“Et tu, Diamondbacks?” - Bally Sports file for bankruptcy protection

Back in January we raised the possibility that Bally Sports could head into bankruptcy. Less than two months later - I’m amused to write this on the Ides of March - we are going down that route. Yesterday afternoon, Diamond Sports, the umbrella company under which the Bally Sports affiliates operate, filed for Chapter 11 bankruptcy protection. They’d exhausted a 30-day grace period, after not being able to make a $140 million payment on their debt last month. The filing lists AZPB Limited Partnership - the group owning the D-backs, which you perhaps know from the legal spiel on each broadcast - as the company’s third largest unsecured creditor, owed $30.9 million. Its total debt is estimated at $8.6 billion.

This is because Bally was already late on a scheduled payment to the D-backs, according to a report in the Sports Business Journal,It’s likely the team will not see any more from their broadcast partners. According to the New York Post, Diamond Sports is “expected to use the bankruptcy proceedings to reject the contracts of at least four teams to which it pays more in rights fees than it collects back through cable contracts and ads. The teams in the red include the Cincinnati Reds, Cleveland Guardians, San Diego Padres and Arizona Diamondbacks,” according to the paper’s sources. It’s basically the equivalent of a failing restaurant chain closing unprofitable branches, while keeping the profitable ones open.

Broadcasts should continue as normal, at least for the immediate future, because Bally wants to continue to be paid by cable operators, However, the next stage of the bankruptcy process, is likely to see MLB seeking to recover the rights, as an asset currently owned by the company. Even though it’s only a few days before the start of the season, it’s unlikely to cause an immediate blackout for fans. MLB have been well aware of the situation, and will step in to take over broadcasts, while it looks to renegotiate deals. While the details are unclear, in the short term, the most likely scenario could be a combination of games being streamed on MLB.tv, with an over-the-air partner for some.

Older fans may remember that, back in the day, some Diamondbacks games did use to be broadcast on Channel 3 here in Phoenix, so you could watch the team occasionally without the need for a cable package. Presumably, the local blackouts which apply to MLB’s own streaming service will be deactivated for the affected areas, since there will no longer be a rights partner to protect. Rob Manfred and the teams will then likely seek to re-sell the rights to another company. That could be a big issue for the D-backs. Not only due to Diamond stiffing them on their current deal, but because nobody will pay the same now cable has lost one-third of its subscribers.

Using that as a rough guide; the original deal was reportedly valued at about $75 million per year (there was equity involved, and it supposedly escalated during the course of the 20-year contract). Reduce that by a third, and if - and it is a large if - the D-backs find a new broadcast partner. they’ll be earning $25 million a year less. It may be less. It seems likely that any new deal would come without blackouts, MLB wanting to retain the rights to sell a streaming package directly to consumers. That would reduce the value to any prospective buyer further. I know I’d get a D-backs package online, not go back to the palaver of cable. From a consumer’s point of view, it’d be both cheaper and more expensive.

The sports fan has for decades been subsidized by the cable bundle, paying a fraction of what the games would cost as a stand-alone. It’s why leagues and teams fought sports tiers for so long, and why selling streams raises prices. “Let’s say you have $4 a month” that a cable consumer pays for an RSN, explained sports consultant Marc Ganis, every subscriber pays it. “If only 20 percent buy (a new standalone option), just to get the same amount of subscription, you’ve got to pay a multiple of five for those who want it. That’s just mathematics.”

On the other hand, being freed from the need to have cable to follow their favorite team would likely entice more people to cut the cord entirely. This can save you hundreds of dollars a month, even including perhaps $20 as the cost of a team streaming package (it helps that we don’t care about basketball or hockey - if you are a multi-sport enthusiast and had to buy packages for each team, that would eat into savings, obviously). Our bill was cut by more than half when we went Internet only. After a brief period of transition, I can’t say we have missed the endless scrolling through hundreds of channels of nothing to watch, before typically switching over to Netflix anyway.

The resulting issues are not going to be exclusive to the team or fans in Arizona, or even to baseball. Bally had rights to almost half the teams in the majors, along with various NBA and NHL franchises (including both the Suns and Coyotes). As we recently discussed, the Padres may be in an ever worse state, considering their payroll surge of late. Having the teat of broadcast money yanked from their lips is potentially very problematic, when estimates say they lost over $100 million in 2021-22 - and still increased payroll by a further $35 million this winter. Perhaps the D-backs reluctance to spend of late makes sense, given the uncertain future for this revenue stream.