Diamond Sports must pay four MLB teams in full, bankruptcy judge says

Diamond Sports, the owner of regional sports networks, was ordered this week by a bankruptcy judge to make full media rights payments to four Major League Baseball teams.

Diamond, which operates a portfolio of 19 networks under the Bally Sports brand, filed for bankruptcy in March, seeking not only to restructure its debt but also reset some of its media rights deals with teams to reflect so-called market rates in after rampant cord cutting.

The company sought to reduce payments owed to four MLB teams — the Arizona Diamondbacks, Cleveland Guardians, Texas Rangers and Minnesota Twins — which led it to face off against MLB officials in bankruptcy court this week. Diamond has already paid the teams up to 75 percent of the payments previously owed in its bankruptcy, court documents show.

If Diamond doesn’t make the rest of the payments owed to the teams, those teams can opt out of their contracts with the company, a judge ruled.

The decision comes after MLB announced earlier this week that it would begin producing and distributing San Diego Padres games on pay-TV packages and its MLB.TV streaming service after Diamond stopped making payments to the team. The court case did not affect the status of the situation with the Padres.

“MLB appreciates the Federal Bankruptcy Court’s decision in Houston requiring Diamond to pay the full contract rate to the clubs,” an MLB spokesman said in a statement Friday. “As always, we hope that Diamond will continue to broadcast matches and fulfill its contractual obligations to clubs. As with the Padres, MLB will be prepared to provide games to fans if Diamond defaults.”

The judge’s decision came after a two-day hearing that included testimony from MLB Commissioner Rob Manfred and showed the tension between the league and Diamond Sports.

A Diamond spokesman said in a statement Friday that in accordance with the bankruptcy judge’s orders, “we look forward to engaging with MLB and our team partners to negotiate a rights package moving forward that works for all parties and positions Diamond for long-term success.”

In particular, Diamond insisted on retaining direct-to-consumer streaming rights to all MLB teams broadcast on its networks. Diamond currently has deals with all of its NBA and NHL teams, plus several MLB teams for the streaming rights.

An increase in the number of consumers cutting their traditional pay-TV packages in favor of streaming services is weighing on the business of regional sports networks. Last year, Diamond launched its streaming answer with Bally Sports+.

Diamond pays fees to 42 teams in the MLB, NBA and NHL to broadcast the majority of local games in their markets.

During the hearing, a Diamond executive said Bally Sports+ has 203,00 subscribers, which is 55 percent of the subscriber goal for the company, The Athletic reported.

Diamond also faces more than $8 billion in debt stemming from Sinclair Broadcast Groupthe acquisition of regional sports networks for $10.6 billion in 2019.

Diamond is now an unconsolidated and independently managed subsidiary of Sinclair.