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

[Make Angels Great Again]

6 minutes ago, Lhalo said:

So $20 a month and you don't even get baseball? Solid.

 

To be fair, i'm sure there's a handful of people somewhere that would pay $20 a month to watch the ducks and clippers.

 

I don't know where personally, but somewhere. Probably.

[jsnpritchett]

9 minutes ago, Lhalo said:

So $20 a month and you don't even get baseball? Solid.

Correct.  That's been one of the biggest challenges for Bally Sports in trying to launch their direct-to-consumer streaming option: they don't have the streaming rights to all of the teams to which they have broadcast rights. Most of the issues involve MLB teams, as they figured out NBA and NHL pretty well. 

[jsnpritchett]

In additional baseball programming news, YouTube TV is dropping MLB Network as of today over carriage disputes.  It'll probably get worked out eventually, but just another example of how chaotic things are right now.

EDIT: ...and DirecTV just raised their price for MLB Extra Innings for '23.

Edited January 31, 2023 by jsnpritchett

[Taylor]

VPNTV+ still carries all the games.

[Hubs]

On 1/30/2023 at 3:15 PM, jsnpritchett said:

...but you don't know, which is the issue.  You have continually said similar things, with little to back it up (and most of the articles you've posted in the last few minutes don't actually say what you seem to be thinking they're saying).  The Angels have pretty low viewership on BSW, yet their rights fee is close to the highest in baseball.  That's not sustainable.

And if the Angels take over BSW and manage it, you do realize that the "rights fee" becomes simply a transfer of money from one entity to another within the same overall corporate umbrella, right?  Carriage fees from cable/satellite providers will be a fraction of what BSW is currently getting (evidence for this comes from the fact that many carriers are already refusing to carry it)--and if fewer people are subscribing, then ad rates go down.

Continuing to believe that local sports rights are going to be an ever-increasing revenue stream is probably a fool's errand.  There's no putting the genie back in the bottle once the shift to streaming occurs (and it has already started).  While it'll still be a few more years before cable/satellite is gone or in the minority in terms of how people access sports and other entertainment, it's coming.

Agree to disagree sir. 

The Diamond Sports Group Bankruptcy has everything to do with Debt Service and a stupid purchase deal and little to do with rights fees or cable subscriber cord cutting. Did they overvalue the purchase? Yes. Did they over finance the purchase? Yes. Did they have lofty revenue goals that they couldn't meet? Also yes. 

The debt service is too high, though it's still a profitable EBTIDA. They have a lot of cash on hand and billions in rights agreements, they just financed the whole deal and now can't afford the payments. 

In regards to cord cutting, I will point out that people said the same thing with the shift to cell phones from landlines, whereas they thought all the local service companies would go bankrupt as people moved to cell only. Now my cell phone bill is way higher than my local phone ever was and these companies are making money hand over fist. 

 

[Hubs]

On 1/30/2023 at 3:29 PM, jsnpritchett said:

They won't get that if Diamond goes bankrupt, nor would they get it if any new entity came in. 

The fangraphs article also talks about the rights fee money not necessarily being disrupted. It talks about the business model making money. It talks about debt service and why they go into bankruptcy. You can not agree, but this is the type of article I've read and why I believe what I believe. 

Side note, I personally HATE Sinclair, their owners, and their politics. I don't like the influence they have on local media, and I don't like the fact that they were able to win the bidding for the RSN's.

I've watched this whole thing unfold for years and I have read dozens if not hundreds of articles on it, and I've known this was a possibility since the day they bought the RSN's from Disney (who was forced to sell that or ESPN).

 

[Hubs]

And once again, from the fangraphs article:

 

I don’t mean to say that the sports media rights bubble will never burst. That question seems unanswerable to me today; it’s certainly a possibility, but that was going to be the case whether or not the Diamond Sports Group transaction fell apart. That doesn’t make what happened any less objectionable, or the use of leveraged buyouts to arbitrarily add default risk to any random business less annoying. Fox Sports Network was a completely fine business before Disney was forced to sell it for regulatory reasons; the big problem here was the debt. I think it’s likely that broadcasting sports on regional networks is less lucrative now than it was in 2019, but well, duh. That doesn’t mean it’s suddenly unprofitable; it just means that the particular structure that Sinclair used to spend $10 billion when they only had $2 billion on hand didn’t work out.

