Bye, Bye Bally?

Another step in the slow crawl towards the edge of the cliff for Bally Sports Arizona, took place today in a Houston bankruptcy court. As looks to have first been reported by Daniel Frankel of NextTV, their parent company Diamond Sports Group filed to tear up their contract with the Diamondbacks, saying “The Debtors have determined, in their business judgment, that the Diamondbacks Agreement is unnecessary and burdensome to the Debtors’ estates and should be rejected. The Debtors lose significant amounts under the Diamondbacks Agreement, and thus have determined that the Diamondbacks Agreement no longer fits within the Debtors’ longer-term plans.”

Things should come to a head quite quickly. A hearing on the topic has been set for next Thursday, the 29th, with Diamond looking to end their contract the following day. However, if they don’t, then the next rights payment to the team would fall on July 1st. Failure to make that would likely lead to a similar situation to the one which unfolded recently in San Diego, where Diamond also defaulted on their contract with the Padres. MLB’s contingency plan kicked in, and the games have been screened through MLB.tv. The cost for that to local fans has been $19.99 per month, with obviously no blackout in effect. MLB also cut deals with various cable providers, to continue airing games on a “San Diego Padres” channel.

Diamond told the court they lost $3 million on D-backs broadcasts in just the month of May. But earlier in June, they were already obliged to pay the team the fully amount dictated in the contract. They had tried to pay less, based on the way the market had changed since the deal was originally signed, with cord-cutting sharply eating into the company’s revenue stream. But the judge disagreed, saying “Profitability is certainly decreasing for each team. But again, this doesn’t mean that the contract rate and those fees under those contracts is not reasonable.” The NextTV report says, that the “Diamondbacks have already initiated conversations about alternative channel distribution beyond Bally Sports Arizona.”

Jack also wrote about the situation, with a particular slant towards the D-backs, and it’s especially worth a read. He explains how the previous hearing covered 50% of what’s due to the team this year, with the balance scheduled to be paid at the start of next month. He also talks about the increased importance of streaming rights, still held by the team and MLB. Jack concludes, “barring a last minute agreement between Diamondbacks ownership and DSG, which seems unlikely, MLB might end up taking over the broadcasts by the July 1st payment due date.” With the last game of June being an Apple TV exclusive [insert annoyed rant here], the June 29th gave vs. Tampa could be Bally Sports Arizona’s last.

What that’d mean remains to be seen, but a similar hybrid model as San Diego is most likely. with games available both to cable subscribers and to those who just want to stream online. Steve Berthiaume and Bob Brenly are employed by the team, so presumably will continue in those roles. Other personnel, however, such as pre- and post-game staff like Jody Jackson and Todd Walsh, face a more uncertain situation. But in San Diego, Ben from Gaslamp Ball told me, “There are shorter pregame shows at home and no pregame shows on the road for now. The postgame show is done by our sideline reporter and broadcast booth on the road with the normal postgame show people doing it at home. That is also shorter.”

In the longer term, this will no doubt have an impact on the team’s bottom line. If Bally Sports were paying over market value (as seems likely to be the case), then it seems certain any replacement deal is going to be for less, and streaming revenue might not cover the gap. That said, the Diamondbacks, with a 2023 payroll of under $115 million, are likely in better shape than the Padres to weather a drop in income. San Diego are at over $245 million this year, and currently have over $100 million of contracts already on the books, every season for the next decade. In 2033, Manny Machado gets $39.1 million, Fernando Tatis Jr. $36.7 million and Xander Bogaerts $25.45 million. That’s a lot of MLB.tv subs...