Diamond Sports RSNs May Emerge From Bankruptcy in 62 Days

Diamond Sports Group on Wednesday took another incremental step toward exiting Chapter 11 bankruptcy protection, as a judge approved the company’s 174-page disclosure statement before scheduling a mid-June confirmation hearing.

In a hearing held in the United States Bankruptcy Court for the Southern District of Texas, Houston Division, Judge Christopher Lopez locked in the Diamond confirmation hearing for the morning of Tuesday, June 18. (“It will be nice and toasty in Houston around that time,” Judge Lopez remarked as he announced the hearing date.) Any objections to the plan must be submitted to the court by May 22.

Wednesday’s court actions came on the heels of Judge Lopez’s approval of Diamond’s recent request for an extension that would push the deadline to solicit acceptance of the re-org plan to Nov. 14—a time frame that aligns with the statutory maximum allowed under the U.S. Bankruptcy Code. While the court signed off on the proposal, an attorney for Diamond suggested the concerns expressed by the NBA and NHL were somewhat overstated, as the extension is merely a “prophylactic motion,” one designed to ensure that no third party might be in a position to file a competing re-org plan.

Diamond counsel went on to say that the timeline for emerging from bankruptcy remains unambiguous, despite what the request for extra time might seem to imply.

With an endgame in sight—the approval hearing is to be held in 62 days’ time—Diamond still has a quite a bit of dealmaking on its plate. As the attorney noted, Diamond continues to negotiate “longer-term distribution deals” with Comcast and DirecTV and is in active discussions with its league partners as well.

“We have proposals in front of both the NBA and NHL, for longer term rights deals involving both linear rights fee modifications as well as digital rights,” the attorney said. According to sources with direct knowledge of the talks between the NBA and the owner of the Bally Sports RSNs, the league will not even consider signing off on a long-term renewal with Diamond until after it has sewn up its national rights deals. Resolution of the NBA’s coast-to-coast TV schemes is unlikely to happen overnight; the exclusive 45-day negotiating window with legacy partners Disney and Warner Bros. Discovery closes on April 22, whereupon suitors such as NBC, Amazon and Apple are expected to make bids of their own.

Diamond’s attorney did not offer further insight as to where things stand with Major League Baseball, which has indicated that it is prepared to end its association with the RSNs at the end of the current season.

On the distribution front, Diamond recently inked a multiyear deal with Charter, the country’s second-largest pay-TV operator, that will kick in as soon as the company emerges from bankruptcy. That leaves two biggies on Diamond’s to-do list, as its current deals with Comcast, which serves 14.1 million video subscribers, and satellite-TV provider DirecTV (11.3 million video subs) are set to expire by the end of the quarter.

All told, the three distributors account for 81% of Diamond’s affiliate revenue. Diamond’s attorney said CEO David Preschlack and his team “remain optimistic and confident” that deals with Comcast and DirecTV will be reached soon. Among the issues that remain to be ironed out include escalating carriage fees and a shift toward digital tiering that will only accelerate the erosion of the RSNs’ audience base. (As carriers increasingly look to remand the RSNs to pricier opt-in subscription tiers, the sports networks are fated to reach even fewer consumers.)

While Preschlack attended Wednesday’s virtual conference, he did not speak before the court.

As Diamond prepares for the next two-month stretch, the company continues to stay busy behind the scenes. In a 78-page motion filed Tuesday, the debtors disclosed the terms of a settlement with the San Diego Padres, one of two MLB clubs whose contract Diamond voided during the 2023 season. (The Arizona Diamondbacks were voted off the island shortly after Diamond exited its Padres deal.)

According to the motion, the Padres last June filed an arbitration claim in the amount of $162 million. After participating in a subsequent mediation session, Diamond agreed to pay the Padres an initial fee of $10.5 million, followed by a second payment totaling 62.5% of the liquidated cash value of Bally Sports San Diego. As spelled out in the filing, that sum is not to exceed $68.3 million.