Bankrupt broadcaster Diamond Sports, the largest regional sports network in the nation, has made a last-ditch offer to the NHL and NBA to cut rights fees in order to avoid liquidation, according to sources. This move comes as Diamond Sports, a subsidiary of Sinclair, filed for bankruptcy in March with a debt of $9 billion. With the upcoming seasons of both the NBA and NHL, Diamond owns the broadcast rights to 15 NBA teams and 12 NHL teams.
Diamond has proposed reducing the fees to both leagues by up to 20% ahead of the September 30 deadline imposed by the bankruptcy court. A source familiar with the situation stated that this could result in a $120 million discount on the $600 million annual broadcast rights fees paid to NBA teams. Although details of the agreement with the NHL are unavailable, sources suggest that both leagues are inclined to accept the proposed reduction as it would allow Diamond to continue operating for another year.
However, there are concerns that this reorganization could ultimately lead to liquidation. Diamond is set to shut down its operations but plans to secure profitable contracts first in order to provide recovery to its creditors. The NBA and NHL are also reportedly unprepared for a liquidation. In the event that an overall deal cannot be reached with either league, Diamond might stop broadcasting games in markets where it is losing money.
Meanwhile, the NBA has plans to stream games that Diamond drops in their local markets if a deal cannot be reached. The loss of revenue from reduced media rights fees may also impact the NBA’s salary cap, which is partly determined by these fees. Diamond, which has sold naming rights to Bally Sports, makes long-term deals with teams for rights fees and then seeks short-term carriage deals with cable companies to turn a profit. However, cable companies have been paying less for sports due to cord-cutting.
While Diamond has reached agreements in principle with Comcast and DirecTV for short-term carriage deals, negotiations with Charter Communications are still ongoing. Sinclair Broadcasting acquired Fox Sports Networks in 2019 for $10.6 billion, giving it exclusive broadcasting rights to 42 teams across MLB, NBA, and NHL. These networks were then placed under Diamond Sports.
Diamond is currently suing Sinclair, alleging that the company took $1.5 billion in dividends and fees knowing that Diamond was heading towards bankruptcy. The outcome of this suit may potentially result in greater recovery for Diamond’s creditors than renegotiating its remaining deals.
Despite the bankruptcy, Diamond still holds contracts with several NBA teams, including the Atlanta Hawks, Cleveland Cavaliers, Charlotte Hornets, Dallas Mavericks, and Miami Heat, among others. For the NHL, Diamond has deals with teams such as the Anaheim Ducks, Arizona Coyotes, Carolina Hurricanes, and St. Louis Blues. Sources have indicated that there are no viable buyers for Diamond in its current state.
This article was originally published on New York Post.
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