[jsnpritchett]

3 minutes ago, Hubs said:

The fangraphs article also talks about the rights fee money not necessarily being disrupted. It talks about the business model making money. It talks about debt service and why they go into bankruptcy. You can not agree, but this is the type of article I've read and why I believe what I believe. 

Side note, I personally HATE Sinclair, their owners, and their politics. I don't like the influence they have on local media, and I don't like the fact that they were able to win the bidding for the RSN's.

I've watched this whole thing unfold for years and I have read dozens if not hundreds of articles on it, and I've known this was a possibility since the day they bought the RSN's from Disney (who was forced to sell that or ESPN).

 

You've been saying that the Angels and other teams will be able to make up the revenue if the RSNs collapse.  My point all along is that that is highly unlikely.  Now you're basically admitting (by the Fangraphs excerpts) that revenue will fall.  That's been one of my points all along: the money likely won't be the same, especially when the transition to streaming occurs.

So it actually sounds like we agree on one of the main points here.  Cool.

[gotbeer]

9 minutes ago, Hubs said:

Agree to disagree sir. 

The Diamond Sports Group Bankruptcy has everything to do with Debt Service and a stupid purchase deal and little to do with rights fees or cable subscriber cord cutting. Did they overvalue the purchase? Yes. Did they over finance the purchase? Yes. Did they have lofty revenue goals that they couldn't meet? Also yes. 

The debt service is too high, though it's still a profitable EBTIDA. They have a lot of cash on hand and billions in rights agreements, they just financed the whole deal and now can't afford the payments. 

In regards to cord cutting, I will point out that people said the same thing with the shift to cell phones from landlines, whereas they thought all the local service companies would go bankrupt as people moved to cell only. Now my cell phone bill is way higher than my local phone ever was and these companies are making money hand over fist. 

 

https://nypost.com/2022/09/20/mlb-nba-and-nhl-may-buy-biggest-owner-of-regional-sports-tv-networks-sources/

Quote

But soon after the buyout, cable TV giants including Charter Communications and Comcast began slashing the fees they were willing to pay for sports amid rampant cord cutting. Meanwhile, satellite-TV provider Dish dropped out of regional sports networks altogether, sparking losses for the so-called RSNs that haven’t let up since.

Quote

While Diamond does have the cash on hand to survive through next year, it is technically insolvent and creditors could soon force it into bankruptcy, sources close to the situation said.

Quote

Diamond has been telling the leagues in recent days if it goes bankrupt it will be able to keep broadcasting games, but will not need to pay teams their rights fees as it will have protection from creditors, sources close to the talks said.

In a bankruptcy scenario, a buyer of the RSNs also could decide to reject existing broadcast rights contracts that are too expensive and arrange for cheaper deals, sources said. With some teams getting up to 30% of their revenue from RSN rights, a prospective bankruptcy could hit team payrolls, insiders claimed.

Quote

After Sinclair won the Fox RSNs, it projected their 2019 Ebitda would be $1.6 billion.

It has been a rough ride downhill since. Sinclair’s Diamond reported Aug. 30 that full year Ebitda, or earnings before interest, taxes, depreciation and amortization, would fall to between $183 million and $200 million.

Meanwhile, Diamond has $8.5 billion of debt and pays about $450 million in annual interest payments so it is spending double what it makes on just the interest on its junk-rated debt. The most junior debt is now trading at around 20 cents on the dollar.

 

[Jay]

55 minutes ago, jsnpritchett said:

In additional baseball programming news, YouTube TV is dropping MLB Network as of today over carriage disputes.  It'll probably get worked out eventually, but just another example of how chaotic things are right now.

EDIT: ...and DirecTV just raised their price for MLB Extra Innings for '23.

Does anybody watch MLB Network during the off-season? Except for you guys whose "hobby" this is.

[TempeAngel]

47 minutes ago, Jay said:

Does anybody watch MLB Network during the off-season? Except for you guys whose "hobby" this is.

Hot Stove is our morning show over coffee and getting my Son off to school.

[oater]

It is unclear to me whether a Diamond bankruptcy would adversely affect income from the Angel's existing cable deal.  Unless Diamond "rejects' the contract in the bankruptcy, the Angels will get paid as an administrative expense (i.e., with priority over other creditors).  If it rejects the contract, the broadcast rights will revert to the Angels,  which will be free to work out a new deal with a third party.  It is very possible that Disney would be liable for any shortfall, since the sale of the contract does not release it from its obligation to perform the agreement.

