Diamond Sports Negotiating Retransmission Fees Seeking To Reorganize

Over the past month the financially endangered Diamond Sports Group, the nation’s largest regional sports network, has been active in negotiating a renewal of retransmission consent agreements with the three largest pay-TV distributors, Comcast
Comcast
, Charter and DirecTV. A successful renewal would be beneficial to the financial fortunes of Diamond Sports as they work toward restructuring their core business in the aftermath of filing for Chapter 11 in March 2023. A bankruptcy hearing is scheduled for June 18.

According to Sportico, the three MVPDs account for 81% of total affiliate revenue and collectively, reach 38 million household subscribers. In addition, the three MVPDs account for about 69% of total traditional pay-TV households.

Charter: In a multiyear agreement, announced in early April, Diamond Sports and Charter Communications renewed their distribution package. Under the new agreement, subscribers to Charter’s Spectrum TV Select Plus package can access Diamond’s channels and stream content on Bally’s Sports app. The previous agreement expired at the end of February and the RSN stayed on air throughout the renewal negotiations. Charter is the second highest pay-TV distributor with 13.5 million U.S. customers.

DirecTV: One month later, Diamond Sports Group reached a renewal agreement with DirecTV, the third largest pay-TV distributor. With the agreement, DirecTV customers with access to either Choice, Ultimate or Premier tiers will continue to have access to the RSN. In addition, Bally Sports content can be streamed via their app. Furthermore, any DirecTV or DirecTV STREAM subscribers without any access to Diamond Sports will be able to purchase a Direct-to-Consumer (DTC) product.

Also in early May, Diamond Sports reached a multiyear renewal agreement with Cox Communications, a smaller pay-TV distributor.

Comcast: Days prior to the DirecTV announcement, renewal distribution talks with Diamond Sports and Comcast reached an impasse, resulting in the RSN being removed from the nation’s largest pat-TV distributor. The agreement had expired last fall, but the two parties agreed to a six-month extension window with no resolution. Besides cost, another negotiating issue is on which tier the RSN channels will be located. Comcast wants the channels on a premium tier with a higher monthly cost which received a pushback from Diamond Sports. With playoff games across the NBA and NHL, for now, the blackout will only impact MLB games.

Amazon

Amazon
: A court hearing on Diamond Sports reorganization plan is scheduled with the U.S. Bankruptcy Court in Houston on June 18. A component of Diamond Sports restructuring strategy is a $115 million investment from Amazon that would provide a 15% ownership in the RSN. As part of the deal, Amazon can invest another $50 million in the first nine months after bankruptcy protection. As a primary partner Amazon Prime Video would be able to stream games from Diamond Sports.

Front Office Sports reports, for the Amazon agreement to take effect, it would require the local media rights of NBA and NHL franchises which Diamond Sports returned to local teams would need to be rescinded. The return of local media rights to the teams had been made under the expectation Diamond Sports would cease operation after the 2023-24 season. Hence, in the event the restructuring strategy is approved it is uncertain what, if any, local sports will be available on Amazon. There are reports Diamond Sports has offered adjustments toward a longer agreement including “rights fees modifications” and digital rights.

According to The Athletic, if Diamond Sports reorganization successfully emerges from bankruptcy with a streaming plan in place, it could impact MLBs direct-to-consumer strategy. In February MLB Commissioner Rob Manfred announced plans to launch an in-market streaming service hopefully needing about half of the 30 MLB teams to succeed. The planned DTC offering would be available nationwide. A successful launch is predicated on the supposition Diamond Sports would not successfully emerge from bankruptcy protection.

At present, MLB could already launch with potentially nine teams to launch the streaming service as soon as 2025. There are three teams whose games are already being produced by MLB in 2024; Arizona Diamondbacks, Colorado Rockies and San Diego Padres. With Warner Bros Discovery closing their RSN operations, the decision impacted three more teams; Houston Astros, Pittsburgh Pirates and Seattle Mariners. Three of the other teams are in the final year of the agreement with Diamond Sports; Cleveland Guardians, Minnesota Twins and Texas Rangers.

In the event that Diamond Sports reorganization plans are approved, there will not be enough teams for MLBs to launch a viable national direct-to-consumer strategy, at least in 2025. At this time, one month before the hearing, most observers believe the bankruptcy court will approve Diamond Sports reorganization plan.