The Post has learned that the MLB, NBA and NHL may orchestrate a purchase of the country’s dominant owner of regional sports television networks, whose fragile finances pose a growing threat to their teams.
Sources close to the situation said the trio of pro-sports leagues are expected to soon begin talks with Diamond Sports, which operates 21 regional networks of Bally Sports representing more than half of the local broadcast markets across the country.
Sources have claimed that a potential deal is looming as Diamond – owned by Baltimore-based Sinclair Broadcast Group – is headed for a cash drain and could head toward a potential bankruptcy if it doesn’t find a white knight in the coming months.
Sinclair in early 2019 won an auction for Fox Sports Networks buys 21st Century Fox for $10.6 billionWith the granting of exclusive rights to broadcast the matches of 42 teams. These included 14 MLB teams such as the St. Louis Cardinals and San Diego Padres. 16 NBA teams including the Miami Heat; and 12 NHL teams including the Detroit Red Wings.
But soon after the acquisition, cable TV giants, including Charter Communications and Comcast, began cutting the fees they were willing to pay for sports amid the wire-cutting outbreak. Meanwhile, satellite TV provider Dish has completely withdrawn from regional sports networks, causing losses to so-called RSNs that have not stopped since.
21st Century Fox shares a co-owner with News Corp. , publisher of the New York Post.
Now, insiders say Diamond could fetch $3 billion including its debt, which is currently trading at $2 billion at a huge discount. Sources said Sinclair is expected to propose relinquishing Diamond’s equity to creditors who will then sell most of the operations to the MLB, NBA and NHL while Diamond will retain a minority stake in the business.
“They will present it to the three patrols,” a source close to the talks said. There is a reasonable possibility that all of this will happen. This is where this is headed.”
If a deal is not reached in what is being described as a “big solution,” there is a growing possibility that creditors – most of them hedge funds that have amassed distressed Diamond debt – could force Diamond and Bally RSNs into bankruptcy in the next three to six months, sources said.
Sources close to the situation said that while Diamond has the cash on hand to stay through next year, it is technically insolvent and creditors may soon force it into bankruptcy.
“I think Diamond is under pressure from hedge funds to ask the liquidation question early,” said a source close to Diamond.
A source close to Sinclair told The Post that creditors are exaggerating their ability to file for bankruptcy.
Diamond does not control the rights of any of the New York City teams. It pays teams for local broadcast rights in sometimes 25-year deals, then sells the broadcasts to cable and satellite companies on a roughly annual basis and plans to turn a profit.
Sources close to the talks said Diamond had been telling the leagues in recent days that if he went bankrupt, he would be able to continue broadcasting matches, but that he would not need to pay the teams’ rights fees because he would have protection from creditors.
In a bankruptcy scenario, buyers of RSNs could also decide to reject existing expensive broadcast rights contracts and arrange for cheaper deals, the sources said. With some teams getting as much as 30% of their revenue from RSN rights, a potential bankruptcy could affect the team’s payroll, the insider claimed.
“This is a bargaining chip for Diamond,” a major debt investor said following the situation.
A league official told The Post that the leagues are working on a contingency plan. MLB, for example, is willing to broadcast games in local markets, charge cable companies the usual fees and pass the proceeds on to team owners until Diamond emerges from bankruptcy.
“Speculation raised by anonymous sources is pure speculation,” a spokesman for Sinclair told The Post on Tuesday. “We have the full support of teams, the NBA and NHL leagues, and we look forward to continuing our work with them to transform the RSN model.”
Meanwhile, it is MLB that in recent months has virtually ended Diamond’s last hope of being alone, according to some insiders.
Diamond on September 26 Launches a live streaming service so that consumers can pay nearly $20 in monthly fees And watch games in their local markets without a cable subscription. With only MLB teams playing in the summer months, it is seen as essential to Diamond’s success.
However, MLB transferred broadcast rights to only five of its 14 teams, and they demanded additional fees even as Diamond argued that those rights should be included in its existing contracts with teams – specifically blaming MLB Commissioner Rob Manfred for the dispute, sources claimed.
“Teams feel Sinclair is cheap and use the commissioner as an excuse,” the MLB team owner told The Post.
The MLB and NHL declined to comment. The NBA cannot be reached for comment.
Meanwhile, MLB was considering launching its own streaming service That will carry local games early next year, The Post exclusively reported in October. Elsewhere, Amazon now has the ability to stream local games and stream them on a regional basis, sources said. So do Apple, ESPN plus, and even NBC’s Peacock.
In early 2019, MLB teamed up with Liberty Media in an unsuccessful attempt Against Sinclair for Fox Sports Networks, Disney was spinning as part of its deal to buy 21Street Fox horn. After Sinclair won the Fox RSNs award, she predicted that 2019 Ebitda would be worth $1.6 billion.
It’s been an arduous journey downhill ever since. Sinclair’s Diamond reported Aug. 30 that full-year Ebitda, or earnings before interest, taxes, depreciation and amortization, will fall to between $183 million and $200 million.
Meanwhile, Diamond has $8.5 billion in debt and makes about $450 million in annual interest payments, so it spends twice what it earns on interest on its debt classified as junk. Most small debt now trades at around 20 cents on the dollar.