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Diamond Sports Files Official Re-Org Plan, Will Cut Ties With Bally’s

Almost a year to the day after Diamond Sports filed for Chapter 11 bankruptcy protection, the operator of the 19 Bally Sports-branded RSNs has submitted its official reorganization plan to the Houston court that oversees the case.

Diamond attorneys filed the 91-page re-org plan to the United States Bankruptcy Court for the Southern District of Texas, Houston Division, with an eye toward an April 17 hearing in front of Judge Christopher Lopez. The document hit the docket late Thursday night alongside a 174-page disclosure statement.

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As part of the proposed re-org, Diamond will extricate itself from the legacy naming-rights deal with Bally’s Corp. that its parent company, Sinclair Broadcasting, inked on Nov. 18, 2020. At the time of the transaction, Sinclair received various warrants and options with respect to the common stock of Bally’s, valued at more than $184 million; for its part, Diamond was set up to generate approximately $88 million in naming-rights fees from Bally’s over a span of 10 years.

According to the disclosure document, under the terms of Diamond’s $495 million settlement with Sinclair, Bally’s commercial agreement “will be rejected, and Bally’s will release and waive any claims against Diamond, including any claims for rejection damages.”

That said, Diamond may “continue to use the Bally’s trade name (at no cost to Diamond) through the end of the 2024 MLB season.”

Diamond’s decision to move on from its naming-rights deal necessitates a major branding overhaul for the sunsetting Bally Sports RSNs, as well as the Bally Sports+ streaming platform, which was hard-launched in September 2022. Neither court document provided guidance as to a possible successor.

Grooming a new naming-rights partner is just one of several tasks Diamond must see to as it looks to bounce back from a bankruptcy saga that began on March 14, 2023. Among the most pressing matters of business is to nail down long-term affiliate deals with its three biggest distributors: DirecTV, Charter and Comcast. Per the disclosure doc, “approximately 81%” of Diamond’s distribution revenue is derived from those three operators, which together serve some 39.5 million domestic video subscribers.

Two of the three distribution deals are in limbo, as Diamond has negotiated informal, short-term extensions with Comcast and Charter. (The latter’s legacy carriage deal expired Thursday.) DirecTV’s contract includes the option of an extension that would kick in sometime this summer.

While re-upping with the Big Three is obviously a top priority, the days of the RSNs functioning as virtual cash machines are over. As Diamond noted in Friday’s filing, cord-cutting has robbed the RSNs of 22 million subscribers, or 35% of the company’s customer base, since 2019.

As was revealed during this week’s hearing, Diamond’s contingency plan to close out its deals with its 15 NBA and 11 NHL team partners was voided upon the court’s approval of the $450 debtor-in-possession financing package. The company continues to work with both leagues “with respect to modifications to their existing telecast rights agreements.”

Meanwhile, talks to keep things rolling along with Diamond’s 12 MLB partners may be a slog, as commissioner Rob Manfred not only wants to launch an in-house streaming service, but also remains adamant about not countenancing any further reductions in rights fees. (The Cleveland Guardians, Minnesota Twins and Texas Rangers agreed to a one-time rights haircut when they signed their one-year extensions with Diamond last month.)

MLB’s OTC plans may be further complicated by the fact that Diamond has negotiated for the in-market streaming rights to five MLB clubs: the Detroit Tigers, Kansas City Royals, Milwaukee Brewers, Miami Marlins and Tampa Bay Rays.

While cited in the disclosure document, exhibits related to Diamond’s post-bankruptcy financial projections and a valuation analysis have yet to be filed with the court.

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