Cable company lawyer says dealing with MLB ‘like talking to a brick wall’

Diamond Sports has been fighting with its partner sports leagues — MLB, the NBA and NHL — over a get-out-of-bankruptcy plan. But to this point, the other major arm of the sports media-rights ecosystem, the distributors, have not had a strong presence in court.

On Tuesday, lawyers from major cable and satellite companies such as Charter, Cox and DirecTV entered the fray, lured in by an argument Diamond and the leagues haven’t been able to settle on their own: Just how much are Diamond’s three partner sports leagues entitled to know about Diamond’s contracts with distributors?

The hour-long hearing didn’t go well for MLB, which was granted access to less information than it wanted by judge Christopher Lopez, and also sharply criticized by a lawyer for a cable company.

“It was like talking to a brick wall,” Cox attorney Stu Lombardi said of his recent dealings with MLB.

Diamond broadcasts 38 teams across the three sports, including 12 MLB teams. The company filed for bankruptcy early last year and believes that with Amazon’s help, it can be a viable business.

The leagues and baseball in particular are skeptical, however, in no small part because Diamond has yet to reach a carriage deal with a major distributor, Comcast. Baseball is the only of the three sports currently in the middle of its regular season, making it the sport most affected by the Comcast-Diamond impasse. Diamond channels went dark on Comcast at the start of May.

But even when it comes to the distribution deals Diamond does have in place, like those with Charter, Cox and DirecTV, the leagues are dubious. They say they don’t know enough about the financial terms to be able to decide whether to endorse Diamond’s overall plan.

“These are things that are critical to being able to understand and cross-examine witnesses and provide evidence, or contradict evidence, in connection with the plan of reorganization,” James Bromley, a lawyer for MLB, said in court.

Diamond Sports makes its money from distributors who pay to carry channels in their bundles. Those deals carry confidentiality clauses. None of the parties dispute that the financial information is sensitive, but lawyers for Charter and Cox said that the information rises to the level of a “trade secret,” while MLB’s lawyer disagreed.

Two weeks of various meetings among the leagues, Diamond and Amazon preceded Tuesday’s hearing. The cable companies appear skeptical about whether MLB needs all the information it asked for.

Sports leagues are increasingly taking over different roles in sports television, be it production, or negotiating their own deals with distributors. MLB handles those duties for three teams this year: the Arizona Diamondbacks, Colorado Rockies and San Diego Padres. Were MLB to ever launch a national, in-market streaming package, specific information about deals Diamond has in place could be valuable.

A confirmation hearing for Diamond’s get-out-of-bankruptcy plan is set to begin July 29, and objections to the plan are due on July 18. Bromley said in a hearing earlier this month that MLB anticipates filing an objection.

Lopez on Friday ruled that, at least for now, the leagues would have access to aggregated numbers from Diamond’s distribution deals, but not more granular distributor-by-distributor specifics.

“There needs to be some access to the actual agreements themselves,” argued Bromley, who was then interrupted by the judge.

“I’ve seen the MLB do it in other cases, I know they can do it in this case,” Lopez said of using aggregated numbers. “I feel really confident you can do it in this case. But if I’m wrong about that … you can certainly come back, you may get another crack at this.”

Lopez pushed two other matters to Friday: what access the leagues have to Diamond’s specific arrangement with one of its proposed new backers, Amazon; and what access is granted to “most-favored nations” clauses, or MFNs, that are common in deals between television stations and distributors.

If Diamond grants better terms to a distributor than it has granted to other distributors previously, Diamond might have to alter the previous deals so that they’re no worse. So if Diamond reaches a deal with Comcast that treats Comcast better than Diamond treats say, Charter or Cox, it could have a trickle-down effect.

“They don’t know how negotiations to bring Comcast back into the fold may affect the other distribution arrangements,” Bromley said.

“At this point, we’re not aware of any information that would suggest an MFN has been triggered,” said Judson Brown, a lawyer for Charter.

Lopez gave some resistance to the cable companies, too. Lombardi, representing Cox, wanted the MFN matter to wait to see if a problem were to actually arise, but Lopez wanted a resolution in place now.

MLB, the NBA and NHL have generally been in lockstep in this process, but MLB has been the most vocal, a point that Lombardi appeared to highlight.

“I’m learning some things live at the hearing,” Lombardi said. “I’m learning in particular that it sounds like our live disagreement is only with MLB.”

In a letter to the court that Lombardi filed Monday, Lombardi suggested that MLB was being too sour toward Diamond.

“On a call last Thursday, counsel to the MLB countered that ‘nothing Diamond has ever done has been profit maximizing,’” Lombardi wrote. “Cox disagrees that assuming that the Debtors will act in a value-destroying manner is the appropriate lens through which to test the Debtors’ financial projections …”

Bromley said the letter should have no bearing because Cox is not a party to the case and hasn’t made a formal motion.

(Photo: Jeff Roberson / Associated Press)