It is reported that Sinclairs Diamond sports group has about $585 million cash in hand but owes about $2 billion in fees to teams this year.


The media deals in bankruptcy parlance are known as executory contracts. Under the federal code, the debtor, in this case, Diamond, can choose to walk away from or keep them. And in some cases renegotiate, which the teams might be willing to do because their claims in a Diamond bankruptcy would be subservient to the lenders.

“That is a big piece of leverage that the debtor has to renegotiate,” Shechtman explained. “Because if they had rosy projections that this asset (the media deal) was going to be worth — let’s just call it $100 million over a period of time — and then they’ve learned that it’s only $50 million over that same period, they can renegotiate based on those new more accurate projections.”

Bankruptcy specifically prohibits MLB/NBA/NHL or anybody else from enforcing those types of provisions,” this lawyer said. “And bankruptcy also gives the holder of the rights, Diamond, the ability to eliminate a provision that says, for example, you can’t transfer the rights without the approval of MLB/NBA/NH or any of the other sports leagues.”

Link
https://theathletic.com/4150222/2023/02/...ptcy-rsns/

(02-13-2023 08:34 AM)GTFletch Wrote:  It is reported that Sinclairs Diamond sports group has about $585 million cash in hand but owes about $2 billion in fees to teams this year.


The media deals in bankruptcy parlance are known as executory contracts. Under the federal code, the debtor, in this case, Diamond, can choose to walk away from or keep them. And in some cases renegotiate, which the teams might be willing to do because their claims in a Diamond bankruptcy would be subservient to the lenders.

“That is a big piece of leverage that the debtor has to renegotiate,” Shechtman explained. “Because if they had rosy projections that this asset (the media deal) was going to be worth — let’s just call it $100 million over a period of time — and then they’ve learned that it’s only $50 million over that same period, they can renegotiate based on those new more accurate projections.”

Bankruptcy specifically prohibits MLB/NBA/NHL or anybody else from enforcing those types of provisions,” this lawyer said. “And bankruptcy also gives the holder of the rights, Diamond, the ability to eliminate a provision that says, for example, you can’t transfer the rights without the approval of MLB/NBA/NH or any of the other sports leagues.”

Link
https://theathletic.com/4150222/2023/02/...ptcy-rsns/

If I had a deal with Bally, I would hope they would just liquidate so I can sell my rights elsewhere, even if for considerably less.

Because from my reading of the article though, if Bally tries to reorganize instead, it seems like the law allows Bally considerable leeway to renegotiate without the teams being able to just cancel their deals. So the worst case might be that the bankruptcy court allows Bally to renegotiate for an amount considerably less than the open market will pay, and the teams will have to swallow that. So a team might go from having say a 5-year deal that is very sweet, above market value, to something bitter, below market value, because the courts lean towards helping Bally survive. If so, that's not fair to the teams, IMO, but it may be how it is.

Or maybe I misunderstand.

How long has Bally had the RSNs? 3 or 4 years. They must have had a plan.

(02-13-2023 08:53 AM)quo vadis Wrote:  

(02-13-2023 08:34 AM)GTFletch Wrote:  It is reported that Sinclairs Diamond sports group has about $585 million cash in hand but owes about $2 billion in fees to teams this year.


The media deals in bankruptcy parlance are known as executory contracts. Under the federal code, the debtor, in this case, Diamond, can choose to walk away from or keep them. And in some cases renegotiate, which the teams might be willing to do because their claims in a Diamond bankruptcy would be subservient to the lenders.

“That is a big piece of leverage that the debtor has to renegotiate,” Shechtman explained. “Because if they had rosy projections that this asset (the media deal) was going to be worth — let’s just call it $100 million over a period of time — and then they’ve learned that it’s only $50 million over that same period, they can renegotiate based on those new more accurate projections.”

Bankruptcy specifically prohibits MLB/NBA/NHL or anybody else from enforcing those types of provisions,” this lawyer said. “And bankruptcy also gives the holder of the rights, Diamond, the ability to eliminate a provision that says, for example, you can’t transfer the rights without the approval of MLB/NBA/NH or any of the other sports leagues.”

