As you may have seen in the news recently, it appears that the company that runs Bally Sports is going bankrupt. Instead of trying to explain what’s going on like I’m a business genius, I’ll let the people who actually know what they’re talking about explain. Take it away, Bloomberg.
After buying regional sports networks from Walt Disney Co. in 2019, Diamond Sports Group LLC has been plagued by declining cable TV subscribers, prompting talks with creditors and major sports leagues about its viability as a going concern. The outcome will have serious implications for the $55 billion sports-media rights world. the company’s channels carry Major League Baseball, National Basketball Association and National Hockey League games to fans from Detroit and Phoenix to San Diego.
With financial difficulties mounting, the Sinclair Broadcast Group Inc.-owned company is likely to miss $140 million in interest payments due in mid-February, starting a 30-day grace period, according to people familiar with the matter.
Earlier this month, the league hired Billy Chambers, a former executive at Sinclair and Fox Sports, to the newly created position of executive vice president of local media. Chambers will work with baseball teams “in the most effective ways to distribute games to fans in local markets across the country,” the league said in a statement.
In the event of bankruptcy, Diamond would have the ability to terminate contracts with teams, potentially cutting industry-critical revenue while allowing teams to regain their media rights. The company can also stop paying teams while still maintaining contracts. If the deal doesn’t go through, both MLB and creditors plan to default on baseball teams, according to two people.
The last line talking about the teams not getting paid is pretty concerning. It’s especially troubling when you consider that the Braves were actually looking forward to 2023 when it came to their TV deal. Now, we’ve talked about Atlanta’s TV deal before on this site, and the bottom line is that the team entered into the deal at what seemed like the worst possible time. Essentially, it looked like the Braves were just willing to wait out the contract until it eventually expires in 2027.
Still, the Braves were looking forward to 2023, as they managed to restructure their television deal to receive a dramatic increase in revenue. The restructuring was reported by the AJC to increase the annual payment from $80 million under the previous agreement to $100 million in 2023, before rising to about $120 million in 2027. So despite the Braves’ issues with their deal, it. they seemed to have weathered the storm of a bad TV deal and found themselves at the pot of gold at the end of the rainbow.
Obviously, that’s about to change now that it looks like Bally Sports is headed for bankruptcy, just as it appeared the Braves were finally going to get some big TV money. The main and obvious question now will be how this affects the Braves going forward. As for baseball, the Braves should still be fine once the smoke clears from this apparent bursting of the TV bubble.
The Braves have basically been printing money over the past few years, and as long as they continue to perform well on the field and keep The Battery strong, they will. I’m not going to speculate how much of a hit they’ll take from Bally going bankrupt, but I’m going to go out on a limb and say it shouldn’t be a crippling blow to Atlanta and their current business model. It will still hurt, but it won’t be horrible for the Braves.
It seems interesting that the corporate owners of the Atlanta Braves may have seen this coming back in 2019. Back when it was announced that Sinclair was taking over the former Fox Sports regional networks, Liberty Media was reported to be interested in buying those networks. Obviously, that would include the channel that carries the vast majority of Braves games, but apparently the deal was too risky for Liberty Media at the time. Here’s what Liberty Media CEO Greg Maffei had to say (as reported by AJC’s Tim Tucker):
“They obviously have very visible and high-profile aspects,” Muffey said of RSNs. “They’re also products that have … risk because they’re some of the most expensive software per viewer that most (cable and satellite distributors) watch. So, if you weren’t sure that you could get long enough contracts with (distributors) to provide time and pay payments that would be sufficient to provide, because cord-cutting and cord-shaving is possible, you can adequately insure your capital protected. didn’t want to go there.
“I think Sinclair was willing to take us further than we did.”
So now here we are in a year and a half scenario where it appears Sinclair has overextended himself. This could also turn out to be some pretty nifty business on Liberty’s part if they end up as a creditor of Bally Sports through bankruptcy. If that’s the case, Liberty Media could end up owning Fox Sports South. Personally, I’m skeptical that a company as big as Liberty Media will stop at owning just one network (again, they were rumored to buy the entire collection of channels back in 2019), so it’s really tough for extreme business. a newbie like me trying to figure out how this is all going to shake out.
So while I don’t think this will be a source of severe pain and suffering for the Braves going forward, I think it will be really interesting to see how other teams handle this scenario. It’s pretty clear that the television bubble for baseball (and sports in general) is about to burst, as cord-cutting has really reduced cable’s dominance, and it’s starting to do so right around the time these big rights deals are being agreed upon. I would imagine this won’t be the last time we see a story like this involving the Regional Sports Networks collection, and it will have a big impact on baseball going forward.