The MLB, NBA and NHL may organize a buyout of the nation’s dominant owner of regional sports TV networks whose shaky finances pose a major threat to their teams, The Post has learned.
The trio of pro-sports leagues are expected to start talks soon with Diamond Sports, which operates 21 regional Bali sports networks, which account for more than half the local broadcast markets across the country, sources close to the situation said. he said.
Sources claimed a possible deal as Diamond, owned by Baltimore-based Sinclair Broadcast Group, is running short of cash and not finding a white knight in the coming months, leading to a potential bankruptcy filing. can go.
In early 2019 Sinclair won an auction to buy Fox Sports Networks from 21st Century Fox for $10.6 billion, giving it the exclusive rights to broadcast 42 teams’ games. These included 14 MLB teams such as the St. Louis Cardinals and San Diego Padres; 16 NBA teams, including the Miami Heat; and 12 NHL teams, including the Detroit Red Wings.
But soon after the purchase, cable TV giants including Charter Communications and Comcast began slashing fees willing to pay for the game amid massive cord-cutting. Meanwhile, satellite-TV provider Dish pulled out of regional sports networks altogether, causing a loss for the so-called RSNs, who have not given up since.
21st Century shares a common owner with Fox News Corp., publisher of the New York Post.
Now, insiders say Diamond could receive $3 billion, including its debt, which is currently trading at a steep $2 billion discount. Sources said Sinclair has been offered Diamond’s equity to creditors, who will then sell most of the operations to MLB, the NBA and the NHL, while Diamond holds a minority stake in the business.
“They will present it in all the three leagues,” said a source close to the talks. “There’s a fair chance that all of this will happen. That’s where it’s going.”
If the deal that is being described as the “grand solution” doesn’t work out, there is a growing possibility that creditors – mostly hedge funds that have extended Diamond’s distressed debt – may lead Diamond and its Bally RSNs to bankruptcy in the next three years. I can force. for six months, sources said.
While Diamond has the cash to survive next year, it is technically insolvent and creditors could soon force it to go bankrupt, sources close to the situation said.
“I believe Diamond is under pressure from hedge funds to quickly resolve the liquidation issue,” said a source close to Diamond.
A source close to Sinclair told The Post that creditors are exaggerating their ability to force bankruptcy.
Diamond does not control the rights of any New York City team. It pays teams for local broadcast rights in sometimes 25-year deals and then sells broadcasts to cable and satellite companies on an almost annual basis to make a profit.
Sources close to the talks said Diamond has been telling the league in recent days that it would be able to continue broadcasting games if it went bankrupt, but that teams would not be required to pay their rights fees, as it would have to deal with creditors. You will get security.
In a bankruptcy scenario, the buyer of RSN may decide to reject the existing broadcast rights contracts which are too expensive and arrange for cheaper deals, the sources said. Insiders claimed that a potential bankruptcy could impact team payroll, with some teams receiving up to 30% of their revenue from RSN rights.
“This is Diamond’s bargaining chip,” said a large debt investor after the situation.
A league official told The Post that the league is working on a contingency plan. MLB, for one, is set to broadcast games in local markets, charging cable companies the usual fee and passing the proceeds to team owners until Diamond emerges from bankruptcy.
A Sinclair spokesperson told The Post on Tuesday, “The speculations made by unnamed sources are just speculation.” “We enjoy full support from the teams, the NBA and NHL leagues, and look forward to continuing our work with them to transform the RSN model.”
Meanwhile, it is MLB that has effectively ended Diamond’s last best hope of surviving on his own in recent months, according to some insiders.
Diamond is launching an over-the-top streaming service on September 26 so consumers can pay a roughly $20 monthly fee and watch games in their home markets without a cable subscription. Since only MLB teams play in the summer months, this is considered essential to the Diamond’s success.
Although MLB transferred the streaming rights to only five of the 14 teams, demanding additional fees, Diamond has argued that those rights should be included in their existing contracts with the teams – a dispute privately. In blaming MLB commissioner Rob Manfred, the sources claimed.
“Teams think Sinclair is being cheap and are using the commissioner as an excuse,” one MLB team owner told The Post.
MLB and the NHL declined comment. An NBA spokesman said the story was not true, refusing to provide any specifics.
Meanwhile, MLB is considering launching its own streaming service that will carry local sports early next year, The Post exclusively reported in October. Elsewhere, Amazon now has the ability to stream local games and broadcast them on a regional basis, sources said. So did Apple, ESPN Plus and even NBC’s Peacock.
In early 2019, MLB teamed up with Liberty Media in a failed bid against Sinclair for Fox Sports Network, spinning off as part of its deal to buy Disney 21.scheduled tribe century Fox. After Sinclair won Fox RSN, he estimated his 2019 Ebitda to be $1.6 billion.
It’s been a rough ride downhill ever since. Sinclairs Diamond reported on August 30 that full-year EBITDA, or earnings before interest, taxes, depreciation and amortization, would fall between $183 million and $200 million.
Meanwhile, Diamond has $8.5 billion in debt and pays about $450 million in interest payments annually, so it’s spending twice as much on its junk-rated debt as just interest. The junior loan is now trading at about 20 cents on the dollar.