Diamond Sports May Walk Away From MLB Deals to Save Its RSNs
As much as the creeping senescence of TV and the American appetite for live sports now seem about as complementary as the ingredients of a peanut butter and calamari sandwich, these two seemingly contradictory realities can coexist without canceling each other out. On the one hand, the RSN model as we know it is collapsing like a soufflé in a noisy kitchen; on the other, the local sports channels aren’t in any danger of disappearing altogether. The question as to who’ll ultimately own these distressed assets, however, is another story.
But for a few outliers that passed into irrelevance after having lost their home team affiliations, the existing RSNs aren’t going the way of the dusty pink slats of bubblegum that used to leave a sugary residue all over your baseball cards.
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RSNs are the primary delivery system for the leagues and teams that populate the channels, with regional nets accounting for nearly 85% of all MLB consumption and almost 80% of NHL deliveries. The NBA, which enjoys a comparatively robust national cable presence, is a bit less beholden to the local TV model, with the RSNs serving up about 45% of the league’s in-game eyeballs.
Taken as a whole, the RSNs provide about 70% of the overall linear-TV audience for the three leagues, which is remarkable given the state of the traditional cable bundle. In the last five years, some 34.4 million subscribers have opted out of the bundle, and yet sports ratings continue to grow. If nothing else, the RSN data would seem to suggest that access to local sports teams plays a not-insignificant role in the choices made by pay-TV loyalists, of whom there were 56.8 million when the operators last reported their subscriber numbers in midsummer.
The spot on the canyon floor where the ravenous coyote of consumer demand meets the plummeting cartoon anvil of capitalism is Diamond Sports Group. Make that two anvils. Per terms of a ruling handed down in August by the United States Bankruptcy Court for the Southern District of Texas, the owner of the Bally Sports RSNs must present its creditors with a restructuring plan before the clock runs out on Saturday. A second anvil drops Sunday at the stroke of midnight, when Diamond’s legacy carriage deal with Comcast, and its 15 million video customers, expires.
Second anvil first: Negotiations between the two sides are ongoing, and are expected to continue through the deadline without any concomitant service interruptions. Comcast, which owns the NBCUniversal suite of broadcast and cable channels, as well as a clutch of NBC Sports-branded RSNs, doesn’t go in for the knuckleduster approach. Moreover, the days of programmers raising hell about the prospect of being remanded to a higher-priced, opt-in sports tier are deader than the diplodocus, so this isn’t necessarily a reprise of Charter vs. Disney.
The X on the road where both anvils are set to land—provided they’re not intercepted by the coyote’s pointy head—is where things get interesting. Distribution hinges on content, and vice versa; in other words, Diamond’s renewal talks with Comcast are informed by the menu of live sports programming the operator can expect to deliver its customers if/when it decides to re-up with the RSNs. If the terms of Diamond’s formal proposal to its creditors won’t be revealed until Saturday (a big “if,” as the relevant documents may very well be filed under seal or redacted to the point of absolute obscurity), Comcast’s squad of negotiators has already been briefed on the broader strokes.
Worth noting: The arcane art of carriage-wrangling is nothing new to Diamond CEO David Preschlack, whose 20-year stint at Disney included a goodly chunk of time running ESPN’s affiliate sales and marketing team. As such, it’s a safe bet that the RSNs will land renewals with the No. 1 cable operator before it hammers out similar deals with DirecTV (next month) and Charter (Q1 2024).
At least a few people who are tangentially plugged into the Diamond discussions believe the company will offload its distribution deals with the 12 MLB clubs that remain after the defections of the Padres and Diamondbacks. Beyond the simple expedience of wiping out some $800 million in rights fees in 2024 alone, offloading its baseball commitments would free Diamond to sell off its single-/zero-team RSNs in Cleveland, Kansas City, Phoenix and San Diego. MLB presumably could snap up those gently used assets at a nice price, which in turn would provide ready-made platforms on which to build an in-house distribution network.
Ending the often contentious relationship with MLB would create its own set of logistical nightmares—quitting baseball amounts to a loss of 1,600 live telecasts per year, give or take, and would leave a ragged hole in the schedule for a good four months out of every 12—but Diamond this summer was already looking to jettison a handful of other team affiliations before the bankruptcy court ordered it to honor its contractual agreements.
In the meantime, Diamond has demonstrated its desire to stay in the NBA and NHL business, as the company continues to meet the conditions imposed by the former while also making good on payments to teams from both leagues. Most recently, Diamond renewed its contract with the Los Angeles Kings and wrote its first checks of the 2023-24 season to the Milwaukee Bucks and New Orleans Pelicans.
The future of the Bally Sports RSNs should be made much clearer in the coming days, if Diamond proves its former overseers wrong. In an Aug. 21 court filing, Sinclair cast derision on Diamond’s efforts to dig its way out of an $8.2 billion hole—one that Diamond claims was at least partially dug by Sinclair itself. Diamond’s emergence from bankruptcy “is nowhere in sight,” Sinclair claimed over the summer, but a bold re-org plan and a radical split from baseball could bring things into focus.
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