Link
https://theathletic.com/4150222/2023/02/...ptcy-rsns/

If I had a deal with Bally, I would hope they would just liquidate so I can sell my rights elsewhere, even if for considerably less.

Because from my reading of the article though, if Bally tries to reorganize instead, it seems like the law allows Bally considerable leeway to renegotiate without the teams being able to just cancel their deals. So the worst case might be that the bankruptcy court allows Bally to renegotiate for an amount considerably less than the open market will pay, and the teams will have to swallow that. So a team might go from having say a 5-year deal that is very sweet, above market value, to something bitter, below market value, because the courts lean towards helping Bally survive. If so, that's not fair to the teams, IMO, but it may be how it is.

Or maybe I misunderstand.

The very real (and honestly very high) risk is that the MLB/NBA/NHL teams taking these rights back would end up being substantially paid a LOT less in a direct-to-consumer streaming model for the next few years compared to reduced renegotiated rights fees with Diamond. So, they just don't want to kill off these RSNs just yet if they can help it at all. Optimally, all of these teams want to be able to phase the RSNs out over a period of several years while building up their streaming services at the same time so that they have a dual income streaming during that transition period as opposed to going cold turkey on those RSNs and going fully to streaming-only.

That's why I think the MLB, NBA and NHL teams that are stuck with Diamond Sports channels are going to figure something out in terms of reduced payments. It's easy for us to sit and tell these teams to rip the cord completely, but they've built their whole budgets and need to meet payrolls *today* based on these RSN income streams and, even if they've got to take some reduced rights fees, it's better to keep at least *some* of it for the next few seasons and then hope and pray streaming-only actually makes profits by the end of the decade (as opposed to being a money-loser).

Note that the RSNs themselves that don't have ridiculous debt loads are still profitable for the time being (just like ESPN and other legacy cable networks). Sinclair has separate ownership stakes in YES (with the Yankees) and Marquee Sports Network (with the Cubs) outside of the Diamond group and those are still doing fine. The difference is that the old Fox Sports RSNs channels that Sinclair moved into the Diamond group were acquired from Disney (who divested them in order to get their Fox acquisition approved) via a massive amount of debt financing and that is what's crushing the balance sheets of that set of RSNs right now.

To be sure, RSNs are eventually going to die, but it's more of question of the teams wanting them to die a "natural death" (which would be towards the 2030s) as opposed to actively killing them prematurely before streaming-only sports actually proves to be profitable (which has a real risk of never happening).

(02-13-2023 09:21 AM)SMUfan Wrote:  How long has Bally had the RSNs? 3 or 4 years. They must have had a plan.

Based on how they have conducted business since they took ownership, it seems to me that this was their plan all along.

Could we see a scenario where local sports return to over-the-air television, at least on a temporary basis, until they can determine a new pay model?

(02-13-2023 11:01 AM)Transic_nyc Wrote:  Could we see a scenario where local sports return to over-the-air television, at least on a temporary basis, until they can determine a new pay model?

I'd say more likely ESPN+, Amazon, etc., get a bunch of rights for 1 year.

(02-13-2023 09:27 AM)Frank the Tank Wrote:  

(02-13-2023 08:53 AM)quo vadis Wrote:  

(02-13-2023 08:34 AM)GTFletch Wrote:  It is reported that Sinclairs Diamond sports group has about $585 million cash in hand but owes about $2 billion in fees to teams this year.


The media deals in bankruptcy parlance are known as executory contracts. Under the federal code, the debtor, in this case, Diamond, can choose to walk away from or keep them. And in some cases renegotiate, which the teams might be willing to do because their claims in a Diamond bankruptcy would be subservient to the lenders.

“That is a big piece of leverage that the debtor has to renegotiate,” Shechtman explained. “Because if they had rosy projections that this asset (the media deal) was going to be worth — let’s just call it $100 million over a period of time — and then they’ve learned that it’s only $50 million over that same period, they can renegotiate based on those new more accurate projections.”

