Diamond Sports Group (owner of Bally RSNs) files for Chapter 11 bankruptcy, MLB to produce Padres games after missed payment

[Hubs]

As a reminder, here's how Sinclair financed the purchase from Disney (one of the is listed as secured note, but it was later found to be unsecured).

The aggregate purchase price, transaction costs, and an additional cash amount contributed to Diamond was funded through a $1.4 billion cash contribution from Sinclair, $1.0 billion of preferred equity issued by a parent company of Diamond (also an indirect subsidiary of Sinclair), a $3.3 billion secured term B loan facility entered into by Diamond, and $3.1 billion of secured notes and $1.8 billion of senior notes issued by Diamond and Diamond Sports Finance Company.

They've since given up their equity and forfeited their 1.4 billion, but there is still 8.2 Billion in loans. During the bankruptcy, those note holders will end up being the new owners of the RSN's. The Angels also own 25% of Fox Sports West (now Bally Sports West).

 

 

[jsnpritchett]

28 minutes ago, Hubs said:

I will point out that the lack of a streaming option most certainly caused the devaluation in the Bally Sports Groups RSN's, but if they had not been purchased with 10B in unsecured debt and that Sinclair was allowed to manipulate and then sue their own subsidiary was ridiculous.

These stations, left on their own with their own rights deals and such were certainly profitable when they were bought in 2019, and yes Covid... upped the streaming boom, but they are less profitable now, and they would still be able to afford the rights fees, if not all of them...

Having to pay 10B in debt, caused this fall, and no one points this out, they all jump to rights fees and cable subscribers, etc. It's lazy journalism. 

It's like ignoring the mortgage on the house, but complaining that costs on the utilities went up, so you can't afford the rent anymore. There is still a gigantic loan to satisfy first. That's causing all of these issues.

I know you post something similar every time I (or anyone else) bump this thread with news--but I will continue to say I personally think you're making too big of a deal about the debt side of things.  The deal is done.  Yes, it was dumb deal to begin with, but I think you're overestimating how well the RSNs were doing in the first place and just how rapidly their revenue from distribution fees and advertising was eroding.  If left on their own under Disney's ownership, they might have lasted another year or two, but the end was still pretty clearly on the horizon.  Distribution fees make up the vast, vast majority of RSN revenue, and some RSNs have lost more than half their reach over the last few years.  Fewer subscribers lead to lower advertising revenue.  Most, if not all, of the RSNs wouldn't be able to survive more than a couple years without renegotiating their rights fees.

[Hubs]

17 hours ago, jsnpritchett said:

I know you post something similar every time I (or anyone else) bump this thread with news--but I will continue to say I personally think you're making too big of a deal about the debt side of things.  The deal is done.  Yes, it was dumb deal to begin with, but I think you're overestimating how well the RSNs were doing in the first place and just how rapidly their revenue from distribution fees and advertising was eroding.  If left on their own under Disney's ownership, they might have lasted another year or two, but the end was still pretty clearly on the horizon.  Distribution fees make up the vast, vast majority of RSN revenue, and some RSNs have lost more than half their reach over the last few years.  Fewer subscribers lead to lower advertising revenue.  Most, if not all, of the RSNs wouldn't be able to survive more than a couple years without renegotiating their rights fees.

You can continue to ignore the debt side and focus on lack of revenue, but having that burdensome debt surely accelerated their demise. And no one talks about it. They overvalued and bought the teams almost with almost 80% debt, 

If Fox Sports (and Disney) still owned the RSN's...

Revenue including carriage fees.... X 

Expenses including rights fees... Y

X-Y = Profitability. Even if X goes down, as long as X is greater than Y, they are profitable and able to meet their obligations.

 

Now...with the ludicrous Diamond Sports / Sinclair / Bally Sports debt deal... 

Revenue including carriage fees.... X 

Expenses including rights fees... Y

Debt Service = Z

X-Y-Z = Profitability.

 

It's a huge issue.

 

 

[jsnpritchett]

27 minutes ago, Hubs said:

You can continue to ignore the debt side and focus on lack of revenue, but having that burdensome debt surely accelerated their demise. And no one talks about it. They overvalued and bought the teams almost with almost 80% debt, 

If Fox Sports (and Disney) still owned the RSN's...

