The immediate future of broadcast rights for 14 major league baseball teams, including the Detroit Tigers, is up in the air as Diamond Sports group is expected to file for chapter 11 bankruptcy this week. With a $140 million payment due to cover the interest on Diamond’s $8.6 billion debt, the company finds itself unable to service the obligation and will file to restructure, according to Bloomberg.
Diamond is owned by Sinclair broadcasting, who purchased 21 Regional Sports Networks (RSN’s) that hold the rights to 42 major professional sports teams from Disney for $10.6 billion. Disney was required to divest the regional sports networks as part of its acquisition of 21st Century Fox’s film and TV assets in order to obtain clearance from the U.S. Department of Justice. The company holds the local broadcast rights to 14 major league baseball clubs, 12 national hockey league clubs, and 16 NBA teams.
Diamond will attempt to restructure the payments that it makes to teams, seeking to discount the payments, with no guarantee that they will be able to make good on the contracts even if the bankruptcy trustee approves the plan. MLB teams in particular, could be in prime position to take back the rights and go it alone, showing games through acquired networks or through their own MLB.com streaming services. MLB originally pioneered and sold off the streaming technology used by ESPN+, Disney, and other streaming outlets.
MLB commissioner Rob Manfred has promised that the games will be broadcast, one way or another, even if the ownership of the broadcast rights remains unsettled with the 2023 season fast approaching. Manfred told the Associated Press,
“I think you should assume that if Diamond doesn’t broadcast, we’ll be in a position to step in. Our goal would be to make games available not only within the traditional cable bundle but on the digital side, as well.”
Local broadcast revenue makes up about 21 percent of MLB’s almost $10.9 billion revenues each season. As recent contracts have been renewed, many clubs doubled their annual revenue with the new deals. That trend is about to be halted, if not reversed. MLB has refused to include digital rights in the contracts with RSN’s, but the Detroit Tigers are an exception. Detroit struck a new deal with Bally Sports Detroit that began with the 2022 season, and included streaming rights.
RSN’s make about 90 percent of their money from customer subscriptions, rather than advertising. MLB teams have a fixed revenue stream resulting from contracts that individual teams have with their local broadcasters such as those branded as Bally’s sports. That revenue is independent of attendance, or ratings, or- by extension- their on field performance. Those guaranteed payments are no longer as certain as death and taxes with Diamond’s bankruptcy looming.
Regional sports networks have seen a drop in subscribers from over 100 million homes to under 67 million households due to consumers switching to other outlets such as streaming channels, or just cutting the cord completely. Less than half of all US homes now have a cable TV subscription.
One possible benefit to fans of an MLB takeover of the broadcast rights could be an end to blackouts, which are fans’ biggest complaint about the broadcast industry. Since MLB would be getting revenue from either streaming or cable/ satellite channels, they’d be getting paid either way.
According to the Sports Business journal
MLB already has started looking into creating a national product that would combine its local rights with its out-of-market Extra Innings package — an effort that would do away with blackouts.
A loss of local broadcast revenue would be felt hardest by those teams that have unpaid contracts with Sinclair, but since 48 percent of local revenues are shared among all clubs, the blow would be softened somewhat for those teams and felt somewhat by all teams. Each MLB team receives an estimated $110 million in sharing of local revenues that includes local TV, ticket sales, and other stadium related local revenues. That’s more than some team’ full major league payroll.