Diamond Sports has been fighting with its partner sports leagues (MLB, NBA and NHL) over a plan to emerge from bankruptcy. But up to this point, the other major arm of the sports media rights ecosystem, the distributors, have not had a strong presence in the courts.
On Tuesday, lawyers for major cable and satellite companies such as Charter, Cox and DirecTV entered the picture, drawn by an argument that Diamond and the leagues have been unable to resolve on their own: How much do the three associated sports leagues cost Diamond? Do you have the right to know Diamond’s contracts with distributors?
The hour-long hearing did not go well for MLB, which was granted access to less information than it wanted by Judge Christopher Lopez, and was also harshly criticized by a lawyer for a cable company.
“It was like talking to a brick wall,” Cox’s attorney, Stu Lombardi, said of his recent dealings with MLB.
Diamond broadcasts 38 teams across all three sports, including 12 MLB teams. The company filed for bankruptcy early last year and believes that with Amazon’s help it can be a viable business.
However, the leagues and baseball in particular are skeptical, largely because Diamond has not yet reached a carriage agreement with a major distributor, Comcast. Baseball is the only one of the three sports that is currently in the middle of its regular season, making it the sport most affected by the Comcast-Diamond impasse. Diamond channels stopped working on Comcast in early May.
But even when it comes to the distribution deals Diamond has, like those with Charter, Cox and DirecTV, the leagues are iffy. They say they don’t know enough about the financial terms to be able to decide whether to support Diamond’s overall plan.
“These are things that are critical to being able to understand and cross-examine witnesses and provide evidence, or contradict evidence, regarding the reorganization plan,” MLB attorney James Bromley said in court.
Diamond Sports makes money from distributors who pay to include channels in their packages. These agreements carry confidentiality clauses. Neither side disputes that the financial information is sensitive, but attorneys for Charter and Cox said the information rises to the level of “trade secret,” while MLB’s attorney disagreed.
Two weeks of various meetings between the leagues, Diamond and Amazon preceded Tuesday’s hearing. Cable companies are skeptical about whether MLB needs all the information it requested.
Sports leagues are increasingly taking on different roles in sports television, whether in production or negotiating their own deals with distributors. MLB handles those duties for three teams this year: the Arizona Diamondbacks, Colorado Rockies and San Diego Padres. If MLB were to ever release a national broadcast package to the market, specific information on the deals Diamond has in place could be valuable.
A confirmation hearing for Diamond’s plan to emerge from bankruptcy will begin July 29, and objections to the plan are due July 18. Bromley said at a hearing earlier this month that MLB anticipates filing an objection.
Lopez ruled Friday that, at least for now, leagues would have access to aggregate numbers from Diamond’s distribution deals, but not more detailed distributor-by-distributor details.
“There needs to be some access to the agreements themselves,” argued Bromley, who was then interrupted by the judge.
“I’ve seen MLB do it in other cases, I know they can do it in this case,” Lopez said of using aggregate numbers. “I’m really sure you can do it in this case. But if I’m wrong about that… you can certainly come back, you might have another chance to figure this out.”
Lopez postponed two other issues to Friday: what access the leagues have to Diamond’s specific deal with one of his proposed new sponsors, Amazon; and what access is granted to “most favored nations,” or MFN, clauses that are common in agreements between television stations and distributors.
If Diamond grants better terms to a distributor than it has previously granted to other distributors, Diamond may have to modify previous agreements so that they are not worse. So if Diamond strikes a deal with Comcast that treats Comcast better than Diamond treats, say, Charter or Cox, it could have a trickle-down effect.
“They don’t know how the negotiations to get Comcast back into the fold might affect the other distribution deals,” Bromley said.
“At this time, we are not aware of any information to suggest that an MFN has been triggered,” said Judson Brown, Charter’s attorney.
López also put up some resistance to the cable companies. Lombardi, representing Cox, wanted the MFN issue to wait to see if any problems actually arose, but Lopez wanted a resolution implemented now.
The MLB, NBA and NHL have generally been in lockstep in this process, but MLB has been the most vocal, a point Lombardi seemed to highlight.
“I’m learning some things live during the hearing,” Lombardi said. “I’m learning in particular that it appears our live disagreement is only with the MLB.”
In a letter to the court that Lombardi filed Monday, Lombardi suggested that MLB was being too bitter toward Diamond.
“In a call last Thursday, MLB counsel responded that ‘none of what Diamond has done has been to maximize profits,’” Lombardi wrote. “Cox disagrees that assuming that the Debtors will act in a manner that destroys value is the appropriate lens through which to test the Debtors’ financial projections…”
Bromley said the letter should be irrelevant because Cox is not a party to the case and has not filed a formal motion.
(Photo: Jeff Roberson / KeynoteUSA)
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