Alden GonzalezESPN Staff Writer Jun 1, 2023 8:06pm ET3 minute read
A US bankruptcy judge in Houston on Thursday ruled in favor of Major League Baseball and four of its teams, forcing Diamond Sports Group, the RSN operator that broadcasts under the Bally Sports name, to pay in full on the contracts at issue.
Diamond, who is going through the bankruptcy process, had argued that the Minnesota Twins, Cleveland Guardians, Arizona Diamondbacks and Texas Rangers should be paid less than their current contracts provide for assets. But Judge Chris Lopez, who presided over a case that lasted two full days and included a lengthy testimony from MLB Commissioner Rob Manfred, ultimately declared that “the contract sentence is the right answer here.”
The decision appears to have set a crucial precedent that shatters Diamond’s hopes of cutting costs by reducing the value of previously agreed contracts, especially since 28 NBA and NHL teams also fall under its purview.
“The profitability is certainly decreasing for any team,” Lopez said in his decision. “But even that doesn’t mean the contract rate and fees under those contracts aren’t reasonable.”
The Twins, Guardians, D-backs and Rangers had already been paid 75% of their debt to hold them until the hearing was completed. When Lopez chose not to adjust their contracts, he decided that they could keep those funds and that Diamond would have to pay the remaining 25% “in the ordinary course of business.” Lopez, who described his ruling as a “very difficult decision,” did not set a deadline for when Diamond must decide whether to keep or stick to those contracts.
Diamond, a Sinclair subsidiary, borrowed more than $8 billion to acquire broadcast rights to 42 teams in the MLB, NBA and NHL from Fox in 2019, then gradually suffered from the proliferation of over-the-top streaming services and was forced into Chapter 11 bankruptcy reorganization in March. Diamond owned the rights to 14 major league teams but lost the San Diego Padres earlier this week when the company failed to pay its planned rights fee by the end of a grace period.
MLB has been broadcasting Padres broadcasts since Wednesday and is offering the games lock-free through its streaming service MLB.TV and on various channels from various cable companies. The league has promised to do the same for every other team outside of Diamond’s purview. The judge’s decision could prompt Diamond to give up the D-Backs, Guardians, Twins and Rangers and potentially some of the other nine major league teams in his possession in the near future.
“MLB welcomes the Houston Federal Bankruptcy Court’s ruling ordering Diamond to pay the clubs the full contractual amount,” the league wrote in a statement. “As always, we hope Diamond will continue to broadcast games and honor their contractual obligations to the clubs. As with the Padres, MLB will be ready to make games available to fans if Diamond fails to live up to its commitments.”
Diamond has long said it needs to secure streaming rights to support its Bally Sports+ app and run a more sustainable business, but it currently only owns the streaming rights to five major league teams: Kansas City Royals, Milwaukee Brewers, Tampa Bay Rays, Detroit Tigers and Miami Marlins. MLB has shown no interest in granting streaming rights to the others. The two-day hearing, which totaled about 20 hours, underscored the animosity that had simmered between the two sides over the past four years.
“I’m asking the parties to talk,” Lopez said. “I’m not asking the parties to agree – I’m asking the parties to talk. This is the request. I’m not going to force you into the room, but I’m asking you to talk.”
During his nearly two-hour testimony on Wednesday, Manfred explained that MLB had promised Bally-owned teams that in 2023 at least 80% of the expected revenue would come from their transfer deals; What is ultimately not paid for by Diamond is backed by the League. Manfred also said that MLB tried to buy the regional sports networks when they were originally up for sale, but fell about $900 million short of Diamond’s winning bid, adding that he would try to buy them again if it did the situation should arise.
The revelation supported MLB’s argument.
“They believe their rights are valuable and that they can get as much or more for it, and they’re willing to put money on the table for it,” Lopez said, referring to Manfred’s statement. “They just can’t.”