MLB, the NBA and the NHL may orchestrate a buyout of the nation’s dominant owner of regional sports TV networks, whose shaky finances pose an increasing threat to their teams, The Post has learned.
The trio of pro-sports leagues are expected to soon begin talks with Diamond Sports, which operates 21 regional Bally Sports networks that account for more than half the local broadcast markets around the country, sources close to the situation said.
A prospective deal is looming as Diamond — owned by Baltimore-based Sinclair Broadcasting — has been hemorrhaging cash and could be headed for a possible bankruptcy filing if it doesn’t find a white knight in the coming months, the sources claimed.
Sinclair in early 2019 won an auction to buy Fox Sports Networks from 21st Century Fox for $10.6 billion, giving it exclusive rights to broadcast the games of 42 teams. These included 14 MLB teams like the St. Louis Cardinals and San Diego Padres; 16 NBA teams including the Miami Heat; and 12 NHL teams including the Detroit Red Wings.
But soon after the buyout, cable TV giants including Charter Communications and Comcast began slashing the fees they were willing to pay for sports amid rampant cord cutting. Meanwhile, satellite-TV provider Dish dropped out of regional sports networks altogether, sparking losses for the so-called RSNs that haven’t let up since.
21st Century Fox shares a common owner with News Corp., the publisher of the New York Post.
Now, insiders say Diamond might fetch $3 billion including its debt, which is currently trading at a heavily-discounted $2 billion. Sinclair is expected to propose giving over Diamond’s equity to creditors who would then sell most of the operation to MLB, the NBA and the NHL while Diamond retains a minority stake in the business, the sources said.
“They will offer it to all three leagues,” one source close to the talks said. “There is a reasonable likelihood this will all happen. That’s where this is heading.”
If a deal isn’t reached in what is being described as a “grand solution,” there is a growing possibility that creditors — mostly hedge funds that have scooped up Diamond’s distressed debt — could force Diamond and its Bally RSNs into bankruptcy in the next three years. to six months, sources said.
While Diamond does have the cash on hand to survive through next year, it is technically insolvent and creditors could soon force it into bankruptcy, sources close to the situation said.
“I believe Diamond is getting pressure from hedge funds to call the liquidation question early,” a source close to Diamond opined.
A source close to Sinclair told The Post that creditors are overstating their ability to force a bankruptcy.
Diamond does not control the rights for any of the New York City teams. It pays the teams for the local broadcast rights in sometimes 25-year deals and then sells broadcasts to cable and satellite companies on almost an annual basis planning to make a profit.
Diamond has been telling the leagues in recent days if it goes bankrupt it will be able to keep broadcasting games, but will not need to pay teams their rights fees as it will have protection from creditors, sources close to the talks said.
In a bankruptcy scenario, a buyer of the RSNs could also decide to reject existing broadcast rights contracts that are too expensive and arrange for cheaper deals, sources said. With some teams getting up to 30% of their revenue from RSN rights, a prospective bankruptcy could hit team payrolls, insiders claimed.
“That is Diamond’s bargaining chip,” said a large debt investor following the situation.
One league official told The Post the leagues are working on a contingency plan. MLB, for one, is prepared to broadcast games in local markets, charging cable companies the usual fees and passing the proceeds to team owners until Diamond emerges from bankruptcy.
“Speculation raised by anonymous sources is just that, speculation,” a spokesperson for Sinclair told The Post on Tuesday. “We enjoy the full support from the teams, NBA and NHL leagues, and look forward to continuing our work with them to transform the RSN model.”
Meanwhile, it is MLB which in recent months has effectively ended Diamond’s last best hope of surviving on its own, according to some insiders.
Diamond on Sept. 26 is launching an over-the-top streaming service so consumers can pay a roughly $20 monthly fee and watch games in their home markets without a cable subscription. Since MLB teams are the only ones playing in the summer months it is seen as essential to Diamond’s success.
However, MLB has transferred streaming rights for only five of 14 teams, demanding extra fees even as Diamond has argued that those rights should be included in its existing contracts with the teams — privately blaming MLB Commissioner Rob Manfred in the dispute, sources claimed.
“The teams feel Sinclair is being cheap and using the commissioner as an excuse,” an MLB team owner told The Post.
MLB and the NHL declined comment. The NBA could not be reached for comment.
MLB, meanwhile, has been considering the launch of its own streaming service that would carry local games as early as next year, The Post reported exclusively in October. Elsewhere, Amazon has the capability now to broadcast local games and air them on a regional basis, sources said. So does Apple, ESPN plus and even NBC’s Peacock.
In early 2019, MLB had teamed up with Liberty Media in an unsuccessful bid against Sinclair for the Fox sports networks Disney was spinning off as part of its deal to buy 21st Century Fox. After Sinclair won the Fox RSNs, it projected their 2019 Ebitda would be $1.6 billion.
It has been a rough ride downhill since. Sinclair’s Diamond reported Aug. 30 that full year Ebitda, or earnings before interest, taxes, depreciation and amortization, would fall to between $183 million and $200 million.
Meanwhile, Diamond has $8.5 billion of debt and pays about $450 million in annual interest payments so it is spending double what it makes on just the interest on its junk-rated debt. The most junior debt is now trading at around 20 cents on the dollar.
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