U.S. Bankruptcy Judge Christopher Lopez on Wednesday ordered that Diamond Sports Group pay four MLB teams (Arizona Diamondbacks, Cleveland Guardians, Minnesota Twins, Texas Rangers) 50% of what they are owed in media rights fees, with the balance to be determined later. The order is an interim measure and may be altered in upcoming hearings.
The clubs and MLB have objected to Diamond televising games without paying for them. Diamond, a collection of 19 regional sports networks (RSNs) doing business as Bally Sports, filed for Chapter 11 bankruptcy last month.
While Diamond insists it is complying with Chapter 11’s protections for companies trying to reorganize, MLB contends Diamond is still obligated to pay, especially since teams rely heavily on revenue from deals with their RSN. MLB has demanded that unless Diamond pays what it owes, Judge Lopez should allow teams to begin the process of terminating its contracts with Diamond and find alternatives for broadcasting their games.
During Wednesday’s hearing, attorneys for the sides argued over bankruptcy law precedent and whether the telecast rights deals—signed several years ago at a time when fans relied more on cable than streaming—are overpriced in the current market.
Judge Lopez encouraged the two sides to “come up with a number or a percentage” to address their payment debate. He also warned that he’ll be quick to intervene should they fail to reach an agreement on terms. “There is a number that works, [and] you’ll know much better than I would what that number is,” Judge Lopez said. “If you come back to me, I’m just going to pick a number, and I hope you don’t leave it in my hands.”
The judge went on to clarify that he wanted Diamond “to provide the teams some payment” but stressed that number should neither “be used as a negotiating point” nor “a leverage tactic to withhold as much as cash as possible in hopes of seeking concessions.”
Lopez added, “I’m not concerned about [teams’] financial stability,” but he believed he should follow “what we would normally do” in a reorganization situation, which is to “pay the uncontested and reserve for the disputed portion of it.”
After a recess, an attorney for Diamond said, “We were unable to reach an agreement with [MLB] commissioner [Rob Manfred] and the four teams.” The attorney did not disclose what MLB offered but confirmed that Diamond had offered to pay 50%—a percentage that aligned with what Lopez said he had in mind. “If there is any overage, I’m confident the teams will pay it,” the judge said.
Judge Lopez alluded to the complex and potentially long-term nature of the case, saying, “If someone wants their day in court, they will have it.” The parties will meet again for a hearing on May 10. Wednesday’s order likely forestalls any imminent changes in broadcasting activities by MLB. It means that Diamond will need to pay the D-backs, Guardians, Twins and Rangers, albeit only a portion of what the company owes. That said, the exclusion of a fifth as-yet uncompensated team—the Cincinnati Reds—has yet to be addressed.
Diamond missed an April 17 payment to the Reds, but still has until May 1 to meet the terms of its rights contract without incurring a penalty. MLB is expected to petition the court for a forfeiture of those rights should Diamond blow past the grace period, whereupon the league would execute a plan to assume production of all Reds games that are scheduled to air on Bally Sports Ohio. Under such a scenario, MLB conceivably might look to put together its first repo telecast as early as Saturday, May 6, the night after the Reds begin a three-date home stand against the White Sox. (The first game of the series is set to stream on Apple TV+.)
Given Judge Lopez’s order for Diamond to pay up half of what it owes to the other four MLB clubs, it’s possible that a similar ruling may be put in place for the Reds. (In such a scenario, MLB would be denied the go-ahead for a TV takeover bid.) That said, the Diamond-Reds situation is complicated somewhat by the club’s legacy agreement with the precursor to the home RSN. Under terms of a 2016 rights renewal with Fox Sports, the Reds hold an ownership stake in the channel, the particulars of which remain undisclosed.
The Reds in 2022 were the one of Diamond’s lowest-rated MLB clubs, with an average in-market draw of 27,000 viewers per game. With an estimated annual rights fee of $48 million, the contract isn’t particularly onerous for Diamond, although the duration of the legacy deal (it runs through the 2023 season) is unfavorable, as it effectively prevents any expansion of the media company’s streaming rights for another decade.