With Bally Sports on the edge of bankruptcy, one possible route for MLB could take the form of … [+]
With Sinclair broadcaster Diamond Sports Group, who operates the Bally Sports regional sports networks on the edge of Chapter 11 bankruptcy restructuring, Major League Baseball is at an inflection point that sees them solidly positioned should they decide to go to direct-to-consumer (DTC ) streaming and take back local media rights.
Bloomberg has reported that “Diamond will probably skip a mid-February $140 million interest-only payment servicing around $8.6 billion in debt as it prepares for a Chapter 11 restructuring that will roil the $55 billion US sports media business.” According to the report, the company has just $585 million cash-on-hand with over $2 billion in media rights fees to pay across the 19 regional sports networks they control that span MLB, the NBA, and NHL. All told, Sinclair’s purchase involves exclusive local rights to 42 professional teams consisting of 14 Major League Baseball teams, 16 National Basketball Association teams, and 12 National Hockey League teams.
Sinclair purchased the regional sports networks for $10.6 billion as part of Disney’s divesting in assets to pass the muster of the Department of Justice as part of the purchase of much of FOX. Diamond Sports Group, who branded with Bally, almost immediately ran into financial headwinds. In January of 2022, they engaged in a $600 million transaction support agreement with lenders; a clear sign the company was on uneven footing.
Sports leagues have been aware that bankruptcy could occur, and with it, Major League Baseball hired former Sinclair and FOX Media Group executive Billy Chambers to the newly created position of Executive Vice President, Local Media. Chambers is scheduled to start at MLB on February 1st. His key job will be to address the situation with the Bally Sports branded RSNs as well as all other management and distribution of local media rights. He served as Chief Financial Officer and Chief Operations Officer of the 21 regional sports networks acquired by Sinclair Broadcast Group from Disney where he assisted in the sales process. Chambers was responsible for finance, legal, business development, traffic, and human resources during his time at Sinclair, a key indicator that MLB wishes to have someone acutely aware of the dire situation and how best to navigate it.
“Billy is an important addition to Major League Baseball and will play an integral role in how we navigate the rapidly evolving local media landscape in the future,” said MLB commissioner Rob Manfred at the time of the announcement earlier in January. “Billy’s extensive knowledge and experience in all areas of regional sports network operations will help us maximize the reach of our game in the clubs’ local markets.”
It’s expected that Sinclair will look to renegotiate the current contracts with MLB, although the league will certainly try to have them meet their obligations.
Major League Baseball is looking at several options around the rights. One of those options could center on a direct-to-consumer model via streaming. The league is considered the gold standard for sports streaming with the experience gained from hosting MLB.TV Premium, the league’s out-of-market streaming service. The league’s technology arm is so good that they spun off an entirely separate company that was sold to Disney and supports Disney+ and ESPN+.
Given that the infrastructure is already in place, and would only require addressing geolocation, the ability to brand offerings for clubs within the league should be seen as a fairly simple option.
A potential upside for consumers would be the lifting of the league’s local blackout policy, which according to MLB is their #1 customer complaint.
What seems certain is the bankruptcy of the Sinclair-owned RSNs is a forcing function for any such option. But, it’s clear that the shedding of cable and satellite subscribers has been happening for some time, and has only accelerated during the pandemic. Media rights at the local level – a critical revenue stream for the individual clubs in Major League Baseball – are, at best, going to level off, but are more likely to decrease as contracts come up for renewal. MLB is positioned to make the potential leap to streaming options for local clubs. All 30 won’t do so at once. Options would have to be examined based on the particulars of each club, some of which are in large media markets while others in small or mid-market.
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