Judge: DSG must fully pay MLB teams’ contracts

A U.S. bankruptcy judge ruled in favor of Major League Baseball and four of its teams in Houston on Thursday, forcing Diamond Sports Group, which runs broadcasts under the name Bally Sports, to fully pay the contracts in question.

Diamond, navigating through bankruptcy proceedings, argued it should pay the Minnesota Twins, Cleveland Guardians, Arizona Diamondbacks and Texas Rangers less than what the current deals call for, arguing that the rapid rate of cord cutting has significantly devalued the assets.

But Judge Christopher Lopez, presiding over a case that lasted two full days and included testimony from MLB commissioner Rob Manfred, ultimately stated: “I think the contract rate is the right answer here.”

The Twins, Guardians, D-backs and Rangers had already been paid 75% of what they were owed as a means to hold them over until the conclusion of the hearing. Lopez, in opting not to adjust their contracts, ruled that Diamond needs to pay the remaining 25%, though he did not set a deadline for the payment.

Diamond, a Sinclair subsidiary, took on more than $8 billion of debt to purchase the broadcasting rights for 42 teams across MLB, the NBA and the NHL from Fox in 2019, then suffered through the proliferation of over-the-top streaming services. Diamond owned the rights to 14 major league teams but lost the San Diego Padres earlier this week when it did not make its scheduled rights-fee payment by the end of a grace period.

MLB has since taken over Padres broadcasts, offering their games blackout-free through its streaming service, MLB.TV, while cutting deals with various cable companies to provide a linear option on different channels. The league has promised to do the same for any other team that falls out of Diamond’s purview. The judge’s ruling could push Diamond to shed the D-backs, Guardians, Twins and Rangers in the near future, or perhaps some of the other nine major league teams under its ownership.

Diamond has long stated that it needs to secure streaming rights in order to prop up its Bally Sports+ app and run a more sustainable business, but it currently holds the streaming rights to only five major league teams — the Kansas City Royals, Milwaukee Brewers, Tampa Bay Rays, Detroit Tigers and Miami Marlins. MLB has shown no interest in providing streaming rights for the others.

During testimony on Wednesday, Manfred stated that MLB promised Bally-owned teams they would generate at least 80% of the revenue they were expecting through their broadcast deals in 2023; whatever is not ultimately paid by Diamond will be backstopped by the league. Manfred also said MLB tried to buy the regional sports networks when they were initially for sale but came up about $900 million short of Diamond’s winning bid, adding that he would attempt to buy them again if the situation presented itself.