Sinclair, Inc's regional sports subsidiary Diamond Sports skipped out on rights payments to two more professional baseball teams while the company continues to work through its capital reorganization following its bankruptcy filing last month.
This week, the Sports Business Journal said Diamond Sports didn't pay the Cleveland Guardians or the Minnesota Twins on schedule as part of the company's licensing agreement with the teams, triggering a 15-day window that could end with Major League Baseball asking a federal bankruptcy court to reclaim broadcast rights to those teams' games.
Diamond Sports could still make a late payment during the grace period, as it did recently with the San Diego Padres. Eight other professional baseball teams were paid on time, the Sports Business Journal said.
The one baseball team that isn't receiving licensing fee payments is the Arizona Diamondbacks, which is owed at least $30.8 million from Diamond Sports, according to documents filed in federal bankruptcy court in mid-March.
Diamond Sports moved for voluntary Chapter 11 bankruptcy protection last month in order to restructure $8 billion worth of debt owed to dozens of companies and investment firms, with U.S. Bank listed as the largest unsecured creditor owed at $1.8 billion.
The move caused some to question the future of the regional sports business model — Diamond Sports operates nearly two dozen of those channels that it acquired from the Walt Disney Company for $9.6 billion in 2019 — though the Sports Business Journal's John Ourand wrote Diamond Sports' on-time payments to the eight baseball teams "shows that it is serious about emerging from bankruptcy protection as a fully-intact company."
Officials at Sinclair appear bullish on the future of its regional sports business as well: Last week, the company announced it was restructuring its business operations into two parts — one focused on broadcast and cable television, and the other on ancillary assets like the Tennis Channel, private equity investments and real estate.
As part of the reorganization, Diamond Sports was placed under the Sinclair Broadcast Group, which couples it with Sinclair's nearly 200 local broadcast television stations. According to Sinclair's most-recent quarterly earnings report, its television stations brought in $704 million in total revenue during the three-month period that ended December 31 of last year; by comparison, the regional sports business generated $691 million in revenue during that same time period. The bulk of Sinclair's local sports revenue was through affiliate fees generated from cable and satellite companies, while the broadcast revenue was almost evenly culled from advertising and pay TV fees.
While Sinclair may feel the Diamond Sports part of the business still has real value, it isn't clear if the regional sports subsidiary will be able to keep up with its financial obligations. The company now has to make payments to the Cincinnati Reds and Texas Rangers baseball teams; if those payments are missed, it triggers the same 15-day shot clock that could ultimately end with the broadcast rights moving away from the Bally Sports channels in those markets.
The scenario adds to an already-confusing sports landscape for pro baseball fans, who will be shuffled between several streaming services and channels this season due to varying rights with different media companies. Along with regional sports networks, Fox, Disney's ESPN, Apple TV+ and Comcast's Peacock have secured the rights to some nationally-televised games this year.
If Diamond Sports skips out on more payments, it will likely result in a scenario where MLB reclaims broadcast rights in the middle of the season. Officials at MLB say they're preparing for the possibility of offering the games through a mixture of traditional cable and streaming, though concrete plans still haven't materialized.
"What we do is largely dependent on how Diamond and the creditors play their cards, what they decide to do," Rob Manfredi, the commissioner of MLB, said in February. "Our number one goal in terms of preparations is that if for some reason Diamond isn't broadcasting, that we want to be in a position to make sure our fans are going to get their games."