Sinclair’s play to capitalize on the RSN market was doomed from the start, but the TV giant may be saved from potential bankruptcy by the very leagues it tried to broadcast. In a macrocosm of the Cubs’ Marquee move, Sinclair — which, not coincidentally, co-owns the network with the Cubs — won the bidding to purchase 21 former Fox regional sports networks from Disney following the acquisition of 21st Century Fox. The resultant debt load from a heavily leveraged $10.6 billion transaction has become untenable as Sinclair’s Diamond Sports hemorrhages cash.
Diamond rebranded all the RSNs through a partnership with gaming giant Bally, increasing the ubiquity of gambling in mainstream sports coverage in a futile attempt to generate revenue. Then they set about launching a stand-alone app that was supposed to have been like Netflix for sports, though the whole thing seemed ill-advised and doesn’t have nearly enough support from leagues and individual teams.
Would you pay $18/month to watch like five teams from three or four sports? Exactly.
I’ve covered this all pretty extensively over the last three years or so, mainly through the lens of the Cubs and Marquee as sort of an interested third party. While there’s an obvious tie-in with Sinclair, Marquee is clearly separate from those other RSNs — the same could be said of the Yankees’ YES Network — and wasn’t lumped in with them when it came to the app or Diamond’s (mis)management. That said, the Cubs would surely have interest if there was a way to broaden Marquee’s reach through a bigger play.
That may come as part of a possible purchase of Diamond Sports by MLB, the NBA, and the NHL. According to a report from Josh Kosman of the New York Post, the trio of sports leagues is expected to begin talks to negotiate a buyout for what would be a highly discounted price. Kosman writes that Diamond “might fetch $3 billion including its debt, which is currently trading at a heavily-discounted $2 billion.” Yeesh.
The expectation is that Sinclair will want to hand over equity to its creditors — primarily hedge funds that have taken on all that bad debt — who would then sell to the leagues. If such a deal isn’t reached, the “technically insolvent” Diamond could be forced to file for bankruptcy by early next year. That wouldn’t necessarily be the worst thing for Diamond, which would be able to continue broadcasting games without paying rights fees to teams due to protection from the filing.
Kosman points out that a group purchasing the RSNs out of bankruptcy would also be able to void existing broadcast rights deals and renegotiate cheaper ones. The leagues clearly don’t want that to happen, seeing as how those fees account for a huge portion of annual revenues. Diamond can try to use that as a bargaining chip, though it’s hard to see a buyer other than the sports leagues having interest.
MLB has played hardball this whole time and its lack of participation is a big part of what has kept Diamond’s app idea from really taking off. Commissioner Rob Manfred has been very critical of the attempt in the past and has probably had an eye on this endgame in some form or fashion for a while. Without baseball helping to carry the service in the summer months, the streaming service really doesn’t stand a chance.
I really have no idea where this is heading, but it certainly sounds as though it’s in the best interest of all parties involved to have the leagues buy the RSNs. That could result in something like the Marquee situation, which has been less than great for Cubs fans, with one major difference. If the leagues control a majority of the broadcast partners, they could open up streaming and eliminate blackout rules that are ostensibly in place to protect local rights.
We’ll have more on this as details emerge, particularly as it impacts the Cubs and fans throughout the overly broad “local” market.