Braves’ TV contract rights payments to be unaffected by Diamond Bankruptcy

News of bankruptcy of Diamond Sports Group, who holds the television broadcast rights of the Braves and 12 other teams, has caught the attention of most baseball fans this season. They were many unanswered questions, especially when the payments for the Diamondbacks, Twins, Rangers, and the Guardians were not made earlier this month. Would fans be able to see their favorite teams? Would teams be able to recoup the payments? Those questions were answered in an emphatic way this week. You are not losing access to any of your teams. In fact, your access may get better.

In April, the judge overseeing the bankruptcy proceedings, Christopher Lopez, ruled that Diamond was only responsible of half of the current payments for the Diamondbacks, Twins, Rangers, and the Guardians pending a hearing this week. This week, he has rolled back those orders.

Judge Lopez ruled that regardless of the present economic circumstances as in high interest games and the cord-cutting movement, Diamond is responsible for full payment.

Much of the coverage of the hearing was provided by Evan Drellich and Daniel Kaplan of the Athletic and John Ourand of the Sports Business Journal, who both did an excellent job. Maybe some of the coverage was one-sided, but Diamond doesn’t come off looking good at all. Over the last two days the U.S. Bankruptcy Court of the Southern District of Texas heard how MLB is willing to step in for MLB teams and laments the fact that it lost a bid to acquire the RSNs. They also heard how an overleveraged Diamond sought to threaten bankruptcy to acquire MLB direct-to-consumer rights and blow off meetings with MLB and its teams.

From The Athletic, Rob Manfred testified:

And [the chairman of Sinclair] said to me, ‘So let me tell you what’s going to happen.’ He says, ‘I put $2 billion into the purchase of these RSNs … so what I’m going to do is I’m going to keep this going long enough until I get my $2 billion out, OK? And then I’m going to start squeezing your clubs to take their rights fees down, OK, in order to make sure that I stay profitable in the RSN business. And if they don’t agree to that, I’m going to put the entity into bankruptcy, and then I’m going to selectively reject contracts.’”

According to Manfred, Sinclair, the primary owner of Diamond Sports Group, threatened bankruptcy to ensure that he personally remained profitable. “Selectively reject contracts” translates into “I’m only paying full value for profitable contracts”. MLB called his bluff, and the strategy backfired. I don’t know if there are payments due or other remedies in the contracts to punish Sinclair’s tactic of simply not making payments, but it’s definitely a bold strategy, Cotton. Instead, the Court heard how MLB is willing to step in protect teams and the rights payments.

Drellich clarified later that this measure would only be in place for a year. But MLB was willing to protect teams’ revenues to ensure that salaries and operating expenses remain paid. It was also known earlier this year that if Bally Sports service was affected by lack of rights payments. How did this work out for viewers of the Padres?

The Padres’ broadcast retained each TV and radio announcer for the game the very next day. The Padres were found on DirectTV, Cox, AT&T, Spectrum, and Fubo, which is all of the outlets they were found before only on different channel numbers. In addition, MLB granted direct-to-consumer access (aka no blackouts) via MLB.tv to not only the current coverage area, but an area nearly three times the size. So MLB appears to have your games covered without a drop in service.

The Court also heard how they not happy that they were outbid for the RSNs. From The Athletic:

Asked whether he would go back in time and make that $9.6 billion bid again, Manfred said he would. “We thought that Major League Baseball was best positioned to manage through what we realized was a coming period of change,” Manfred said. “Our bid was really very, very different than the Sinclair bid. They put $8.5 billion dollars of leverage on the $10.5 billion dollar bid, I think I’m right about those numbers. We had some leverage, but it was $3.5 billion. We had a major media player, Liberty Media, as a partner. … We thought that put us in a much better position to have alternatives in order to distribute games.

Manfred laid out how leveraged Sinclair was in. They seemed to anticipate the flight from cable operators better than Sinclair as well. But wait, they were going to partner with the owner of the Braves, Liberty Media? To my knowledge, this information was not out there. So the owner of the Braves were going to, in part, be a counterparty to other MLB teams’ contracts? They could profit or lose money based on the competitors of their subsidiary? Nothing more is known about the arrangement. However, the Padres got no MLB.tv blackouts at least for this year. Liberty Media has the broadcasting might. Could we get the end of blackouts with Liberty’s help down the road? This route going forward looks much better with MLB’s hands, but how much do we trust Manfred?

Regardless, typically bankruptcy laws are there to protect the rights of people and entities that cannot manage the debt that they have, and the rights of their creditors. The last two days it seemed like Diamond is easing into bankruptcy to protect their bottom line but otherwise isn’t in dire straits, and they have a buyer for their losing assets. From Judge Lopez:

In other words: it’s not my role to change your poorly measured contracts and save your overleveraged behinds, Diamond. Also,

The Judge is saying, “Look, if you’re truly tapped out, sell stuff to MLB. They are interested. I urge them to negotiate but won’t compel them.”

This hearing is likely to be one of many accidents in the twenty-car pileup that is Diamond Sports Group’s Bankruptcy. This will likely drag on and on. However, the Braves will cash TV rights checks from someone. And you won’t miss a single minute of their games.