Revenue including carriage fees.... X 

Expenses including rights fees... Y

X-Y = Profitability. Even if X goes down, as long as X is greater than Y, they are profitable and able to meet their obligations.

 

Now...with the ludicrous Diamond Sports / Sinclair / Bally Sports debt deal... 

Revenue including carriage fees.... X 

Expenses including rights fees... Y

Debt Service = Z

X-Y-Z = Profitability.

 

It's a huge issue.

 

 

The reason I think it's pointless for you to keep repeating yourself is that the deal is done. You can't change what happened, so continuing to scream about the debt and say the deal should never have gone through doesn't accomplish anything. 

I would also urge you to look deeper into the real "x" and "y" numbers, and you'll see that things are much worse than you seem to think they are. 

[Hubs]

1 hour ago, jsnpritchett said:

The reason I think it's pointless for you to keep repeating yourself is that the deal is done. You can't change what happened, so continuing to scream about the debt and say the deal should never have gone through doesn't accomplish anything. 

I would also urge you to look deeper into the real "x" and "y" numbers, and you'll see that things are much worse than you seem to think they are. 

I'm not denying you're right about the carriage fees declining with the advent of streaming, but I think you're wrong to pinpoint that as the sole cause of the RSN's bankruptcy.

They have what 14 MLB teams? So with most RSN rights fees coming in at less than the Angels, you're probably talking at most $1B for Baseball Rights fees per year. More likely it's around $700 Million.

EDIT: I found this list for 2022.

Arizona 68M, Atlanta 100M, Cincinnati 48M, Cleveland 55M, Detroit 60M, Kansas City 45M, Angels 112M, Miami 49M, Milwaukee 33M, Minnesota 42M, San Diego 47M, St. Louis 59M, Tampa Bay 56M, Texas 111M.

= 885M in Baseball Rights fees per annum. They pay for other rights fees too, from college sports to NBA to NHL, but these aren't even close to what baseball gets due to the number of games, the number of nationally televised games in the NBA's case, and the number of viewers. Baseball is the cream of the crop. 

Assuming these cover say 45% of the population, and an equal number of cable subscribers, this is 45% of the 65 Million estimated cable subscribers. I'm gonna assume $6 bucks for the RSN per month per subscriber  = $72 per year. 29 Million *72 = 2.088 Billion per year in carriage fees, down from approximately 2.7 Billion when the deal was signed. 

The 8 Billion in loans has to carry a payment of 800M per year. Probably more. You're not getting a 30 year mortgage on a loan like this. I'm guessing 10 year loan max, but probably less (5 or 7) and probably at a significant interest rate.

So if you are getting $2.1 Billion in revenue, not including commercials, of course, and paying out over 1/3 in debt service that you weren't paying before, and watching your subscribers go down, it's time for Chapter 11. 

They can focus on rights fees and declining cable subscribers all they want, but this debt service is causing the bankruptcy.

[jsnpritchett]

2 hours ago, Hubs said:

I'm not denying you're right about the carriage fees declining with the advent of streaming, but I think you're wrong to pinpoint that as the sole cause of the RSN's bankruptcy.

They have what 14 MLB teams? So with most RSN rights fees coming in at less than the Angels, you're probably talking at most $1B for Baseball Rights fees per year. More likely it's around $700 Million.

EDIT: I found this list for 2022.

Arizona 68M, Atlanta 100M, Cincinnati 48M, Cleveland 55M, Detroit 60M, Kansas City 45M, Angels 112M, Miami 49M, Milwaukee 33M, Minnesota 42M, San Diego 47M, St. Louis 59M, Tampa Bay 56M, Texas 111M.

= 885M in Baseball Rights fees per annum. They pay for other rights fees too, from college sports to NBA to NHL, but these aren't even close to what baseball gets due to the number of games, the number of nationally televised games in the NBA's case, and the number of viewers. Baseball is the cream of the crop. 

Assuming these cover say 45% of the population, and an equal number of cable subscribers, this is 45% of the 65 Million estimated cable subscribers. I'm gonna assume $6 bucks for the RSN per month per subscriber  = $72 per year. 29 Million *72 = 2.088 Billion per year in carriage fees, down from approximately 2.7 Billion when the deal was signed. 

