- Expected move now confirmed as pressure on regional sports network business mounts
- Diamond, which operates 19 RSNs, set to be spun off from Sinclair to become standalone company
- Bally Sports+ boss says RSN business must “reinvent itself” to survive in “new world” of streaming
Diamond Sports Group, the largest owner of regional sports networks (RSNs) in the US, has filed for chapter 11 bankruptcy, finally confirming a move that was first reported back in January.
The Sinclair subsidiary operates 19 Bally Sports-branded RSNs, which have local broadcast rights for 16 National Basketball Association (NBA) teams, 14 Major League Baseball (MLB) franchises and 12 National Hockey League (NHL) clubs.
The expected move was announced late on Tuesday in a statement, which confirmed that proceedings from the bankruptcy will be used to eliminate more than US$8 billion of outstanding debt and restructure the company’s balance sheet.
Diamond has US$425 million cash in hand to fund its business and restructuring, according to the statement, which added that the Bally Sports RSNs will ‘continue to operate in the ordinary course’ during the Chapter 11 process. It did not make clear whether the teams it has deals with will continue to receive rights fee payments throughout the procedure.
As part of the plan, Diamond is set to be spun off from Sinclair to become a standalone company, although its current owner is expected to continue to provide management services during the proceeding and transition services after the business emerges from bankruptcy.
Diamond said its first-lien lenders will remain unaffected while other secured and unsecured creditors will swap their debt for equity and warrants issued by the reorganised company.
Commenting on the filing, Diamond chief executive David Preschlack said he expected the business to emerge from the restructuring process “a stronger company”.
“The financial flexibility attained through this restructuring will allow DSG to evolve our business while continuing to provide exceptional live sports productions for our fans,” he added.
While the NBA and NHL are nearing the end of their seasons, Diamond’s announcement will be an immediate concern for MLB, whose 2023 campaign gets underway on 30th March.
A recent report in the New York Post suggested that MLB was considering streaming the games of some teams broadcast on Bally Sports for free in the event that the channels go dark, and the league confirmed in a statement on Tuesday that it would be prepared to step in if that scenario materialises.
‘Diamond Sports Group’s bankruptcy declaration today is an unfortunate development that we have been expecting,’ the league said. ‘Despite Diamond’s economic situation, there is every expectation that they will continue televising all games they are committed to during the bankruptcy process.
‘Major League Baseball is ready to produce and distribute games to fans in their local markets in the event that Diamond or any other regional sports network is unable to do so as required by their agreement with our clubs.’
It added: ‘Over the long term, we will reimagine our distribution model to address the changing media climate and ultimately reach an even larger number of fans.’
Diamond was set up to operate the Bally Sports RSNs after Sinclair purchased the channels for just under US$10 billion.
The company’s demise is another blow for the RSN industry, which has historically seen companies pay individual franchises rights fees in exchange for being able to broadcast their games locally and charge cable providers a carriage fee.
Last year, Diamond launched the Bally Sports+ streaming platform in an effort to cater for changing viewer behaviours, with consumers gradually shifting from linear to over-the-top (OTT) services, but that move has yet to significantly pay off.
Speaking ahead of the bankruptcy filing on day one of SportsPro’s ongoing OTT Summit USA event in New York, Michael Schneider, the chief operating officer and general manager of Bally Sports+, suggested that the RSN business needs to evolve.
“The industry does need to reinvent itself in the regional sports network world,” he said. “I think if you look at how the economics are, if you look at how the business runs right now, we’re in a new world.
“Are we at the inflection point for direct-to-consumer? No. I think we’re at the beginning. But there’s no doubt that whatever comes next, we’ve got to completely rethink this business model.”