ROYCE LEWIS, The magnetic and oft-injured star of the Minnesota Twins recently returned from another extended absence and has been producing as one of the best players in the game. On Thursday afternoon, he hit his ninth home run in 15 games, setting a franchise record, energizing a fan base and keeping the Twins within striking distance in the American League Central. But Minnesota residents with Comcast subscriptions haven’t been able to watch it, nor have virtually any of the Twins’ 47 games since early May.
Seven and a half weeks ago, Comcast pulled all Diamond Sports Group channels from its airwaves after the two sides failed to reach an agreement on a new contract, a circumstance so tense that it sparked an open letter from the U.S. senator based in in Minnesota, Tina Smith, urging Comcast. “get back to negotiations and fix this.”
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“My constituents,” Smith wrote on June 5, “are furious.”
Major League Baseball can only sit back and watch it all unfold with gritted teeth.
An industry that, through its commissioner, Rob Manfred, has frequently touted the importance of reach, has seen its reach significantly truncated and can do little about it. Comcast customers residing in markets where each of Diamond’s 12 baseball teams play have been locked out for nearly two months and will likely remain that way all season, with fans of the Twins, Atlanta Braves and Tigers of Detroit, three clubs that reside in regions. where Comcast is most prevalent: among the most affected.
A high-ranking league executive, speaking on condition of anonymity earlier this month, called Comcast’s situation “brutal” and lamented the likelihood that, in his opinion, nothing will change in the near future: Comcast will not abandon Their demands, the exclusivity provisions will not allow MLB to offer a streaming option for local fans and Diamond Sports Group will not compensate for lost revenue.
In about five weeks, everything could come to a head.
A confirmation hearing is scheduled for July 29-30, at which time a bankruptcy judge could determine whether Diamond, who runs regional sports networks for 38 MLB, NBA and NHL teams under the Bally Sports name, It will continue as a business or it will close. down completely. It’s a decision that could accelerate drastic changes in a rapidly evolving media landscape and will have a major impact on MLB’s strong desire to place media rights under a national umbrella.
Before attracting a partner like Amazon, Netflix, Hulu or KeynoteUSA+, the league believes it needs the rights (without blackouts, without the territorial exclusivity tied to traditional RSN deals) for somewhere in the neighborhood of 15 teams, according to sources. And that will only be possible if Diamond does not emerge from bankruptcy.
DIAMOND OPPORTUNITIES DRAMATICALLY improved in mid-January when it announced a restructuring support deal that included partnering with Amazon for its streaming capabilities. His prospects took a major hit on May 1, when Diamond failed to close a deal with Comcast, its third-largest distributor. According to sources, the deal fell through because Comcast wanted to put Diamond equipment in a higher, more expensive tier. Six weeks later, both sides remain deadlocked, with no sign of anything changing.
MLB officials have spent the past 15 months angry at Diamond, angered by the volatility that has created uncertainty about whether the league’s teams would get paid and openly skeptical about Diamond’s long-term viability. In recent weeks in bankruptcy court, representatives from the MLB, NBA and NHL have expressed frustration over the lack of information about Diamond’s finances, particularly regarding his agreements with distributors, leading to what It amounted to a fight of discovery.
Neither league seems to believe Diamond can remain a sustainable business without Comcast.
“I think it’s important, from Major League Baseball’s perspective, to understand exactly how devastating it is to lose Comcast service,” MLB attorney James Bromley said in bankruptcy court on May 15.
“In our opinion, Diamond does not appear to have a viable business plan for this fall,” NBA attorney Vincent Indelicato said during the latest status conference in bankruptcy court on June 4. “And that’s very concerning as we approach the start of our season in a few months.”
Diamond recently asked to delay his confirmation hearing from mid-June to late July, largely to buy himself more time to negotiate new deals with the NBA and NHL, both of which were essentially able to regain his digital rights upon completion. of the 2023-24 season. But the later date now falls uncomfortably close to the start of their next seasons, ratcheting up the tension. Further complicating matters is the possibility that Judge Chris Lopez will delay his ruling so the company can resolve outstanding issues with its reorganization plan.
As NHL attorney Shana Elberg said on June 4, “Time is of the essence.”
Diamond has defended its viability, noting that it has secured long-term deals with 10 of its 12 largest distributors, including the two largest, DirecTV and Charter. A source familiar with Diamond’s situation said it also agreed to terms of a new naming rights deal with FanDuel, one that would allow the online gaming giant to operate Diamond’s direct-to-consumer platform on its website. (If allowed to emerge from bankruptcy, the name of Diamond broadcasts will change from Bally to FanDuel at the end of the current MLB regular season.)
The company’s pitch to the leagues is simple: In an ever-changing media landscape rife with uncertainty, it offers something of significant value: guaranteed, multi-year distribution revenue that teams can count on, a type that perhaps they cannot replicate by diversifying. on your own.
Companies like Diamond “created what for quite some time was a behemoth that produced increasingly higher rights fees for teams and leagues and at the same time broad distribution and critical mass,” said Ed Desser, a veteran television executive who is now president. from the media consultancy Desser Media. “There’s no doubt that organizations like these have been providing a service for quite some time. The question now is, ‘Has the pendulum swung to the point of mitigating that value?’ And there are differences of opinion. That’s not just a function of where you sit, but also what you assume in terms of subscribers, distributors, programming, etc.”
IF THE DIAMOND EMERGES of bankruptcy, MLB teams would simply maintain their pre-existing RSN agreements. Some of them extend into the 2030s and pay up to nine figures annually. It’s the kind of revenue that will be difficult, if not impossible, to replicate elsewhere, according to industry experts, which is why Manfred has frequently stated his preference for teams to be paid over the life of their contracts.
That’s the ideal scenario, but the league apparently no longer considers it feasible. The worst-case scenario is not that those contracts disappear, but rather that Diamond emerges on shaky ground, causing more of the same uncertainty that clouded last offseason and, if owners continue to cite shaky RSN deals as an excuse for not spending , It seems destined to stain the next.
Somewhere between those two extremes is MLB’s pivot plan: housing all media rights under one umbrella, rather than teams striking deals with RSN on their own. The approach would include maintaining a traditional linear cable product while incorporating a major streaming company that would serve as the digital home of MLB. Through this, MLB officials say, blackouts would cease and some of the current fragmentation that has frustrated fans would dissolve. It’s a plan some consider overly optimistic, full of too many moving parts, and could work only if all 30 teams finally come together.
“There will probably be like 25 teams that will eventually take him,” said a high-ranking executive at a mid-market team, “and then there will be another five that will be a really hard sell.”
MLB currently owns the streaming and streaming rights to the San Diego Padres and Arizona Diamondbacks, both cut by Diamond last year, as well as the Colorado Rockies, who lost their deal with RSN when AT&T SportsNet Rocky Mountain ceased its commercial operations in October. The Texas Rangers, Cleveland Guardians and Twins, who negotiated one-year deals with Diamond in February, could join them during the offseason.
But big-market teams like the New York Yankees, Boston Red Sox and Los Angeles Dodgers, among a small handful of others, have varying degrees of share in their RSNs and earn substantially more than other clubs in the markets. local media. Many are skeptical that those teams have any interest in eventually sharing their profits under a national model. But others respond that eventually they will have no choice; The traditional cable model that sustained revenue for years is collapsing everywhere, at different speeds.
Diamond’s fate will play a big role in determining the pace.
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