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MLB raises concerns over Diamond Sports dispute with Comcast

The inability to reach a deal with Comcast impairs Diamond Sports' ability to meet its post-bankruptcy financial commitments, lawyers for MLB say.

The inability to reach a deal with Comcast impairs Diamond Sports' ability to meet its post-bankruptcy financial commitments, lawyers for MLB say.

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Attorneys representing Major League Baseball (MLB) say the sports organization is concerned about a programming-related impasse between Sinclair’s Diamond Sports Group and Comcast and how it might impact Diamond Sports’ ability to emerge from bankruptcy.

The concerns were raised in an affidavit filed with the federal bankruptcy court overseeing Diamond Sports’ Chapter 11 case, and comes about three weeks after Comcast pulled nearly two dozen Bally Sports-branded regional sports networks after it was unable to reach an agreement with Diamond Sports to continue offering the channels.

Diamond Sports offers live games from MLB and other professional sports leagues through the Bally Sports channels, which are distributed on cable, satellite and through the Bally Sports Plus app in key parts of the country.

Comcast is one of the largest pay TV providers in the country, offering sports channels through its Xfinity TV and Xfinity Stream products. The cable provider pays a fee to programmers like Diamond Sports for the right to redistribute their channels, and Diamond Sports uses some of that revenue to pay sports leagues and clubs for the rights to carry games on Bally Sports networks.

Diamond Sports filed for Chapter 11 bankruptcy protection last year in an effort to restructure more than $8 billion in debt. The broadcaster filed a reorganization plan earlier this year, and one that MLB lawyers say is highly contingent upon the broadcaster renewing its existing distribution agreements with cable and satellite platforms. A judge has scheduled a preliminary hearing date for mid-June to consider the reorganization plan.

To date, Diamond Sports has made some progress in that respect: Last month, it announced renewed distribution agreements with DirecTV, Cox Cable and Charter’s Spectrum TV. But the impasse with Comcast is seen as problematic, because it has the potential to leave a lot of money on the table if a new deal isn’t reached soon, MLB lawyers complain.

“Unless Comcast and the debtors can come to a new agreement, it is highly likely that the loss of carriage of the debtors’ broadcasts by Comcast, and the resulting loss of licensing fees from Comcast, will render the Plan unconfirmable,” attorneys wrote in a court filing. They further complained that, if the plan isn’t “comfirmable,” any attempts to continue that part of the case would simply waste the “time and estate resources” of the MLB, its teams and “other interested parties.”

The MLB has long been an aggrieved party in the Diamond Sports bankruptcy case. One of its clubs, the Arizona Diamondbacks, was owed slightly more than $30 million at the start of the case, according to records reviewed by The Desk. Games played by the Diamondbacks were originally broadcast on Bally Sports through a 20-year licensing deal with Fox Sports Networks in 2015. Sinclair acquired the regional Fox Sports business from the Walt Disney Company a few years later. The rights to Diamondbacks games reverted to MLB last summer after a federal judge allowed Diamond Sports to break the contract as part of the bankruptcy case.

The situation with Comcast deteriorated fast after discussions between it and Diamond Sports broke down last month, according to people familiar with the situation. Both sides offered temporary extensions that would have kept the Bally Sports channels on Comcast’s pay TV products for several weeks while negotiations continued, but each side proposed terms in their unique extension offers that the other side found unfavorable, the sources said.

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. 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.

Now that Bally Sports channels have been dropped by Comcast, the two sides are no longer negotiating toward a temporary agreement. But conversations continue over a permanent carriage deal, and there have been “promising” signs that a new agreement will be reached “soon,” according to a source.

In the meantime, Comcast customers who live in an area with a Bally Sports network can purchase Bally Sports Plus to stream live games and related programming. The service costs $20 per month or $190 per year.

Editor’s note: An earlier version of this story said a federal judge overseeing Diamond Sports’ bankruptcy case had given approval to its reorganization plan. The judge approved “the adequacy of its disclosure statement,” according to a spokesperson. The story was updated on Friday.

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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 10 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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