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Judge says Diamond Sports must reveal pay TV contracts to leagues

The coverage map of Sinclair's regional sports channels Bally Sports. (Image courtesy Sinclair Broadcast Group, Graphic by The Desk)
The coverage map of Sinclair’s regional sports channels Bally Sports. (Image courtesy Sinclair Broadcast Group, Graphic by The Desk)

A federal judge overseeing the Chapter 11 bankruptcy case involving Diamond Sports Group says the company must disclose certain elements of its contracts with pay TV distributors to some of its sports partners.

On Friday, U.S. Bankruptcy Judge Christopher Lopez agreed that major professional sports franchises like Major League Baseball (MLB), the National Hockey League (NHL) and the National Basketball Association (NBA) did not have enough information to determine the long-term viability of Diamond Sports without learning more details about the company’s arrangement to distribute its Bally Sports-branded channels on cable, satellite and some streaming platforms.

Representatives from Diamond Sports initially opposed the request, saying it would require them to reveal certain information that is normally kept confidential under non-disclosure agreements with distributors. The leagues and some other creditors said the information was necessary to determine if a proposed restructuring plan offered by Diamond Sports was enough to help the company stay afloat.

Prior to Friday’s hearing, Lopez gave both sides an opportunity to reach an agreement that would allow the leagues to receive the information they wanted while allowing Diamond Sports to keep some business-related information confidential.

“I think they need to see it,” Lopez said on Friday after both sides failed to reach a compromise.

Diamond Sports was formed in 2019 as a joint venture between Sinclair, Inc. (then Sinclair Broadcast Group) and Allen Media Group. The joint venture was created to acquire nearly two dozen Fox Sports-branded channels obtained by the Walt Disney Company through its purchase of some Fox-owned film and cable television assets. Disney divested the regional sports networks in order to satisfy regulatory concerns associated with the Fox transaction.

Diamond Sports spent more than $10 billion acquiring the channels, but it wasn’t able to turn a profit from them. The joint venture filed for Chapter 11 bankruptcy protection early last year, and reported around $8.6 billion owed to major sports leagues, broadcasters, banks and other creditors.

In January, the company announced the formation of a restructuring support agreement, or RSA, with various creditors after Sinclair agreed to infuse Diamond Sports with a $495 million cash payment. The RSA also calls for Amazon to take a minority stake in Diamond Sports and become the exclusive digital distributor of Bally Sports online.

The viability of the RSA appears to be conditioned on Diamond Sports renewing distribution agreements with major pay TV platforms. Over the past few months, Diamond Sports has inked carriage renewals with Charter Communications, DirecTV and Cox Communications, among others — but there is one major holdout.

In late April, Comcast removed all Bally Sports-branded channels from its regional Xfinity TV systems at the expiration of its carriage agreement with Diamond Sports. Both sides offered to extend the distribution agreement on a temporary basis, though with different terms and conditions, which were rejected by the other side.

Under Comcast’s proposal, Diamond Sports would have continued to collect a per-subscriber fee charged at the rate agreed to under the former contract for as long as negotiations continued, according to people familiar with the situation. Comcast also wanted Diamond Sports to provide Xfinity TV users the ability to log on to the Bally Sports Plus streaming app with their cable credentials, and the ability to relegate Bally Sports channels to more-expensive service tiers.

Diamond Sports did not object to the streaming access perk, but it was concerned about the potential that Comcast would move Bally Sports into more-expensive packages, which could impact how much it earned from subscriber fees if customers didn’t upgrade to receive the channels. The broadcaster also sought a different extension that allowed it to collect “back fees” charged at the new agreed-upon rate when a permanent contract was in place, sources said.

Some of Diamond Sports’ broadcast partners — including the MLB, NHL and NBA — are concerned that a future agreement between Diamond Sports and Comcast could trigger “most-favored nations” clauses in the broadcaster’s contracts with Charter, Cox, DirecTV and others. Their concerns rest on a future agreement where Diamond Sports accepts Comcast’s offer to move Bally Sports channels into a more-expensive tier.

If that happens, the leagues are worried that other pay TV distributors will want to rewrite their agreements with Diamond Sports to also move Bally Sports channels into more-expensive TV plans — which could severely impact the reach of the channels on cable, satellite and streaming platforms.

The leagues are pushing for information that would help them understand which pay TV distributors provide the most cash to Diamond Sports. Once they have that information, they can more-effectively gauge whether the RSA submitted by Diamond Sports is viable and whether the broadcasters will be able to make regular licensing payments to sports leagues and individual clubs for the right to air their games on television, they say.

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About the Author:

Matthew Keys

Matthew Keys is a nationally-recognized, award-winning journalist who has covered the business of media, technology, radio and television for more than 11 years. He is the publisher of The Desk and contributes to Know Techie, Digital Content Next and StreamTV Insider. He previously worked for Thomson Reuters, the Walt Disney Company, McNaughton Newspapers and Tribune Broadcasting.
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