The 8 Billion in loans has to carry a payment of 800M per year. Probably more. You're not getting a 30 year mortgage on a loan like this. I'm guessing 10 year loan max, but probably less (5 or 7) and probably at a significant interest rate.

So if you are getting $2.1 Billion in revenue, not including commercials, of course, and paying out over 1/3 in debt service that you weren't paying before, and watching your subscribers go down, it's time for Chapter 11. 

They can focus on rights fees and declining cable subscribers all they want, but this debt service is causing the bankruptcy.

They're not getting $2.1B in revenue from carriage fees and the advertising revenue is likely a fraction of what you're thinking it might be.  That's all I'll say about that for now.  I am not now, nor have I ever been, saying that the structure of the deal to create Diamond was a good one.  It was clearly terrible from the outset.  My point continues to simply be that you have a rosier image of the carriage fees and advertising revenue than the realities of where they are at this point in time (and you're underestimating the non-MLB rights fees they pay, too, btw...NBA alone is somewhere in the $600M/year range).

[Hubs]

They made a deal last week to not discount the rights of the majority of their MLB team deals for 2024. 

https://www.yahoo.com/entertainment/tentative-deal-between-diamond-sports-023720346.html

 

[Hubs]

19 hours ago, jsnpritchett said:

They're not getting $2.1B in revenue from carriage fees and the advertising revenue is likely a fraction of what you're thinking it might be.  That's all I'll say about that for now.  I am not now, nor have I ever been, saying that the structure of the deal to create Diamond was a good one.  It was clearly terrible from the outset.  My point continues to simply be that you have a rosier image of the carriage fees and advertising revenue than the realities of where they are at this point in time (and you're underestimating the non-MLB rights fees they pay, too, btw...NBA alone is somewhere in the $600M/year range).

They get between $4 and $6 per cable subscriber, based on the market. LA is on the higher end as they offer two channels here, and some of the smaller markets are on the lower end. ESPN is almost $8 and Fox News was reportedly almost $10. It's what drives cable fees. They have at a minimum 35% of the market in the USA with some major markets. There are currently between 60-65M cable subscribers, down from 84M when the deal was signed and almost 100M at the peak.

The carriage fee is the reason the RSN's were valued so highly. I think 2.1 B per year is pretty fair honestly.

This was discussed in detail when the Dodgers left then Fox Sports and moved their channel to TWC. Mason and Ireland discussed this with someone and they broke down the option of a streaming channel. They talked about maybe 50k would pay 10 bucks a month to stream Dodgers games, but with 4M Cable Subscribers and $5 bucks a month they're getting 20M a month vs. 500k... 

This model has changed, somewhat, but it is still profitable, at least for now. The rights fees without a streaming option will continue to decline, even if they've locked them in for 2024. I am not arguing this point. 

The added 800M plus in debt service per year is why they went to Chapter 11, which is reorganization, rather than Chapter 13 which is liquidation. They're trying to get out from some of the unprofitable rights deals and markets and trying to offload some of that unsecured debt. Diamond Sports is formerly a subsidiary of Sinclair, which owns the most local news stations in the country, and they did this complicated debt deal to buy the RSN's because they were profitable. They are probably not profitable now, but some portions are. But I maintain that if they hadn't been sold, this wouldn't have accelerated so swiftly.

And as for rights fees for other leagues, look them up, they don't have the most profitable teams, and even the Clippers which share the LA Market with the Angels get a fraction of what the Angels get. Hockey is a fraction of Basketball.

 

[jsnpritchett]

12 minutes ago, Hubs said:

They made a deal last week to not discount the rights of the majority of their MLB team deals for 2024. 

https://www.yahoo.com/entertainment/tentative-deal-between-diamond-sports-023720346.html

 

Yep.  Still doesn't change anything I've been saying.  It's a one-year deal.

