Media Focus: Diamond Sports Bankruptcy Forecasts More Traditional Media Challenges

We’ve seen our share of challenges in the newspaper business and have been following the difficulties in our backyard with the Tampa Bay Times still trying to fight off an unpayable debt to the Pension Benefit Guaranty Corporation. The television business has managed to stave off the same challenges for years and the bill is now coming due. A good example of the disruption is the bankruptcy of the largest group of regional sports broadcasting in the US.

Diamond Sports Group, the largest owner of regional sports networks, filed for Chapter 11 bankruptcy protection in March, 2023 after missing a $140 million interest payment. The company, which owns 19 networks under the Bally Sports banner with rights to 42 professional teams across MLB, NBA, and NHL, will continue operations during the bankruptcy process, with game coverage expected to remain unaffected. The bankruptcy filing was made in the Southern District of Texas, and the move comes as a result of its debt, which reached $8.67 billion.

The company was staring down costly upcoming rights payments of nearly $1 billion, mainly to baseball teams, with potential renegotiations to be made with some of these baseball teams. Major League Baseball is prepared to take over broadcasts for teams if necessary, and the organization will reimagine its distribution model in response to the changing media landscape to reach a larger number of fans. This bankruptcy filing reflects broader financial issues in the regional sports network industry, with other companies like Warner Brother’s Discovery also facing challenges related to their ownership stakes in sports networks.

Industry experts and sports leagues believe that the regional sports network model is facing inevitable challenges, including cord-cutting and diminishing advertising revenue. Long-term solutions may involve streaming platforms like Amazon or Apple acquiring rights, or selling the rights back to individual teams. Previous owner, Sinclair Broadcasting, is also trying to buy back Diamond Sports. Currently, the trading value of Diamond’s debt is approximately two cents on the dollar. The Company is in the final stages of the bankruptcy and is developing its Reorganization Plan which the Company says it will have by the end of November.

Broadcast-centric media companies are facing the same array of forces that other parts of the media business have experienced – loss of traditional revenue streams as their audience is turning to internet-based services. The buildup of new streaming services has also not been able to overcome the loss of revenue – most companies are experiencing stagnant growth in streaming subscriptions, resulting in budget cuts and layoffs.

Let us know if Jennis Morse can help in any way. We specialize in Chapter 11 business bankruptcy reorganizations, complex business transactions within debtor and creditor disputes, and commercial litigation. We handled the 2008 bankruptcy filing for Creative Loafing LLC and have a good insight into key issues at stake in the media business.