The Phoenix Suns’ move to abandon the regional sports network model for free local TV has encountered a roadblock.
On Wednesday, Diamond Sports Net Arizona, an affiliate of the bankrupt Diamond Sports Holdings, sued Suns Legacy Partners for breach of contract. It also sued Gray TV Inc. and Kiswe Mobile Inc. for tortious interference in the Texas bankruptcy court where Diamond seeks a Chapter 11 reorganization. Diamond, which does business as Bally Sports, demands monetary damages and injunctive relief to stop the Suns from continuing with their plan to leave it behind.
According to the lawsuit, Diamond says it is the sole and exclusive holder of the Suns’ TV distribution and telecast rights as part of a contract with the Suns. Diamond also has a right of first refusal before the Suns can join a new partner. Suns owner Mat Ishbia intends to find one.
“Nobody is surprised by this lawsuit and it will not stop the Phoenix Suns and Mercury from making our games available to as many people as we possibly can,” Ishbia said in a statement to Sportico. “I firmly believe the future success of the NBA and WNBA is about getting our product to everyone who wants it versus just the people who pay for it,” Ishbia said.
The Suns have been a particularly high-profile partner for Diamond. Over the course of the 2022-23 NBA season, Phoenix was the league’s eighth most-watched franchise, averaging 32,692 household impressions per game in the local market. When weighed by market size and duration, not only did the Suns out-deliver the in-market NBA coverage on TNT (14,392) and ESPN (10,755), but the team’s ratings on Bally Sports Arizona also improved by 29% versus the previous season.
The Suns put up even bigger numbers with the advent of Kevin Durant, averaging 47,917 impressions per game after his Feb. 9 acquisition. Per Nielsen, Phoenix-Prescott is the 11th largest U.S. media market, boasting a base of 2.14 million TV homes. That reach goes a long way toward justifying the heady carriage fee Bally Sports Arizona extracts each month from local cable/satellite/telco-TV operators; at an average rate of $6.29 per subscriber per month, the RSN commands the fourth-highest fee on the dial.
The complaint, which is partially redacted, acknowledges that the Suns “made a final written offer to Diamond Arizona” on Oct. 14, 2022, which Diamond rejected. Diamond nonetheless argues it “made clear its desire” to continue to negotiate. Also, with regard to Diamond’s right of first refusal, the company claims it was notified about the offer proposed by Gray and Kiswe, though was not provided sufficient time to evaluate it.
“Diamond Arizona,” the complaint charges, “was given barely any notice at all, let alone an opportunity to evaluate or accept Gray and Kiswe’s Replacement Offer as required, before the Suns, Gray, and Kiswe announced the Replacement Agreement with the Suns, in clear disregard of the Agreement.”
Meanwhile, Diamond depicts Gray and Kiswe as wrongly persuading the Suns to drop Diamond, and that they tried to “take advantage of Diamond Arizona’s precarious financial situation.”
Diamond also contends the deal violates the automatic stay issued by U.S. Bankruptcy Judge Christopher Lopez. The stay is a court order that bars creditors from continuing to engage in collection activities.
Representatives for Gray didn’t immediately respond to a request for comment. Endeavor, which advised the Suns on the deals, declined to comment.
Last week, Suns and Mercury CEO Josh Bartelstein told Sportico Diamond’s position was “totally inaccurate” and that they “are moving forward with this deal and could not be more excited about what it means for our fans and our future.”
Expect attorneys for the Suns to depict Diamond’s arguments as meritless and obstructive. The team will likely assert that it complied with the right of first refusal—Diamond’s complaint suggests it was given some notice—and that the automatic stay does not govern a new contract with a new partner. In that same light, the Suns might maintain Diamond cannot use the bankruptcy process to suspend business activities of its partners.
There are more than two dozen MLB, NBA and NHL teams that have local media partnerships with Diamond. Payments owed to those clubs have been closely watched during the bankruptcy process, and Suns were the first to break away with a completely different model. It’s unclear if other Diamond partners, particularly those with expiring deals, may contemplate a similar shift.
(This story has been updated in the fourth paragraph with a statement from Suns owner Mat Ishbia.)