[Hubs]

14 minutes ago, Hubs said:

They made a deal last week to not discount the rights of the majority of their MLB team deals for 2024. 

https://www.yahoo.com/entertainment/tentative-deal-between-diamond-sports-023720346.html

 

This included the Angels. They get a reported $112M. (which is 75% of 150, since the Angels reported a 3B deal but own 25% of the channel)

[jsnpritchett]

Just now, Hubs said:

They get between $4 and $6 per cable subscriber, based on the market. LA is on the higher end as they offer two channels here, and some of the smaller markets are on the lower end. ESPN is almost $8 and Fox News was reportedly almost $10. It's what drives cable fees. They have at a minimum 35% of the market in the USA with some major markets. There are currently between 60-65M cable subscribers, down from 84M when the deal was signed and almost 100M at the peak.

The carriage fee is the reason the RSN's were valued so highly. I think 2.1 B per year is pretty fair honestly.

This was discussed in detail when the Dodgers left then Fox Sports and moved their channel to TWC. Mason and Ireland discussed this with someone and they broke down the option of a streaming channel. They talked about maybe 50k would pay 10 bucks a month to stream Dodgers games, but with 4M Cable Subscribers and $5 bucks a month they're getting 20M a month vs. 500k... 

This model has changed, somewhat, but it is still profitable, at least for now. The rights fees without a streaming option will continue to decline, even if they've locked them in for 2024. I am not arguing this point. 

The added 800M plus in debt service per year is why they went to Chapter 11, which is reorganization, rather than Chapter 13 which is liquidation. They're trying to get out from some of the unprofitable rights deals and markets and trying to offload some of that unsecured debt. Diamond Sports is formerly a subsidiary of Sinclair, which owns the most local news stations in the country, and they did this complicated debt deal to buy the RSN's because they were profitable. They are probably not profitable now, but some portions are. But I maintain that if they hadn't been sold, this wouldn't have accelerated so swiftly.

And as for rights fees for other leagues, look them up, they don't have the most profitable teams, and even the Clippers which share the LA Market with the Angels get a fraction of what the Angels get. Hockey is a fraction of Basketball.

 

I love that you're talking to me like I'm a child who doesn't know anything about this.  I'll just again say that some of your numbers aren't really accurate and leave it at that, as I can't fully reveal how I know. 

We can keep going back and forth and getting nowhere, but at the end of the day, I think we both agree that, regardless of the hows and whys of it all, traditional RSNs aren't long for this world, and the revenue that will replace the MLB revenue generated by RSNs won't come close to replicating it.

[Hubs]

1 minute ago, jsnpritchett said:

Yep.  Still doesn't change anything I've been saying.  It's a one-year deal.

Agreed. They will emerge from Chapter 11 with new owners, but I will maintain that the Angels are not in trouble the way that some smaller markets are. If you look at the cable subscriber estimates at 65M of the 131M households it's half and probably gonna drop to 40% in the next few years.

There are 5.7M TV households in Los Angeles Metro and then even at 40% its 2.3 Million subscribers. $6*12*2.3M = 165 Million in revenue. 

[Hubs]

7 minutes ago, jsnpritchett said:

I love that you're talking to me like I'm a child who doesn't know anything about this.  I'll just again say that some of your numbers aren't really accurate and leave it at that, as I can't fully reveal how I know. 

We can keep going back and forth and getting nowhere, but at the end of the day, I think we both agree that, regardless of the hows and whys of it all, traditional RSNs aren't long for this world, and the revenue that will replace the MLB revenue generated by RSNs won't come close to replicating it.

I am not talking just to you and I certainly don't think you're a child who knows nothing. I agree with you on the majority of this. I just don't know how the banks approved this deal (including my own US Bank/Union Bank, who's is gonna get screwed on this deal hard).

Even if my numbers are wrong, I just want to keep the debt service as part of the conversation, because if the Angels had gone the Dodgers route, I think they'd have been fine.

Even now they can go with the Clippers, Ducks, and Kings, and get out of the Diamond deal and move down the road, start their own channel, and be on the cable broadcasts for the long term. Streaming is not the answer, we are in agreement on that.

And Cable companies know that they aren't losing all their subscribers because of two things, Live Sports and Local News. I for one would ditch Cable completely if I would be able to watch NFL and the Angels via streaming.

