockey and basketball, having to pay $20/month for each of those teams gets back to cable prices pretty quickly.

I was really hoping the MLB would use this opportunity to look for a new model that they can grow and that doesn't rely on carriage fees, but it doesn't look like that's going to be the case.

[HalfSmokes]

I wonder if the padres can bar Sinclair employees from their park now

[JCA-CrystalCity]

they almost have to trade soto at this point to restock and cut costs. I'm assuming they are in the max bracket, so it's probably a $30 million savings.

well, it's 2.5 out of the last wildcard with 3 teams ahead of them. not quite white flag time. but if they are 5 out of the last wc near the deadline & still 3 teams ahead of them, moving Soto might be prudent.

[imref]

https://www.wsj.com/articles/diamond-sports-san-diego-padres-bankruptcy-tv-payroll-b82c2b81

[nfotiu]

Looks like ESPN could be joining the bankruptcy watch soon too. 

https://cordcuttersnews.com/could-espn-be-facing-bankruptcy-because-of-spectrum-its-reportedly-possible

It seems far fetched on the surface, but they're suddenly in a situation not too different than Bally's with no path out if Charter doesn't cave.    Tonight is a bit of a point of no return for ESPN to get back on Charter.  They seem more than happy to shed their low margin video customers. 

Subscriber losses were already snowballing to a level higher than ESPN was anticipating.   Adding a loss of 15 million customers will assuredly send them significantly underwater, with no obvious path to profitability.   

All these college sport re-alignments could be in for a big shock if ESPN is in trouble.   

[nfotiu]

And just as I post that, they reach an agreement, lol

[Natsinpwc]

And just as I post that, they reach an agreement, lol

Funny.

[HalfSmokes]

Disney is offering its streaming services at wholesale rates (whatever that turns out to mean). I wonder if this is a sign that they are realizing that future profitability without cable is going to be much harder than they ever thought.

[welch]

Bally / Diamond likely to drop contract with Cleveland Guardian and Texas Rangers, reports The Athletic.

A United States federal judge approved a wind-down plan for Diamond Sports Group on Wednesday, setting up a potential path to an endgame for the broadcaster and its bankruptcy proceedings. Questions and contingencies still loom, however, particularly regarding Diamond’s dealings with Major League Baseball and two of its teams.

Diamond, which runs the Bally regional sports networks, still has deals in place with 11 MLB teams, but two are in jeopardy and could soon be terminated. Per people briefed on the proceedings who were not authorized to speak publicly, the teams whose TV agreements are on the chopping block are the Cleveland Guardians and the World Series champion Texas Rangers.

If Diamond drops those two teams, the clubs would get their rights back and could be broadcast either by the league in 2024, as the Padres and Diamondbacks were for part of the 2023 season. Alternatively, the Guardians and Rangers could strike a deal with another broadcaster to carry games.

“Our intention is to broadcast almost all of (our) Major League Baseball teams next year,” a lawyer for Diamond said in court Wednesday. “There are a few, a very few, for which we do not have agreements in place. And that, frankly, at this point, are too expensive for us to broadcast without concessions. I am told that those discussions are taking place, there have been reach-outs to both of the teams involved.”

The Guardians received $55 million in 2023, per Cleveland.com. The average annual value of the Rangers’ 20-year deal, which began with the 2011 season, has been said to be $111 million.

“There’s no deal with MLB, there’s no deal with the Rangers, we don’t know what (Diamond’s) intention is with respect to the Rangers,” a lawyer for the Rangers said on Wednesday in court.

Looks like Diamond might carry the two if the teams accept less money.

https://theathletic.com/5067432/2023/11/15/cleveland-guardians-texas-rangers-tv-deals-dropped/

[JCA-CrystalCity]

https://blogs.fangraphs.com/the-television-elephant-telephant-elevision-in-the-room/

Frankly, too complex for me to digest and excerpt key quotes. Goes through some revenue models and how to make up for lost revenues. Suggests revenue uncertainty may impact willingness to give long term contracts.

[Senatorswin]

To me these really long-term contracts are crazy. I wouldn't give a contract more than 7 years. You just don't know what the player will be like or what the baseball situation will be 10 years down the road.

I can think of few that were bad in the later years and the team would prefer to dump the player if not for the money:

Miguel Cabrera
Giancarlo Stanton
Alex Rodriguez (to a lesser extent)

I suspect Trea Turner, Bryce Harper (though he may be productive throughout his contract), Cory Seager, Manny Machado, Aaron Judge and Mookie Betts will all of worn out their welcome the last couple years of those contracts. Their fans will be wishing they were gone.

I know teams overpay for their services now and know they won't be nowhere near as productive at the end.

[imref]

to your point, Scherzer is among the highest paid players on the Mets, Nationals, and Rangers right now.

[HalfSmokes]

https://blogs.fangraphs.com/the-television-elephant-telephant-elevision-in-the-room/

Frankly, too complex for me to digest and excerpt key quotes. Goes through some revenue models and how to make up for lost revenues. Suggests revenue uncertainty may impact willingness to give long term contracts.

“  That’s nightly viewers, not overall viewers; not everyone is watching every game, of course. To convert nightly viewership into total subscribers, we’ll need to make a few assumptions. If the average fan buys a year-long package but only watches, say, 20% of their team’s games, that works out to 500,000 subscribers per team, with 20% of them or 100,000 watching every game. If the average fan watches 10%, that’s one million subscribers. Let’s split the difference and call it 750,000.”


Maybe I’m cynical, but that seems wildly optimistic

[JCA-CrystalCity]

Maybe I’m cynical, but that seems wildly optimistic

Struck me that way too, at least w/r/t MASN. Aren't the nielsen's much lower?

[nfotiu]

“  That’s nightly viewers, not overall viewers; not everyone is watching every game, of course. To convert nightly viewership into total subscribers, we’ll need to make a few assumptions. If the average fan buys a year-long package but only watches, say, 20% of their team’s games, that works out to 500,000 subscribers per team, with 20% of them or 100,000 watching every game. If the average fan watches 10%, that’s one million subscribers. Let’s split the difference and call it 750,000.”


Maybe I’m cynical, but that seems wildly optimistic

Yeah, that's insane.  People who watch 20% of a team's games are not voluntarily buying a $100/year subscription.   I would say people watching 75% of games would likely buy a package, and they'd be lucky to get more than half of that audience paying for a standalone product.   50,000 average subscribers to the team would be close to the ceiling for a $100/year+ package, and then you're killing any exposure to your sport if you are limiting your audience to people willing to pay to watch.

Also, the 100,000 number he is using is wrong.   Must be double counting the home and away audiences as the average household viewing is in the 50,000-60,000 range per team.

One example is already out there.   Bally's sportsnet+ was able to get only 200,000 across their entire footprint which includes about 25 NBA/NHL teams and 5 MLB teams that agreed to be on the streaming service.   That's less than 10,000 per pro team.   There is no universe where that number climbs to 750,000 per team even if it is the only way to get a team's games.   

Local rights out to bid to Amazon/Max/Peacock/Apple/Paramount/ESPN+ has got to be the future for everyone not the NFL.    It's the only way to monetize local tv rights and still get some solid revenue.   

A bunch of local standalone services would be an eventual disaster to the leagues.   ESPN is talking about going standalone around 2024-25.  Once that happens, the decline of the bundle will accelerate even more quickly, and MLB is going to need a solution quickly.