MLB Reportedly Wants A Stake in Bally Sports RSNs, Streaming Service

The future of Sinclair’s Bally Sports Regional Sports Networks (RSNs) plans to offer a direct-to-consumer (DTC) streaming service is still up in the air. Earlier this year, we reported on Sinclair’s plan to offer a DTC streaming app with gamification for in-app sports betting to help increase the company’s revenue. It has been reported that Sinclair was looking to charge $23 per month to allow fans to watch their local NBA, NHL, or MLB teams play on their RSNs. Across the 3 leagues, 42 of the 92 teams play on a Sinclair-owned RSN, which makes having a DTC app important for a company that has been dropped from many major streaming providers in the era of cord cutting.

Diamond Sports Group, the Sinclair subsidiary that owns Bally Sports RSNs, in partnership with Byron Allen’s Entertainment Studios, has been mounting up a pile of debt to the point where analysts are calling the RSNs “Sinclair’s Achilles heel,” and it is rumored the subsidiary may be headed to bankruptcy. To make things worse, Diamond Sports may face another hurdle coming from Major League Baseball, who may want a stake in the future of the RSNs, according to an 8-K filing. John Ourand of Sports Business Journal  has a detailed report on the situation:

“According to the report, Diamond Sports neared a deal with a group of its creditors “when Major League Baseball entered the picture” around two weeks ago. MLB’s involvement came when Diamond Sports and its creditors approached the league for permission to stream its games on a direct-to-consumer service. MLB responded by requesting an equity stake in any planned streaming service that featured MLB games, “a new wrinkle that complicated matters too much to complete on time.” The company then “needed to cleanse participants in the negotiation,” the report said.

Sources suggested that MLB actively engaging with Diamond Sports could be seen as a good sign for Sinclair, even if baseball’s involvement caused a Diamond Sports’ deal with its creditors to be delayed. Top execs from leagues, teams and media companies privately have believed that Diamond Sports is headed to bankruptcy. It’s unclear whether word of MLB’s involvement will change that.”

While discussing MLB’s future with Diamond Sports and Bally Sports RSNs at the World Congress of Sports, MLB Commissioner Rob Manfred was blunt and did not pull any punches.

“The other set of rights they’ve talked a lot about is gambling rights,” Manfred said, “they don’t have those either. We have been clear with Diamond from the very beginning, this was not a late starting issue. We’ve been very clear with them from the beginning that we see both those sets of rights as extraordinarily valuable to baseball, and we’re not just going to throw them in to help Sinclair out.”

Of the three major leagues that play their games on RSNs, MLB is the big fish. Each team plays 162 games per season, which is why Manfred is critical of the way things are being handled with Bally Sports RSNs. However, he is not the only commissioner that had words for Sinclar at the World Congress of Sports.

“For now, clearly, the (cable) bundle’s broken. I mean, we’re seeing now an issue that’s very topical at the moment, our regional sports networks, Sinclair in particular, and they’re, we’re trying with them to work through those issues,” said NBA Commissioner Adam Silver.

Since cord cutting has become more popular with younger generations, Sinclair getting dropped from most major live TV streaming providers isn’t helping. Silver noted that the NBA’s younger demographic has declined 70% among cable viewers. Many fans do not view Sinclair in a positive light because their RSNs aren’t on many cord cutting services, which the MLB and Manfred are aware of.

“I think that the negativity surrounding the RSNs has been increased exponentially as a result of the situation with the Sinclair subsidiary Diamond. Part of their problem is cord-cutting. The other part of their problem is there’s excessive leverage on that business,” Manfred said. “If you think about what they paid for it, how much debt they have on it, I mean, you think it’s over 80%, it’s a huge number. And that leverage has produced headlines that are more negative. There are RSNs out there that aren’t thriving or growing, but they’re going to survive. Look, look, there are RSNs — YES and NESN — that have businesses that remain profitable, they’re affected by cord-cutting. But the fact of the matter is I think the negativity has been increased by the Diamond (Sinclair) situation.”

The leagues know how important digital rights and RSNs are when it comes to expanding their games. Manfred rebuked the idea that MLB came into the discussion late to delay Sinclair’s plans of gamification and a DTC app.

Manfred stated, “…we believe those digital rights are crucial and we want to own and control the platform on which they’re delivered, we may have partners in that process. But this idea that late in the discussions we somehow demanded an equity stake (from Sinclair), that’s just not accurate.”

If Diamond Sports Group does file for bankruptcy then many are expecting Fanatics, a sports merchandising company, to get into the RSN business after CEO Michael Rubin met with those in the industry. John Ourand at Sports Business Journal reported a few takeaways:

“Rubin’s meetings with league, team, distribution, and network executives have been dormant for several weeks and nothing is imminent, as sources say Fanatics is concentrating on expanding other parts of its business before tackling media.

Several sources said that these talks with Rubin could pick back up again next year. Plus, leagues, teams, and media companies are considering several options beyond Fanatics.”

Fanatics already has merchandising deals with all three of the major professional leagues that play on the RSNs. A Diamond Sports bankruptcy and a purchase of the NBCUniversal and AT&T RSNs would make Fanatics a major player. More details from Ourand:

“If Fanatics were to make a move, it would need to get control of the local rights, which may be the easiest step. Sources say NBCUniversal and AT&T have been trying to find buyers for their RSNs. And top executives from leagues and media companies share a common belief that the Sinclair subsidiary Diamond Sports Group, which owns 21 Bally Sports-branded RSNs, could be headed into bankruptcy.”

Time will tell if Bally Sports goes bankrupt or if a DTC RSN option ever comes into fruition, with or without MLB’s involvement. Fans have been wanting a widely available, yet affordable way to stream their local teams and if the MLB, NBA, NHL want their sports to keep growing then they’ll have to figure out a way to make that happen.