Bankruptcy specifically prohibits MLB/NBA/NHL or anybody else from enforcing those types of provisions,” this lawyer said. “And bankruptcy also gives the holder of the rights, Diamond, the ability to eliminate a provision that says, for example, you can’t transfer the rights without the approval of MLB/NBA/NH or any of the other sports leagues.”

Link
https://theathletic.com/4150222/2023/02/...ptcy-rsns/

If I had a deal with Bally, I would hope they would just liquidate so I can sell my rights elsewhere, even if for considerably less.

Because from my reading of the article though, if Bally tries to reorganize instead, it seems like the law allows Bally considerable leeway to renegotiate without the teams being able to just cancel their deals. So the worst case might be that the bankruptcy court allows Bally to renegotiate for an amount considerably less than the open market will pay, and the teams will have to swallow that. So a team might go from having say a 5-year deal that is very sweet, above market value, to something bitter, below market value, because the courts lean towards helping Bally survive. If so, that's not fair to the teams, IMO, but it may be how it is.

Or maybe I misunderstand.

The very real (and honestly very high) risk is that the MLB/NBA/NHL teams taking these rights back would end up being substantially paid a LOT less in a direct-to-consumer streaming model for the next few years compared to reduced renegotiated rights fees with Diamond. So, they just don't want to kill off these RSNs just yet if they can help it at all. Optimally, all of these teams want to be able to phase the RSNs out over a period of several years while building up their streaming services at the same time so that they have a dual income streaming during that transition period as opposed to going cold turkey on those RSNs and going fully to streaming-only.

That's why I think the MLB, NBA and NHL teams that are stuck with Diamond Sports channels are going to figure something out in terms of reduced payments. It's easy for us to sit and tell these teams to rip the cord completely, but they've built their whole budgets and need to meet payrolls *today* based on these RSN income streams and, even if they've got to take some reduced rights fees, it's better to keep at least *some* of it for the next few seasons and then hope and pray streaming-only actually makes profits by the end of the decade (as opposed to being a money-loser).

Note that the RSNs themselves that don't have ridiculous debt loads are still profitable for the time being (just like ESPN and other legacy cable networks). Sinclair has separate ownership stakes in YES (with the Yankees) and Marquee Sports Network (with the Cubs) outside of the Diamond group and those are still doing fine.

Analysts seem to think that Sinclair's YES and Marquee stakes are held by Diamond Sports Group. They're managed separately, but I think that the bondholders who end up owning DSG after the bankrupcty are also going to own part of YES and Marquee, together with Stadium (if that still exists) but apparently not the Tennis Channel.

Quote:The difference is that the old Fox Sports RSNs channels that Sinclair moved into the Diamond group were acquired from Disney (who divested them in order to get their Fox acquisition approved) via a massive amount of debt financing and that is what's crushing the balance sheets of that set of RSNs right now.

To be sure, RSNs are eventually going to die, but it's more of question of the teams wanting them to die a "natural death" (which would be towards the 2030s) as opposed to actively killing them prematurely before streaming-only sports actually proves to be profitable (which has a real risk of never happening).

What the non-lawyers don't know, Frank, is how the leverage works here.

Can the company in Chapter 11 impose a "renegotiation", against the will of the other contracting party, on the judge's say-so?

Or is it a more genuine negotiation, where the RSN and the teams work out a new contract, and if they can't work out a new contract, then the RSN ends it?

And how much ability does DSG have to withhold payments while they're in Chapter 11? Are the teams looking at SKIPPING payments from DSG, or just delaying them until the bankruptcy is over (probably working out a payment plan at that point?)

MLB is acting like they have the ability, with DSG in bankruptcy, to reorganize the territorial rights system. I don't have any idea how that's supposed to work.

Amazon has a new sports network that does not have linear limitations that is led by former ESPN suits. Apple appears to be organizing one of their own by all indications of their inclusion in media rights discussions. Both companies are brilliant at squeezing margins out of their acquisitions. So both would make a great deal of sense to be poised to take advantage of these higher profile assets if they suddenly came on the market at a massive discount.

