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Saturday, February 11, 2023

Diamond RSNs Planning Bankruptcy in Blow to Lucrative Cable Model |

Diamond Sports Group, a collection of 19 regional sports networks (RSNs) doing business as Bally Sports, is planning to file for bankruptcy next week, according to multiple people familiar with the plan. The group currently controls the local broadcast rights to more than 40 teams in the NBA, NHL and MLB, and its bankruptcy would be a significant blow to the cable network model that has lucratively buoyed U.S. sports for the past 50 years.
For the affected teams, including the Miami Heat, St. Louis Cardinals and Tampa Bay Lightning, the bankruptcy will trigger a number of questions. For instance, what happens with payment owed to the teams during the Chapter 11 process? More concerning, what do local sports media rights look like in the aftermath, and will leagues like the NBA or MLB get involved more directly?

Hombre Brotani Posted: February 11, 2023 at 04:40 AM | 3 comment(s) Login to Bookmark
  Tags: cable, cable sports, regional sports networks

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   1. John Reynard Posted: February 12, 2023 at 12:16 AM (#6116580)
I wonder how much money MLB will have to borrow to paper this over. But, at least we know where the revenue sharing payments will be going for a bit....and it won't be the As and Pirates.
   2. Walt Davis Posted: February 12, 2023 at 02:46 PM (#6116627)
The revenue sharing payments are shared equally among all teams, they will flow to the A's and Pirates like they always have.

You are thinking of the CBT which is not revenue sharing. A chunk of that does flow into a MLB, ahem, slush fund that indeed might be tapped to help any teams deeply affected by this. Lord only knows where this money has been going the last few years (the Dodgers have paid a ton) so I assume they've got a fair amount saved up and plenty more coming in from the Mets, Yanks, Dodgers, Padres, etc.

This impacts on revenue sharing not in how those funds are disbursed but in that, if local media rights aren't paid for a large number of teams, then thare is less revenue to share meaning that the A's, Pirates, Yanks, Cubs get less money. The specific teams affected will also be hit in that the half of their local revenue that they get to keep will obviously be substantially reduced.

"Common" revenue: this is the national TV contracts, most of the merchandising and licensing revenue, etc. minus the union's take. This is split equally among the teams.

"Shared" revenue: Every team pays slightly less than half of local revenue (possibly with some adjustement for stadium costs) into a pool. This pool is splite equally among the teams. Naturally the Dodgers pay more into this fund than they get out of it.

CBT revenue: Teams with high payrolls pay the "luxury tax" with about half going to the union and the rest into a MLB development fund (or some such). This revenue is NOT shared among teams. This system was never really designed to deal with $100s of millions and probably needs an overhaul.

Common and shared revenue adds up to about $220 M per team based on what I saw a couple of years ago so probably closer to $250 per team now. Let's call it $7 B. The affected TV contracts are mostly smaller ones, I'm not sure it's more than $1 B total, half of which would go into the shared revenue pool. Not that MLB has $500 M in this slush fund I don't think so if the revenue is completely missed this year, it's obviously a problem. And if it continues past a year ...

The bigger question is what are these rights worth? When Hicks went under, the Rangers were one of the valuable assets he could sell off. When the Trib went under, the Cubs were one of the valuable assets they could sell off. It's not clear to us nomrals how valuable the Sinclair/Bally network is right now. These rights will end up womewhere through some medium in the not too distant future but it seems the expectation is that they won't sell for nearly what Sinclair paid.
   3. The Yankee Clapper Posted: February 12, 2023 at 03:37 PM (#6116638)
Like any business operating in multiple locations while facing bankruptcy, Diamond may try to keep the profitable outlets while shutting down the money losing contracts. Not sure there are enough profitable ones to make a go of it, and with interest rates rising, it may be happy to get totally out of the highly-leveraged mess it got itself into.

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