Another showdown looms between the Rangers, Mavs and Stars and the company that broadcasts their games in North Texas.
But the last thing you need to worry about is whether you’ll be able to watch the games while they’re watching.
You should be able to watch the Mavericks play in Denver on February 15. Closing time is 8 p.m., though Bally Sports Southwest’s parent company Diamond Sports is expected to miss a $140 million interest payment owed to creditors.
Worry is all that comes after.
Diamond Sports, a subsidiary of the Sinclair Broadcast Group, is facing a financial crisis weighed down by $8.6 billion in debt, according to a January Bloomberg News report. Skipping the interest payment in February would start a 30-day grace period that could eventually lead to a bankruptcy filing. It could start to topple other dominoes leading to a crisis in the current professional sports landscape.
“I don’t think consumers will care about this until team payrolls are affected,” said John Ourand, who covers sports media and broadcast for Sports Business Journal.
Ah, therein lies the problem. Ultimately, it’s not so much about where you can watch your favorite team, but, at worst, how that team performs. A delay, or default, on the huge local broadcast rights fees owed to the teams could mean a significant reduction in operating income. Eventually, that could affect areas like business operations and ultimately team payrolls. At the very least, it will probably slow down the exponential growth of local TV broadcasting rights.
If things ever get close to the worst, it starts with the sticky situation Diamond Sports must resolve with its creditors and three professional sports leagues: MLB, NBA, and NHL. In working through all of this, the parties must also consider the future of broadcasting and the value of the fixed-rate revenue stream that comes from the sale of local over-the-air rights in the face of the growing, but still developing, broadcast market.
This is not just a local problem. Diamond operates 19 regional sports networks covering 42 teams across all three leagues. And, 35 of the 36 WNBA Dallas Wings games in 2022 were on Bally Sports Southwest platforms.
Baseball Payouts Coming Up
The first real test case may be baseball. Consider the potential impact on the Rangers, for example. They brokered one of the first mega-deals for a local team more than a decade ago. The deal pays them nearly $100 million annually divided into quarterly payments. The first of those payments is due in March. The Rangers, who open the regular season on March 31, have more than $200 million in guaranteed player-only contracts. Tying up the transfer payments in bankruptcy proceedings could create a debt burden for the club.
The stars are also due a payment in April, and a smaller one for the first round of the NHL playoffs.
The hope is that the leagues and Diamond can untangle the mess and emerge with a more stable local broadcast model for teams and consumers alike.
For now, no one really wants to discuss worst-case scenarios, though it’s certainly in mind. MLB recently hired Billy Chambers as its executive vice president for local media. Chambers was the chief financial officer and chief operating officer of the regional sports network (RSN) division when it was owned by Fox. The RSN situation will be at the top of the agenda for MLB owners at their quarterly meetings scheduled for this week in Florida.
MLB is also well positioned to resist this type of problem. Its broadcast wing is well advanced, and in the event of a breach, it could, for example, step in aggressively, take back its local rights and sell them directly to distributors who would then broadcast the games perhaps through the channel formerly dedicated to the RSN.
The teams are choosing their words carefully, if they say anything at all.
“We certainly hope there will be no interruptions to the telecast of Texas Rangers games for next season,” Rangers spokesman John Blake said. “We are confident that a long-term solution to the RSN problem will be achieved.”
Stars president Brad Alberts said: “At the moment, it is not a crisis for our team. We look forward to business as usual as [the sides] try to work things out.”
Mavs owner Mark Cuban did not respond to a request for comment.
The Rangers’ first BSSW broadcast is a March 20 exhibition against Cleveland, just after that 30-day grace period ends. By then, Diamond’s reorganization strategy should be clearer. Or he could move toward default on all, or just some, of his networks. According to Bloomberg’s report, Diamond has $585 million in cash on hand, so it could skip paying interest and still pay rights fees on select networks it wants to retain.