In my historical research on this topic, I discovered that the Founding Fathers, when they included bankruptcy protection in the Constitution, meant for it to be used to put the Braves back on TBS. The amicus brief is forthcoming.

(02-13-2023 11:11 AM)johnbragg Wrote:  

(02-13-2023 09:27 AM)Frank the Tank Wrote:  

(02-13-2023 08:53 AM)quo vadis Wrote:  

(02-13-2023 08:34 AM)GTFletch Wrote:  It is reported that Sinclairs Diamond sports group has about $585 million cash in hand but owes about $2 billion in fees to teams this year.


The media deals in bankruptcy parlance are known as executory contracts. Under the federal code, the debtor, in this case, Diamond, can choose to walk away from or keep them. And in some cases renegotiate, which the teams might be willing to do because their claims in a Diamond bankruptcy would be subservient to the lenders.

“That is a big piece of leverage that the debtor has to renegotiate,” Shechtman explained. “Because if they had rosy projections that this asset (the media deal) was going to be worth — let’s just call it $100 million over a period of time — and then they’ve learned that it’s only $50 million over that same period, they can renegotiate based on those new more accurate projections.”

Bankruptcy specifically prohibits MLB/NBA/NHL or anybody else from enforcing those types of provisions,” this lawyer said. “And bankruptcy also gives the holder of the rights, Diamond, the ability to eliminate a provision that says, for example, you can’t transfer the rights without the approval of MLB/NBA/NH or any of the other sports leagues.”

Link
https://theathletic.com/4150222/2023/02/...ptcy-rsns/

If I had a deal with Bally, I would hope they would just liquidate so I can sell my rights elsewhere, even if for considerably less.

Because from my reading of the article though, if Bally tries to reorganize instead, it seems like the law allows Bally considerable leeway to renegotiate without the teams being able to just cancel their deals. So the worst case might be that the bankruptcy court allows Bally to renegotiate for an amount considerably less than the open market will pay, and the teams will have to swallow that. So a team might go from having say a 5-year deal that is very sweet, above market value, to something bitter, below market value, because the courts lean towards helping Bally survive. If so, that's not fair to the teams, IMO, but it may be how it is.

Or maybe I misunderstand.

The very real (and honestly very high) risk is that the MLB/NBA/NHL teams taking these rights back would end up being substantially paid a LOT less in a direct-to-consumer streaming model for the next few years compared to reduced renegotiated rights fees with Diamond. So, they just don't want to kill off these RSNs just yet if they can help it at all. Optimally, all of these teams want to be able to phase the RSNs out over a period of several years while building up their streaming services at the same time so that they have a dual income streaming during that transition period as opposed to going cold turkey on those RSNs and going fully to streaming-only.

That's why I think the MLB, NBA and NHL teams that are stuck with Diamond Sports channels are going to figure something out in terms of reduced payments. It's easy for us to sit and tell these teams to rip the cord completely, but they've built their whole budgets and need to meet payrolls *today* based on these RSN income streams and, even if they've got to take some reduced rights fees, it's better to keep at least *some* of it for the next few seasons and then hope and pray streaming-only actually makes profits by the end of the decade (as opposed to being a money-loser).

Note that the RSNs themselves that don't have ridiculous debt loads are still profitable for the time being (just like ESPN and other legacy cable networks). Sinclair has separate ownership stakes in YES (with the Yankees) and Marquee Sports Network (with the Cubs) outside of the Diamond group and those are still doing fine.

Analysts seem to think that Sinclair's YES and Marquee stakes are held by Diamond Sports Group. They're managed separately, but I think that the bondholders who end up owning DSG after the bankrupcty are also going to own part of YES and Marquee, together with Stadium (if that still exists) but apparently not the Tennis Channel.

Quote:The difference is that the old Fox Sports RSNs channels that Sinclair moved into the Diamond group were acquired from Disney (who divested them in order to get their Fox acquisition approved) via a massive amount of debt financing and that is what's crushing the balance sheets of that set of RSNs right now.