[gotbeer]

8 minutes ago, oater said:

It is unclear to me whether a Diamond bankruptcy would adversely affect income from the Angel's existing cable deal.  Unless Diamond "rejects' the contract in the bankruptcy, the Angels will get paid as an administrative expense (i.e., with priority over other creditors).  If it rejects the contract, the broadcast rights will revert to the Angels,  which will be free to work out a new deal with a third party.  It is very possible that Disney would be liable for any shortfall, since the sale of the contract does not release it from its obligation to perform the agreement.

Just curious.  But why would you think Disney would be liable for any shortfall?  Unless they did something criminal, I can't see how the sale would bind Disney to an agreement.  I would think it would fall on the creditors like the Angels to object to the sale if they didn't think they would get paid.  

[jsnpritchett]

22 minutes ago, oater said:

It is unclear to me whether a Diamond bankruptcy would adversely affect income from the Angel's existing cable deal.  Unless Diamond "rejects' the contract in the bankruptcy, the Angels will get paid as an administrative expense (i.e., with priority over other creditors).  If it rejects the contract, the broadcast rights will revert to the Angels,  which will be free to work out a new deal with a third party.  It is very possible that Disney would be liable for any shortfall, since the sale of the contract does not release it from its obligation to perform the agreement.

There is no chance Disney will be held liable for any shortfall. They were required to sell the Fox Sports assets as a condition for getting government approval for their purchase of 20th Century Fox. No court is going to hold them liable for make-goods on the actions that occurred downstream in a forced asset sale.

[Taylor]

3 hours ago, Jay said:

Does anybody watch MLB Network during the off-season? Except for you guys whose "hobby" this is.

I don't watch MLB Network during the season.

[Taylor]

1 hour ago, jsnpritchett said:

There is no chance Disney will be held liable for any shortfall. They were required to sell the Fox Sports assets as a condition for getting government approval for their purchase of 20th Century Fox. No court is going to hold them liable for make-goods on the actions that occurred downstream in a forced asset sale.

If Ronnie D becomes president he'll make sure that Wokey Mouse and his Marxist crew get what's due to them.

[Blarg]

3 hours ago, Jay said:

Does anybody watch MLB Network during the off-season? Except for you guys whose "hobby" this is.

I would but Frontier dropped it along with Bally Sports. No, I'm not going to be paying streaming costs for the service. 

[Hubs]

40 minutes ago, Taylor said:

If Ronnie D becomes president he'll make sure that Wokey Mouse and his Marxist crew get what's due to them.

This is hilarious. It’s why I don’t ever go on the political forum. And I’ll refrain from further comment. 

[Hubs]

4 hours ago, jsnpritchett said:

You've been saying that the Angels and other teams will be able to make up the revenue if the RSNs collapse.  My point all along is that that is highly unlikely.  Now you're basically admitting (by the Fangraphs excerpts) that revenue will fall.  That's been one of my points all along: the money likely won't be the same, especially when the transition to streaming occurs.

So it actually sounds like we agree on one of the main points here.  Cool.

What I’m saying is that the business model is not the problem. People are willing to pay for cable for broadcast sports. They are going to have to reorganize this in the future. I don’t dispute that. it’s that they have too much debt. 
 

The creditors (the banks used to finance the purchase) are going to own DSG instead of Sinclair, they will break it up and sell the pieces in order to recover their money. This will result in a new owner for most of these RSN’s. This will hurt some smaller market teams.

The Angels however are in a market with 15-20 million people. If there are 7 million cable subscribers in SoCal that equals $400 million a year in cable fees plus ad revenue minus rights fees and production costs. They’ll be fine. 
 

 

 

 

[jsnpritchett]

12 minutes ago, Hubs said:

What I’m saying is that the business model is not the problem. People are willing to pay for cable for broadcast sports. They are going to have to reorganize this in the future. I don’t dispute that. it’s that they have too much debt. 
 

The creditors (the banks used to finance the purchase) are going to own DSG instead of Sinclair, they will break it up and sell the pieces in order to recover their money. This will result in a new owner for most of these RSN’s. This will hurt some smaller market teams.