Meanwhile, as the leagues try to figure out exactly how Diamond will proceed, there just isn’t much to say. Especially since Diamond doesn’t say anything. Through a Bally spokesperson, the company declined to comment on the Bloomberg report.
Market changes
What comes next?
“That’s the big question,” Ourand said. “We are at such an early stage. There are so many questions that have not been answered.”
Said Maury Brown, who covers sports media for Forbes: “Unless it’s a miracle, there doesn’t seem to be a solution where teams get what they want.” [contracted] for. All computers will be affected, but the open question is that no one really knows what [the landscape] It will look like.”
Among the things to consider:
Streaming vs. Over-the-Air Value
There is no doubt that the market is changing due to the disconnection of traditional cable and satellite programs. According to MoffettNathanson’s Cord Cutting Monitor, the decline in total pay-TV distribution in Q3 2022 was a record 6.3%. On average, about 5 million people per year turn to streaming services through cable packages. The reach of cable networks is reduced.
Ultimately, that’s why Sinclair/Diamond/Bally are in this mess. When it spent $10.6 billion on the Fox RSN package, it got away with a shrinking market.
“It’s been a terrible model,” Ourand said.
Streaming services continue to gain viewership. MLB.TV, the broadcast arm of MLB, reported a record 11.5 billion minutes watched in 2022, up 9.8 percent from the previous year.
But there is a happy medium. Professional sports are attractive to both types of customers. While HGTV and the Food Network may have separate niche audiences, professional sports tend to appeal as a package.
“Is dead?” Brown said about the RSN model. “It’s going to be more niche, but it’s still live sports and unscripted TV. People like that. The problem right now with cutting the cord and using streaming services is that people are overloaded with subscriptions. Are you making a consumer choose one? [local team] About another. If so, it will depend a lot on [team success]. And it doesn’t provide the kind of fixed dollars that teams prefer for cost certainty.”
Untangling tentacles of RSNs, links
It is possible that the leagues will be involved as some type of collective in the operation of the RSN network. But that leads to other problems related to markets and inventory.
From a technological point of view, it is not difficult. MLB’s tech arm is very advanced. The issue boils down to money.
“They would have to go through a lot to get there,” Ourand said. “Who will own what shares? Is it fair? MLB would have a lot more inventory, and that’s valuable. But the NBA could argue that it has a better demographic. It is a question that has not been well answered.
Not to mention, while Bally/Diamond/Sinclair’s market share is significant, it doesn’t even represent half of the teams in the NBA, NHL, and MLB combined. How would teams with stable local broadcast situations feel about leagues stepping in to subsidize the situation for others?
cutting the diamond
While Diamond as a whole has been a disaster, some individual RSNs are very attractive. Among them: The BSSW product.
It includes two big markets in D-FW and Houston (although Astros and Rockets games are broadcast on a Comcast network), but also San Antonio, Austin, Oklahoma City, and New Orleans. That gives BSSW one MLB team, four NBA teams, and one NHL team.
In a reorganization, it would be a valuable asset to sell to recover money to pay off creditors. Comcast, under the NBC brand, has seven RSNs. Perhaps Amazon, Apple, or even Fanatics would like to expand their footprint into sports streaming.
On the other hand, the southwest region could be key to a scaled down, more sustainable version of a reshuffled Diamond. Both Ourand and Brown maintain that the Southwest network is among the most attractive of Diamond’s pieces.
And it has another advantage, Ourand said.
“The Mavs are in a better position than most teams just because of the owner,” he said. “With his background, [Cuban] he has as much knowledge of this business and where it is going as any owner.”
There is a lot to fix. It will take place over the next few months. It’s unclear exactly where he’s headed. But at least this time, it won’t start with a message on your TV explaining that the games aren’t airing due to a transportation dispute.
“My instinct tells me that there would be no change [to broadcast availability]Brown said. “There will be a lot of angry owners out there. But they want your product out there. That is my instinct. But I’m not sure.”
Twitter: @Evan_P_Grant
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