My take on this is that Diamond assumed a lot of contracts that were made by Fox. Those contracts may have been profitable in the context of Fox Sports, but not profitable once that bigger parent is removed. That's been a consistent theme that we've seen in radio with the sale of ABC Radio and CBS Radio to smaller radio-only companies. Just because those operations are successful and profitable under their previous ownership is no guarantee they'll remain profitable when those contracts and obligations are moved to a new owner with different operational systems and structures.
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Bally RSN owner Sinclair looking at bankruptcy
- Thread starter Ccook55
- Start date
They basically inherited the whole production network. The only thing that changed was the name.
Let me try it this way: If you recall, beginning with I believe the 2021-2022 football season, if you wanted to see some college games, your only option was to pay to stream them. Why? They weren't making enough $$ selling spots and via other income sources to make it worth anyone's time financially to produce and broadcast them OTA or via cable/dish providers. Depending on how well they're done and how much effort is put into production and content, sporting events aren't cheap to produce. That in mind, again, if RSNs can't make a go of it producing and distributing games using the current model, in at least some (perhaps not all) cities, one option for them to consider would be to require viewers who want to see the games to sign up and pay to stream them. This is especially true if there's a big delta between the teams and/or leagues who expect to make more $$$ from the TV and media rights, and the RSNs who say they're over their heads financially already, to the point where they're about to go bankrupt.
And the access to the bigger Fox Sports business. Fox Sports has much deeper pockets than Diamond.
Diamond was structured as an LLC. That makes them walled off from Sinclair. Also read this:
Diamond Sports Removes Sinclair as Operator of Regional Sports Networks
As the traditional cable bundle continues to wither away, the once robust regional sports networks business model has begun circling the drain.
www.sportico.com
The problem is not production costs. It’s rights fees not getting paid.
Fox Sports built these networks from the ground up. Or bought affiliates over time. They didn’t have any debt load.And the access to the bigger Fox Sports business. Fox Sports has much deeper pockets than Diamond.
Diamond was structured as an LLC. That makes them walled off from Sinclair. Also read this:
Diamond Sports Removes Sinclair as Operator of Regional Sports Networks
As the traditional cable bundle continues to wither away, the once robust regional sports networks business model has begun circling the drain.
But Diamond did. They paid about $10 billion for the combined operation and contracts.
They over paid and got stuck when covid hit. Disney made out.
Wrong, and the speculation that is based upon this incorrect "fact" is unfounded. You will note that the source you cited is quite thorough, and does not state anything about a bankruptcy case "beginning with all contracts voided."
The bankruptcy court has the legal authority to void contracts, but it is not something that is automatic. If it were to happen, MLB and its member clubs would be able to make filings with the court to explain their position, and importantly would have notice of whatever Diamond intends to do.
MLB and its member clubs will be major creditors to the Diamond Sports bankruptcy estate, and will have rights in the proceeding, including the ability to bid on some or all of the Diamond Sports assets -- assets which include the television rights granted by MLB's member clubs.
The examples I'm aware of went this way. I gave one of them earlier. But I keep saying that the company has not filed yet, so we don't know exactly what the process will be. I stand by that statement.
And number 4: Many teams facing player salary escalators assumed they would cover that nut through jacking broadcast rights fees. For Bally's, their margins were pushed into negative territory after being hit by 2022/2023 contracts with teams under the RSN.
How does this affect the teams bottom lines now. They have guaranteed money from the RSNs. Does the whole structure reset.
Nope. The story you linked about Cumulus Chicago includes the following line:
> Cumulus says it is seeking to reject less than 20 contracts out of more than 15,000 agreements.
Meaning 99.9% of Cumulus's existing contracts survived. It would waste a tremendous amount of the court's time if contracts were voided automatically and had to be renegotiated -- and not all of the renegotiation would be in favor of the bankrupt estate.
It also notes the motion was filed with the court in mid-January, and the court scheduled a hearing rule on February 1st, about 9 weeks after Cumulus filed for chapter 11 bankruptcy.
As far as my prediction: I would not be surprised if Diamond Sports tries to drop a handful of their broadcast rights. It's totally possible that they have bad deals with certain franchises.
Combined with the fact that broadcast advertising revenues have been falling. So you have the perfect storm of rising costs, falling revenues, and massive debt.
That will depend on what happens in the bankruptcy. If the contracts are kept, then they remain in force. If they are rejected, then the clubs will have to renegoiate - and they may choose to negotiate with someone other than Diamond Sports Group.
Yes I addressed that in my previous posts in this thread. I recall in the Citadel bankruptcy that the day they filed, they came in with a bunch of replacement agreements ready to go.
I think the biggest issue Diamond faces is the debt. That's what they're hoping to address.
Sure, that's another factor.
Whenever you have a business where costs are rising rapidly (rights fees, general inflation), and revenues are not keeping up (as people continue cancelling cable), the excrement will eventually hit the air circulation device.
Then what you're predicting amounts to a double edged sword. Cutting rights contracts is like shutting down big chunks of your business. For example; an RSN in a major media market with say one NBA and one NHL team ends up losing 50% or more of their revenue by not renewing one contract. Because of that, one also seriously devalues the overall business, major staff cuts, and even the team has to start all over. Teams think they have RSN's or networks over a barrel. To an extent, they do. That is until a bunch of the RSN's are no longer viable and end up closing their doors in multiple markets. Then all these teams get to start all over at likely much lower rights fees.
The problem is these player contracts are set. Those can’t be renegotiated.
Subscribers cancelling cable is just the tip of the iceberg. As BigA mentioned; the larger problem is diminishing advertising revenue during a season. A perfect storm. Falling revenues and increased costs in the form of broadcast rights fees. That's when the sh*t hits the fan, and the fan is made of *hit.
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