To be sure, RSNs are eventually going to die, but it's more of question of the teams wanting them to die a "natural death" (which would be towards the 2030s) as opposed to actively killing them prematurely before streaming-only sports actually proves to be profitable (which has a real risk of never happening).

What the non-lawyers don't know, Frank, is how the leverage works here.

Can the company in Chapter 11 impose a "renegotiation", against the will of the other contracting party, on the judge's say-so?

Or is it a more genuine negotiation, where the RSN and the teams work out a new contract, and if they can't work out a new contract, then the RSN ends it?

And how much ability does DSG have to withhold payments while they're in Chapter 11? Are the teams looking at SKIPPING payments from DSG, or just delaying them until the bankruptcy is over (probably working out a payment plan at that point?)

MLB is acting like they have the ability, with DSG in bankruptcy, to reorganize the territorial rights system. I don't have any idea how that's supposed to work.

Yeah - looking at it deeper, it does look like the Diamond subsidiary does hold stakes in YES and Marquee. Being in the Chicago market, the Cubs have been super-coy in its public statements in always stating that Marquee is "independent" from the Diamond situation. From my understanding, the Cubs do have complete control over whether they want to sell a Marquee streaming service directly and isn't subject to what's happening with the other Diamond networks.

The bolded is definitely an interesting long-term point because the Yankees, Cubs, Red Sox, Dodgers and a few other wealthy clubs are going to fight the rumblings of MLB effectively taking control of *all* of local rights and/or eliminating territorial rights to the death. Those clubs do NOT want an MLS-style (or even NFL-style, for that matter) TV contract where they give up their local rights and every team shares everything equally.

Stadium is part of Sinclair and was a streaming outlet for CUSA the last few seasons and Stadium is where the MWC Network streams as well. I wonder if that outlet is a part of this.

(02-13-2023 12:32 PM)MinerInWisconsin Wrote:  Stadium is part of Sinclair and was a streaming outlet for CUSA the last few seasons and Stadium is where the MWC Network streams as well. I wonder if that outlet is a part of this.

It's a part of the process, but I don't think Stadium is a major factor in any direction. It produces trivial revenues for Sinclair Diamond Sports Group, but the costs of Stadium are pretty trivial too--they get the games sublicensed from Fox and CBS-SN. They're losing the CUSA games, but they'll still have the Mountain West games for a few years. Who knows, maybe ESPN picks up a few nickels by simulcasting some ESPN+ games on Stadium.

Or maybe Stadium just shows a lot more AF7 seven-man football league, sponsored by af7.com/own_an_af7_franchise. I'm not kidding, it's a real thing on Stadium some Saturdays.

Quote:Under the federal code, the debtor, in this case, Diamond, can choose to walk away from or keep them. And in some cases renegotiate, which the teams might be willing to do because their claims in a Diamond bankruptcy would be subservient to the lenders.

I'm assuming the fine writers at The Athletic are not lawyers, so I'd like to clarify that I understand the barest outline of how these negotiations work.

1. GIVEN: Diamond Sports Group / Bally Sports Southeast / Fox Sports South / Turner South has a contract with the Atlanta Braves to show Braves games on cable TV and pay the Braves $100M a year through 2027. (This is from quick googling, details may be off but let's say this is the example)
2. In Chapter 11, DSG has the option to assume this contract, or void this contract.
3. Before that decision is made, DSG and the Braves have the chance to mutually renegotiate the contract to pay the Braves $75M a year through 2027. If the Braves and DSG do not agree, then DSG voids the contract and the Braves are free to sell the TV rights to whoever for whatever. (Or DSG assumes the contract and assumes responsibility for full payment.

I've seen other things that seem to indicate that under Chapter 11, the judge has wide latitude to rewrite contracts, or accept contracts rewritten by the debtor. But I *think* that's just sloppy language from journalists who weren't focused on how bankruptcy works, they were focused on the details of the deals they were writing about.