The Angels however are in a market with 15-20 million people. If there are 7 million cable subscribers in SoCal that equals $400 million a year in cable fees plus ad revenue minus rights fees and production costs. They’ll be fine. 
 

 

 

 

Your last paragraph is the issue.  If you can't understand that that business model is not, in fact, sustainable in the medium-to-long run (and possibly even the short run) given where things are headed, I don't know what to tell you, man.  But keep on posting and acting like it's still 2013 or something. 

[oater]

8 hours ago, gotbeer said:

Just curious.  But why would you think Disney would be liable for any shortfall?  Unless they did something criminal, I can't see how the sale would bind Disney to an agreement.  I would think it would fall on the creditors like the Angels to object to the sale if they didn't think they would get paid.  

Obviously the details of the contract matter, but Disney's liability would be contractual in nature.  When Disney acquired the Fox properties it likely assumed all of Fox's liabilities (including Fox's obligation under the cable contract with the Angels).  The sale to Diamond does not release Disney from its obligations under the contract unless the Angels agreed to release Disney from liability.  Since the sale was highly leveraged, the Angels would have no reason to release Disney of its liability.  

 

[jsnpritchett]

3 hours ago, oater said:

Obviously the details of the contract matter, but Disney's liability would be contractual in nature.  When Disney acquired the Fox properties it likely assumed all of Fox's liabilities (including Fox's obligation under the cable contract with the Angels).  The sale to Diamond does not release Disney from its obligations under the contract unless the Angels agreed to release Disney from liability.  Since the sale was highly leveraged, the Angels would have no reason to release Disney of its liability.  

 

Can you point to a real world example of this occurring, particularly in a situation that involved a government-mandated sale of assets? There is no way Disney is going to be held liable for any potential shortfall in rights fees. 

[gotbeer]

4 hours ago, oater said:

Obviously the details of the contract matter, but Disney's liability would be contractual in nature.  When Disney acquired the Fox properties it likely assumed all of Fox's liabilities (including Fox's obligation under the cable contract with the Angels).  The sale to Diamond does not release Disney from its obligations under the contract unless the Angels agreed to release Disney from liability.  Since the sale was highly leveraged, the Angels would have no reason to release Disney of its liability.  

 

That makes zero sense.  You are saying that when Disney acquired Fox it acquired 100% of the liability.  But when Diamond acquired the RSN, it acquired limited liability.  

Just because a sale is highly leveraged, doesn't mean that the selling company is keeping any liability.  

That's like saying because Musk's takeover of Twitter was highly leveraged, the landlords can go after the former twitter shareholders because Musk defaulted on leases on Twitter offices.

[bruin5]

15 hours ago, Hubs said:

And once again, from the fangraphs article:

 

I don’t mean to say that the sports media rights bubble will never burst. That question seems unanswerable to me today; it’s certainly a possibility, but that was going to be the case whether or not the Diamond Sports Group transaction fell apart. That doesn’t make what happened any less objectionable, or the use of leveraged buyouts to arbitrarily add default risk to any random business less annoying. Fox Sports Network was a completely fine business before Disney was forced to sell it for regulatory reasons; the big problem here was the debt. I think it’s likely that broadcasting sports on regional networks is less lucrative now than it was in 2019, but well, duh. That doesn’t mean it’s suddenly unprofitable; it just means that the particular structure that Sinclair used to spend $10 billion when they only had $2 billion on hand didn’t work out.

Debt was the majority of the problem. At the time of sale there were many criticisms that Sinclair overpaid. 

However, once they purchased the assets, Sinclair/Diamond overvalued their service and immediately increased the rates they charged the carriers. Someone mentioned Frontier not carrying, Dish dropped them, and I don’t think any streamer picked them up. Spectrum and Direct are the only ones that still carry (for now). That’s a lot of revenue left behind.

[jsnpritchett]

5 minutes ago, bruin5 said:

Debt was the majority of the problem. At the time of sale there were many criticisms that Sinclair overpaid. 

However, once they purchased the assets, Sinclair/Diamond overvalued their service and immediately increased the rates they charged the carriers. Someone mentioned Frontier not carrying, Dish dropped them, and I don’t think any streamer picked them up. Spectrum and Direct are the only ones that still carry (for now). That’s a lot of revenue left behind.

Fubo did pick up the Bally Sports networks recently, though there's speculation that Fubo won't last much longer. They have under 1.5M subscribers.