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MLB wins court ruling forcing Diamond Sports to pay for local rights deals

RSN operator’s request to reevaluate contracts denied.

2 June 2023 Ed Dixon

Getty Images

  • Judge rules in favour of MLB, as well as Arizona Diamondbacks, Cleveland Guardians, Minnesota Twins and Texas Rangers
  • DSG had argued that cord-cutting had devalued the rights contracts

A US bankruptcy judge has ruled in favour of Major League Baseball (MLB) and four of its teams in their ongoing dispute with Diamond Sports Group (DSG), the Sinclair-owned Bally Sports-branded regional sports network (RSN) operator.

The decision from judge Christopher Lopez means DSG will have to fully pay its rights contracts covering MLB, as well as the Arizona Diamondbacks, the Cleveland Guardians, the Minnesota Twins and the Texas Rangers.

Currently dealing with bankruptcy proceedings, DSG had argued that it should pay the four franchises less than the amount committed in the existing deals, citing that increased cord-cutting in the US had devalued the assets.

However, Lopez stated that “the contract rate is the rights answer here”.

He added: “Profitability is certainly decreasing for each team.

“But again, this doesn’t mean that the contract rate and those fees under those contracts is not reasonable.”

ESPN notes that the Diamondbacks, Guardians, Rangers and Twins had already been paid 75 per cent of what they were owed by DSG as a means to hold them over until the conclusion of the hearing. Lopez ruled that the four teams can hold on to that money and that DSG needs to pay the remaining 25 per cent “in the ordinary course of business”.

Lopez did not set a deadline on DSG deciding whether to hold on to those contracts.

DSG had owned local broadcast rights to 14 MLB teams but lost its contract with the San Diego Padres earlier this week after skipping its latest rights payment. The league will take over broadcast production and distribution for the Padres, and is prepared to do the same for any other of its franchises that walk away from their DSG agreement.

‘MLB appreciates the ruling from the federal bankruptcy court in Houston requiring Diamond to pay the full contractual rate to clubs,’ MLB said in a statement.

‘As always, we hope Diamond will continue to broadcast games and meet its contractual obligations to clubs. As with the Padres, MLB will stand ready to make games available to fans if Diamond fails to meet its obligations.’

MLB commissioner Rob Manfred had also given testimony during the hearing, where he stated that any money that is not paid by DSG will be backstopped by the league. He added that MLB had tried to buy the RSNs when they first came up for sale, but offered about US$900 million less that DSG’s winning bid. Manfred said the league would look to buy them again should the opportunity arise.

SportsPro says…

The judge’s decision may well set a precedent that hampers DSG’s attempts to cut costs by lowering the value of its existing local rights contracts. As well as MLB clubs, the company has agreements with 16 National Basketball Association (NBA) teams and 12 National Hockey League (NHL) outfits.

DSG has been bullish about its future since entering bankruptcy, stating it has “significant liquidity” and has been making rights payments to teams. The company has cited the need to secure streaming rights to strengthen its Bally Sports+ direct-to-consumer (DTC) service, which it sees as a crucial element of the business going forward.

However, DSG only has digital rights to five MLB teams and the league has no intention of offering it more packages. Indeed, the company blamed the league’s desire to stream games itself as a contributor to March’s bankruptcy.

The two-day hearing in Houston has served to highlight the ongoing tension between both parties.

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