There also seems to be a wrinkle where, during Chapter 11, DSG can delay payments willy-nilly, but those have to be made whole or satisfied at the end of the bankruptcy. (So if DSG doesn't pay the Braves their money on April 1, May 1, June 1, and they end up voiding the Braves' deal, they do have to pay the contract through whenever they void it. I think)

(02-13-2023 08:34 AM)GTFletch Wrote:  It is reported that Sinclairs Diamond sports group has about $585 million cash in hand but owes about $2 billion in fees to teams this year.


The media deals in bankruptcy parlance are known as executory contracts. Under the federal code, the debtor, in this case, Diamond, can choose to walk away from or keep them. And in some cases renegotiate, which the teams might be willing to do because their claims in a Diamond bankruptcy would be subservient to the lenders.

“That is a big piece of leverage that the debtor has to renegotiate,” Shechtman explained. “Because if they had rosy projections that this asset (the media deal) was going to be worth — let’s just call it $100 million over a period of time — and then they’ve learned that it’s only $50 million over that same period, they can renegotiate based on those new more accurate projections.”

Bankruptcy specifically prohibits MLB/NBA/NHL or anybody else from enforcing those types of provisions,” this lawyer said. “And bankruptcy also gives the holder of the rights, Diamond, the ability to eliminate a provision that says, for example, you can’t transfer the rights without the approval of MLB/NBA/NH or any of the other sports leagues.”

Link
https://theathletic.com/4150222/2023/02/...ptcy-rsns/

For the sake of this discussion, would this also get the ACC out of the RSN part of their football rights?

(02-13-2023 01:27 PM)whittx Wrote:  For the sake of this discussion, would this also get the ACC out of the RSN part of their football rights?

I hope so. I have a feeling it would just return those games back to Disney's control. So, I don't think the ACC would be able to resell them to someone else. However, they would at least get moved to the same viewing options as the other games.

(02-13-2023 01:27 PM)whittx Wrote:  

(02-13-2023 08:34 AM)GTFletch Wrote:  It is reported that Sinclairs Diamond sports group has about $585 million cash in hand but owes about $2 billion in fees to teams this year.


The media deals in bankruptcy parlance are known as executory contracts. Under the federal code, the debtor, in this case, Diamond, can choose to walk away from or keep them. And in some cases renegotiate, which the teams might be willing to do because their claims in a Diamond bankruptcy would be subservient to the lenders.

“That is a big piece of leverage that the debtor has to renegotiate,” Shechtman explained. “Because if they had rosy projections that this asset (the media deal) was going to be worth — let’s just call it $100 million over a period of time — and then they’ve learned that it’s only $50 million over that same period, they can renegotiate based on those new more accurate projections.”

Bankruptcy specifically prohibits MLB/NBA/NHL or anybody else from enforcing those types of provisions,” this lawyer said. “And bankruptcy also gives the holder of the rights, Diamond, the ability to eliminate a provision that says, for example, you can’t transfer the rights without the approval of MLB/NBA/NH or any of the other sports leagues.”

Link
https://theathletic.com/4150222/2023/02/...ptcy-rsns/

For the sake of this discussion, would this also get the ACC out of the RSN part of their football rights?

not necessarily. that package isn't breaking Diamond Sports's back. DSG isn't desperate to get out if that one.

but it's a solid opportunity for ESPN to buy that sublicense and show those games on Disney platforms.

edit: it's a sublicense from ESPN to Raycom to Fox Sports Netwirks/ Ballys. Hypothetically, Balls could sublicense it to whoever --Turner or the CW or USA network, say.

but realistically either ESPN buys it back or it stays on the RSNs

Is there any chance Fox takes back over the RSN's?

(02-13-2023 03:27 PM)_C2_ Wrote:  Is there any chance Fox takes back over the RSN's?

fox wants no part of them.

Someone mentioned Disney/ESPN gets Bally. They can't Bally picked up some of the former local Fox Sports Network that Disney had to sell off when they bought Fox media. It was approved by the feds or the feds would not allow the merger.