Alden Gunn Sareth, ESPN Staff Writer June 1, 2023, 8:06pm ET
- ESPN baseball reporter. Covered the Los Angeles Rams for ESPN from 2016 to 2018 and the Los Angeles Angels for MLB.com from 2012 to 2016.
Houston U.S. bankruptcy judge rules in favor of Major League Baseball and its four teams on Thursday, forcing a broadcast under the name Bally Sports RSN operator Diamond Sports Group paid in full for the contract.
Diamond, which is navigating bankruptcy proceedings, has argued it should pay the Minnesota Twins, Cleveland Guardians, Arizona Diamondbacks and Texas Rangers less than The current transaction calls for fees, noting that the rapid pace of cord-cutting across the US has devalued assets substantially. But Judge Chris Lopez presided over a case that lasted two full days and included lengthy testimony from Major League Baseball Commissioner Rob Manfred, ultimately saying that “contract rates are the right answer here.”
The decision may set an important precedent, undermining Diamond’s hopes of reducing costs by lowering the value of previously agreed contracts, especially in its jurisdiction where there are also 28 NBA and NHL teams.
“The profitability of every team has definitely declined,” Lopez said in his ruling. “However, that doesn’t mean contract rates and those fees under those contracts are unreasonable.”
Twins, Guardians, D-backs and Rangers have already paid 75% of what they are owed as a means of delaying them until the end of the hearing. Lopez opted not to adjust their contract, ruling that they could keep the funds while Diamond was required to pay the remaining 25 percent “in the ordinary course of business.” Describing his ruling as a “very difficult decision,” Lopez set no deadline by which Diamond must decide whether to keep or keep those contracts.
Diamond Sinclair Subsidiary took over $8 billion in debt in 2019 to buy broadcasting rights to 42 teams in MLB, NBA and NHL from Fox, and subsequently Gradually reeling from the proliferation of over-the-top streaming services, it was forced into Chapter 11 bankruptcy in March. Diamond, which owns broadcast rights to 14 major league teams, lost the San Diego Padres earlier in the week for failing to pay its scheduled rights fees before the grace period expired.
MLB has been broadcasting the Padres broadcast since Wednesday, offering uninterrupted gameplay on various channels through its streaming service MLB.TV and through various cable companies. The league has pledged to do the same with any other teams not under Diamond’s jurisdiction. The judge’s ruling could prompt Diamond to get rid of the D-backs, Guardians, Twins and Rangers and perhaps some of the other nine major league teams in the near future.
“Major League Baseball appreciates the Houston federal bankruptcy court’s ruling requiring Diamond to pay the club the full contract rate,” the league wrote in a statement. “As always, , we expect Diamond to continue to broadcast games and fulfill his contractual obligations to the club. Like the Padres, MLB stands ready to provide games to fans should Diamond fail to meet his obligations.”
Diamond has long said it needs streaming rights to prop up its Bally Sports+ app and run a more sustainable business, but it currently only has streaming rights to five major league teams: Kansas City Royals, Milwaukee Brewers, Tampa Bay Rays, Detroit Tigers and Miami Marlins. Major League Baseball has no interest in providing streaming rights to others. The two-day hearing, which lasted about 20 hours in total, underscored the festering animosity between the two sides over the past four years.
“I asked both sides to negotiate,” Lopez said. “I’m not asking for consent – I’m asking for a dialogue. That’s the asking. I’m not going to force you into the room, but I’m asking you to have a dialogue.”
In nearly two hours of testimony Wednesday, Manfred said MLB had committed to Bally-owned teams that they would generate at least 80% of their projected revenue through broadcast deals in 2023; All costs will be supported by the league. Manfred also said that Major League Baseball tried to buy the regional sports networks in the original sale, but it was about $900 million less than Diamond’s winning bid, adding that he would try to buy them again if the situation arises.
This revelation helps MLB’s argument.
“They believe their rights are valuable, they can get as much or more for them, and they’re willing to pay for them,” Lopez said. said, alluding to Manfred’s testimony. “They just can’t do it.”