A clash is brewing between Major League Baseball (MLB) and a bankrupt regional broadcaster, Diamond Sports, over media rights payments. This dispute has significant implications for the future income of MLB teams across the league. Diamond Sports, which operates several regional sports networks (RSNs) under the Bally’s name, aims to reduce fees to some of the 13 MLB teams that it owns local broadcasting rights for. Currently, the cable industry is experiencing a decline, prompting Diamond Sports to seek fee cuts.
Among the affected teams is the NL West-leading Arizona Diamondbacks, which has surprised many with its performance this baseball season. Diamond Sports is on the verge of finalizing a deal with the Diamondbacks that would offer a 20% discount over five years. In return, the broadcaster would gain valuable streaming rights that it currently lacks. However, MLB Commissioner Rob Manfred has threatened to block the deal if it is presented in its current form during a bankruptcy court hearing scheduled for July 17.
Despite the Diamondbacks’ success, Diamond Sports is losing money on its media deal with the team. Therefore, the company wants to renegotiate the rights deal. Manfred, who has authority over all media deals, has been vocal about MLB taking over local broadcasts if Diamond rejects contracts. In such a scenario, other team owners would need to compensate for the lost revenue. However, big-market teams like the Yankees, Mets, Cubs, Dodgers, and Red Sox, which have their own regional broadcast deals, are not enthusiastic about this plan. While they are willing to support paying other clubs 80% of their lost Diamond media rights fees for this season, they are not inclined to do so beyond that.
Diamond Sports, which signed a 20-year, $1.5 billion deal with the Diamondbacks in 2015, is now offering 80% of the team’s current contract for next year. This percentage drops further in subsequent years. Despite the potential financial risk for the Diamondbacks, Manfred faces a difficult decision regarding blocking the deal.
As long as Diamond Sports remains in bankruptcy, which is expected to extend into next year, it has the ability to reject media rights contracts. Speculation suggests that the company may be forced to liquidate within the next year if Manfred does not agree to the restructuring plan. Diamond Sports’ best chance of emerging from bankruptcy lies in obtaining more streaming rights for its national service. It currently profits from approximately half of its 13 MLB media rights deals and is open to maintaining those deals without changes.
If Diamond Sports were to go under, MLB could take over the media rights or sell them as a package to tech giants like Amazon Prime and Apple+, which are entering the live sports streaming arena. Both companies already have broadcast deals. Furthermore, MLB has expressed interest in launching its own national streaming service to broadcast games for all 30 teams.
In an attempt to rescue Diamond Sports from bankruptcy, team owners offered to purchase the company in spring. However, the deal has yet to be accepted. The negotiations between Diamond Sports and the Diamondbacks are closely monitored, and there are additional negotiations between Diamond Sports and other clubs underway.
Thus far, Diamond Sports has paid the Minnesota Twins and Texas Rangers their current fees for this season, but these contracts will need to be renegotiated next season. Additionally, Diamond Sports has only made payments to the Cleveland Guardians through July and has a payment due on July 15 for its media rights deal with the NL Central-leading Cincinnati Reds. Earlier this year, Diamond Sports rejected the remaining portion of its expensive contract with the San Diego Padres, with MLB stepping in to broadcast their home games.
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