As Diamond Sports Group seeks to emerge from Ch. 11 bankruptcy and nears a Saturday deadline to agree to a reorganization plan with its creditors, the regional sports network operator has reportedly made a final offer to the National Basketball Association and National Hockey League. With the start of the regular season approaching for both leagues, the company is looking to slash its local broadcast fees for NBA and NHL games by up to 20%, respectively, to avoid liquidation in today’s dynamic sports media ecosystem.
The Sinclair Broadcast Group subsidiary has $9 billion in debt and owns the broadcast rights to 27 teams across the two professional sports leagues, not to mention an additional 12 Major League Baseball teams. Earlier in the year, the company ceded rights for San Diego Padres and Arizona Diamondbacks games, which have been produced by MLB’s local media department over the last several months.
Diamond Sports Group pays the NBA approximately $600 million annually in broadcast rights, according to the report from the New York Post, while specific financial metrics pertaining to the NHL are unknown. Both leagues are reportedly inclined to take the deal, which would give the company the ability to avoid liquidity for another year, according to a source. Based on the intel, it seems the leagues are not prepared for the magnitude of this kind of shakeup, which could have resounding effects on competitive balance. After all, Major League Baseball paid both the Padres and Diamondbacks at least 80% of what was owed to them from the Diamond deals in order to maintain this ability.
Another source, however, emphasized that it believes the reorganization will ultimately result in the liquidation of Diamond Sports Group. Other sources concurred that Diamond will ultimately shutter, but not before making money from some of its more profitable contracts. The Milwaukee Bucks and New Orleans Pelicans received rights payments prior to the Sept. 1 deadline, and the company also recently inked a multi-year extension with the Los Angeles Kings.
Diamond Sports Group originally sought to institute a Nov. 9 deadline; however, that request was denied by a bankruptcy court. The NHL also asserted in August that it may look for emergency relief to forgo contracts if no plan is reached. While specific contingency plans for the NHL are largely unknown, the NBA is prepared to produce games for affected teams itself, along with assuming responsibility for negotiating linear distribution means and selling advertising.
The company had been in negotiations with Comcast that recently came to a close, ending in a one-year agreement between the two sides. Moreover, Diamond and DIRECTV have reportedly come to terms on a new deal before its cessation next month, which ensures that its users will still be able to access local broadcasts of their favorite teams. Significant carriage negotiations with Charter Communications are still forthcoming since the existing contract expires in February.
Diamond Sports Group is also suing its parent company, Sinclair, Inc., affirming that it received $1.5 billion because of misconduct. Sinclair, which reported its own 8% year-over-year (YoY) decline in revenue, insinuated that its subsidiary will not emerge from bankruptcy.
