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Bally Sports’ operator Diamond Sports Group (DSG) could exit chapter 11 bankruptcy protection within the next two months, provided it finalises agreements with its major league and cable distributor partners.
DSG first filed for chapter 11 in March 2023, hoping to strike a deal with creditors and negotiate “unsustainable” local rights deals it inherited as part of the $10.6 billion acquisition of the former Fox Sports regional sports networks (RSNs) from Disney in 2019.
The venture has been hindered by a decline in pay-TV households, the lack of a viable direct-to-consumer (DTC) option, and massive debts believed to be up to US$8.5 billion.
After repeated deadline extensions and protracted negotiations, a US court has approved DSG’s ‘disclosure statement’ – a document which outlines how the company proposes to operate on a more sustainable footing moving forward.
It includes details of short-term deals struck with the National Hockey League (NHL), National Basketball Association (NBA) and several individual Major League Baseball (MLB) franchises, as well as a new distribution agreement with Charter Communications.
The 174-page statement also lays out a financial restructure that includes a US$115 million investment from Amazon, a US$495 million settlement from parent company Sinclair to settle an ongoing legal dispute, and US$450 million in new financing to help ease DSG’s debt pile.
As part of the plan, the 19 active Bally Sports RSNs will be renamed.
A confirmation hearing has been scheduled for 18th June at the United States Bankruptcy Court for the Southern District of Texas, Houston Division. This gives DSG a deadline to negotiate distribution deals with other major platforms, including Comcast and DirecTV, and to strike longer-term deals with partner leagues that include enhanced digital rights for DSG’s DTC platforms.
Both the NBA and NHL have agreed for local games to remain on Bally Sports until the end of the season at a lower rights fee. In exchange, both leagues will reclaim their rights at the end of the 2023/24 campaign. However, DSG would like to extend these deals.
It is unclear what the state of play is with MLB, which has been more hostile in its stance on DSG, criticising its proposals and repeatedly accusing the company of stalling for time.
Any objection to DSG’s plans must be filed by 22nd May.
Cord-cutting has undermined the economics of the cable bundle in the US, reducing RSN income and limiting exposure for major league sports teams.
Few had given the traditional RSN much hope of survival in the digital era, with several teams opting for a combination of DTC and free-to-air (FTA) coverage as an alternative. Indeed, DSG had planned to wind down its operations at the end of the season without Amazon’s investment.
However, DSG now believes it has a workable plan and the medium-term financial foundation to stage a potential comeback. While streaming might be the ultimate future for live sports in the US, it’s worth pointing out that RSNs are still a valuable part of the cable bundle for many.
Beyond the National Football League (NFL) and a few marquee events capable of attracting vast national audiences, the US sports broadcasting market is highly localised and local rights are still hugely valuable. Indeed, local transmissions of MLB games often outperform national cable programming in their native markets.
The days of the linear RSN might be numbered and it could be that DTC is the future. But with tens of millions of dollars at stake for the teams involved, the thing that teams value the most is certainty. In the short term, there will be many franchises keen not to rock the boat and keep the RSN money taps flowing for as long as possible.
Amazon’s involvement provides a degree of legitimacy that can inspire confidence among potential partners despite the deluge of negative headlines and gives DSG’s streaming strategy a welcome shot in the arm.
There are still plenty of loose ends to be tied up, but the end is now in sight.
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