Alden GonzalesESPN staff writer3 minutes to read
A US bankruptcy judge in Houston ruled in favor of Major League Baseball and four of its teams on Thursday, forcing Diamond Sports Group, the RSN operator that broadcasts under the name Bally Sports, to pay the contracts involved in full.
Diamond, who has been navigating through bankruptcy proceedings, has argued that he should pay the Minnesota Twins, Cleveland Guardians, Arizona Diamondbacks and Texas Rangers less than current deals require, noting that the rapid rate of cord-cutting across the US has greatly reduced the value of the assets. But Judge Chris Lopez, who presided over a case that lasted two full days and included lengthy testimony from MLB Commissioner Rob Manfred, ultimately stated that “contract rate is the correct answer here.”
The decision likely sets a crucial precedent that undermines Diamond’s hope of cutting costs by reducing the value of previously agreed contracts, especially with 28 NBA and NHL teams also within his purview.
“Profitability is definitely decreasing for each team,” Lopez said as part of his ruling. “But again, that doesn’t mean that the contract price and those fees under those contracts aren’t reasonable.”
The Twins, Guardians, D-backs, and Rangers already got 75% of what was owed to them as a means of keeping them until the hearing was over. Lopez, by choosing not to amend their contracts, ruled that they could keep that money and that Diamond needed to pay the remaining 25% “in the normal course of business”. Lopez, who called his ruling a “very difficult decision,” did not set a deadline for when Diamond would have to decide whether or not to keep those contracts.
Diamond, a Sinclair subsidiary, took on more than $8 billion in debt to buy broadcast rights for 42 teams across the MLB, NBA and NHL from Fox in 2019, then gradually suffered from the spread of streaming services across the top and was forced into a realignment. Chapter 11 bankruptcy in March. Diamond owned the rights to 14 major league teams but lost to the San Diego Padres earlier this week when it failed to pay the rights fee due at the end of the grace period.
MLB has been running Padres broadcasts since Wednesday, presenting games without interruption through its streaming service, MLB.TV, and on various channels through several cable companies. The league has promised to do the same with any other team outside Diamond’s purview. Judge Diamond’s ruling could prompt him to dump the D linebacker, the Guardians, Twins, and Rangers in the near future, and possibly some of the other nine major league teams owned by him as well.
“MLB appreciates the ruling by the Federal Bankruptcy Court in Houston requiring Diamond to pay the clubs full contractual price,” the league wrote in a statement. “As always, we hope that Diamond will continue to broadcast games and fulfill its contractual obligations to the clubs. As with the Padres, MLB will be willing to make games available to fans if Diamond fails to live up to its obligations.”
Diamond has long stated that it needs to secure broadcast rights in order to support Bally Sports+ and run a more sustainable business, but currently holds broadcast rights to only five major teams: the Kansas City Royals, Milwaukee Brewers, Tampa Bay Rays, Detroit Tigers and Miami Marlins. MLB has shown no interest in providing broadcast rights to others. The two-day session, which lasted a total of about 20 hours, emphasized the animosity that had festered between the two sides over the past four years.
“I’m asking the parties to talk,” Lopez said. “I’m not asking the parties to agree—I’m asking the parties to speak. That’s the request. I’m not going to force you into the room, but I’m asking you to talk.”
During his nearly two-hour testimony Wednesday, Manfred stated that MLB promised Bally-owned teams that they would generate at least 80% of the revenue they were projecting through their broadcast deals in 2023; Whatever Diamond didn’t pay in the end will be subsidized by the league. Manfred also said that MLB tried to buy the regional sports networks when they were initially for sale but came up about $900 million less than Diamond’s winning bid, adding that he would try to buy them again if the situation arose.
Revelation helped the MLB argument.
“They think their rights are valuable, they can get as much or more for them, and they’re willing to put money on the table for them,” Lopez said, referring to Manfred’s testimony. “They just can’t.”
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