Talks to acquire MLB, the NBA and the NHL, the nation’s dominant owner of regional sports networks, are breaking down, raising the possibility of a bankruptcy filing that could accelerate a nationwide exodus of sports fans from cable television, The Post has learned.
As The Post exclusively reports, Diamond Sports Group, which operates 21 Bally Sports-branded sports networks, or RSNs, that account for more than half of the nation’s local broadcast markets, entered talks this fall to sell itself. sports leagues for $3 billion, including debt.
But Diamond, a unit of Sinclair Broadcast Group, surprised investors Nov. 28 by cutting its earnings outlook for this year in half as wiretapping continues to affect the industry. Accordingly, the leagues are no longer willing to pay a premium for a buyout, and lenders are instead set to take their chances in bankruptcy court in the first half of next year, according to sources close to the negotiations.
That means Diamond’s unprofitable broadcast contracts are likely to be dropped and its decades-old, cable-TV-based business model will go out the window as deals are cut to stream live games online, sources said. MLB may invest next year as an interim platform, but streaming rights are expected to eventually end up with major tech companies such as Apple, Amazon and Facebook, sources said.
“There is chaos at the moment. But we’ll be able to look back and say this is when a big tech company really got into the sports market,” an MLB team owner told The Post on condition of anonymity. “Right now there are a lot of people who don’t see games in their home markets. It’s not good for sports leagues.”
Over the past few years, tech companies have made inroads into live sports streaming. Amazon Prime, which exclusively hosts several New York Yankees games, inked its largest deal to air an entire season of NFL “Thursday Night Football” with a September deal. Facebook and Apple TV+ have also acquired exclusive rights to some MLB games.
But Diamond’s bankruptcy could open the door to a new level of deals, and some insiders hope it will change the way people consume sports for the better. Many young fans can’t watch games now because they don’t have cable, and some cable providers don’t even carry sports, the MLB owner grappled.
“Eventually it will be one device everywhere,” predicted the team owner. “Twelve years from now, all three sports will be on one channel all the time.”
Diamond owns the rights to 14 Major League Baseball teams, such as the St. Louis Cardinals; 16 National Basketball Association franchises, including the Miami Heat; and 12 National Hockey League teams, including the Detroit Red Wings. None of the New York teams are on the Diamond networks, although Diamond owns a minority stake in the YES Network.
Creditors are expected to use the courts to reject Diamond’s lucrative contracts with teams, where it has long paid more for media rights than it receives from cable distributors and advertisers to broadcast their games.
Diamond, for example, is currently under a money-strapped contract that will pay the San Diego Padres $60 million a year through 2032, two sources said. Most of Diamond’s MLB contracts are unprofitable, while perhaps half of his NBA deals lose money and several of his NHL contracts, according to a source.
Insiders warn that if negotiations don’t go smoothly, it could be a bumpy spring for teams and fans alike. MLB is preparing to sign new media deals with the teams Diamond rejects in bankruptcy and air their games directly in local markets, two sources said. MLB currently airs out-of-market games nationally, but does not have local rights.
“They feel like they can pick up games quickly. However, they cannot tell us that it is 100 percent guaranteed,” said a source close to the situation.
Diamond’s poor negotiations with the leagues have surprised sophisticated investors, including hedge fund Angelo Gordon, which this fall owned some of Diamond’s debt and hoped to sell to MLB, according to a source close to the situation. He has now sold his investment at a loss and is no longer involved, the source said.
The leagues have hired bankers as they try to navigate the debate. MLB hired investment banks Morgan Stanley and Guggenheim Partners. The NBA retained Allen & Co. and the NHL is now looking for a banker, the sources said.
MLB, the NBA and the NHL declined to comment. Angelo Gordon and the San Diego Padres did not respond to requests for comment.
Diamond this month hired David Preschlak, former president of NBC’s regional sports networks, as its new CEO. He is already meeting with MLB as he tries to build a better relationship with the leagues than his predecessor, sources said.
Diamond Sports Group representative Paul Caminiti said. “The idea of rejecting MLB contracts is absolutely false. DSG is committed to improving and strengthening our relationship with MLB, the NBA and the NHL by fulfilling our contractual obligations and acquiring more rights.” He declined to comment on the potential bankruptcy.
Layoffs and transfers can be a risk, and many team owners could also lose lucrative revenue, warns Greg Burris, director of Adelphi University’s sports management program and former director of communications for the MLB Players Association.
“This bankruptcy of Diamond could accelerate the way the future of the sports broadcasting market looks, and disruption may occur before a more permanent solution can be found,” Burris said. “It may be in the league’s best interest to include the players in the discussion of this situation as there may be a temporary economic hit.”
Nevertheless, he adds, the industry is ready for reconstruction. While sports used to sell subscriptions to cable companies, broadcasts have become increasingly mired in infighting between the wagons due to acrimonious cord-cutting. There is a growing danger that young viewers are being left out of sports altogether.
“I think the sports leagues need to review the distribution of games, the scheduling of games and the blackouts of certain games,” Burris said. “I think there are solutions in terms of distribution and manufacturing innovations that are based on technology.”