 

Edited December 20, 2023 by Hubs

[jsnpritchett]

18 minutes ago, Hubs said:

Agreed. They will emerge from Chapter 11 with new owners, but I will maintain that the Angels are not in trouble the way that some smaller markets are. If you look at the cable subscriber estimates at 65M of the 131M households it's half and probably gonna drop to 40% in the next few years.

There are 5.7M TV households in Los Angeles Metro and then even at 40% its 2.3 Million subscribers. $6*12*2.3M = 165 Million in revenue. 

Keep in mind that not everyone who subscribes to cable in the LA/OC area gets Bally Sports West.  Spectrum doesn't even offer it on their basic plan anymore.  You either have to upgrade or talk your way into one of their plans that lets you do a la carte channels (I personally have the a la carte option, but not everyone can get it).  Your $6 carriage fee estimate is a little high, too.

[Inside Pitch]

On 12/18/2023 at 3:36 PM, jsnpritchett said:

This is interesting: Amazon may step in to partner with Diamond/Bally Sports:

https://www.wsj.com/business/media/amazon-in-talks-to-invest-in-diamond-sports-b07af4d9?mod=followamazon

"Diamond Sports Group, which carries the games of more than 40 major sports teams across the country and filed for bankruptcy earlier this year, is actively negotiating with Amazon about a strategic investment and a multiyear streaming partnership, according to people familiar with the matter.

If an agreement is reached, Amazon’s Prime Video platform would eventually become the streaming home for Diamond’s games.

Diamond, which has the local rights to about half the teams in Major League Baseball and the National Basketball Association and about a third of the National Hockey League teams, would continue operating its cable networks through its existing partnerships. It isn’t clear how much money Amazon is planning to invest or at what valuation."

My guess is that even if this happens, Diamond would still look to get out of some additional MLB deals altogether and try to renegotiate some others to lower rights fees.

This is likely their best shot. 

[jsnpritchett]

 

[Stradling]

Hey if this RSN situation prevents some of these contracts then so be it.  The fucking Padres gave Xander $280 million.  Haha. 

[Hubs]

22 hours ago, jsnpritchett said:

Keep in mind that not everyone who subscribes to cable in the LA/OC area gets Bally Sports West.  Spectrum doesn't even offer it on their basic plan anymore.  You either have to upgrade or talk your way into one of their plans that lets you do a la carte channels (I personally have the a la carte option, but not everyone can get it).  Your $6 carriage fee estimate is a little high, too.

Do you know what the carriage fee is or are you also just estimating? 

When you opt into the sports package, you get both Bally's channels. And also NFL Network, MLB Network, etc.

[jsnpritchett]

3 minutes ago, Hubs said:

Do you know what the carriage fee is or are you also just estimating? 

When you opt into the sports package, you get both Bally's channels. And also NFL Network, MLB Network, etc.

Yes, I know what it is.  No, I'm not going to say the exact amount.  Ha.

And, yes, I know you can get it when you opt in/upgrade.  That's my point: it used to be offered as part of the basic package, but it no longer is.

 

[Hubs]

Just now, jsnpritchett said:

Yes, I know what it is.  No, I'm not going to say the exact amount.  Ha.

And, yes, I know you can get it when you opt in/upgrade.  That's my point: it used to be offered as part of the basic package, but it no longer is.

 

Because it's too expensive?

[jsnpritchett]

Just now, Hubs said:

Because it's too expensive?

Correct. Enough people complained that they were paying too much for sports stuff that they never watched that most cable/satellite providers moved RSNs, etc to a separate tier to make active users foot more of the bill.

[Amazing Larry]

 

[The Ghost of Bob Starr]

On 12/21/2023 at 9:23 AM, Stradling said:

Hey if this RSN situation prevents some of these contracts then so be it.  The fucking Padres gave Xander $280 million.  Haha. 

Time for AngelsWinTV to take over.  Get er done @Chuck    
 

angels win TV - your TV home of the Angels. 

[Chuck]

17 hours ago, The Ghost of Bob Starr said:

Time for AngelsWinTV to take over.  Get er done @Chuck    
 

angels win TV - your TV home of the Angels. 

[The Ghost of Bob Starr]

Stoddart and Salker on play by play.  
@Stradling serving as Jose Mota 

@Blargserving as Alex Curry.  
 

im in. 

Edited January 12 by The Ghost of Bob Starr