Major League Baseball is less than three weeks into its regular season, and five of the 14 teams under Diamond Sports Group's umbrella are currently missing payments.
The Cincinnati Reds and the Texas Rangers recently joined the Arizona Diamondbacks, Cleveland Guardians and Minnesota Twins among those who have not been paid their most recent rights fees by Diamond, the Bally Sports operator that filed for Chapter 11 bankruptcy in the middle of March.
Clarity for four of those teams -- all but the Reds -- might not be determined until the final day of May, at the earliest, at which point a bankruptcy judge will hear Diamond's claims that those teams should be paid a lesser fee to account for the deterioration of the traditional cable model. Diamond and the Reds, who partially own Bally Sports Ohio and are separate from the litigation, entered into a 15-day cure period after Monday's missed payment. If Diamond doesn't pay what it owes the Reds by the end of that period, the team would break free from its obligation and MLB would theoretically take over its broadcasts for the foreseeable future.
Diamond will continue to air all of the teams' games while their situations remain unsettled, a representative of the company said -- but that's part of the problem.
In a filing Monday, the Rangers stated that Diamond needs to "make reasonable interim payments for the rights they are using" and accused the company of using the threat of nonpayment as a bargaining tool to secure streaming rights, which MLB has previously been hesitant to grant. Diamond possesses the streaming rights for only five major league teams and has said that obtaining the remaining rights is critical to running a more sustainable business in the current climate.
The Rangers, as well as the other three teams, have argued that Diamond should make its rights payments in the interim and that those payments can then be adjusted in the wake of the evidentiary meeting that is scheduled for May 31. Diamond has instead said it will place those rights fees -- totaling tens of millions of dollars -- in an escrow account and will hold off on making those payments for at least six more weeks. A hearing Wednesday is expected to determine whether those four teams will be paid in the interim.
Diamond, the Sinclair subsidiary that took on more than $8 billion of debt to purchase 42 regional channels across MLB, the NBA and the NHL, filed for bankruptcy restructuring March 14 and planned to use the process to determine which of its contracts it would shed. The company missed its initial payment to the San Diego Padres but ultimately paid the team its rights fees March 29, right before the expiration of its grace period.
On April 5, in the wake of missed payments to the Twins and Guardians, MLB filed an emergency motion to force Diamond to either pay teams their rights fees or release them from their contracts. The D-backs, whose rights payment was missed just before bankruptcy proceedings, meaning it got lumped in with the rest of the company's debt, filed a similar motion on their behalf. The Rangers, who previously filed a notice of default and termination in the event Diamond becomes insolvent, have since been added to the mix.
Teams are free to break from their contracts with Diamond after a rights fee is missed and the subsequent grace period, typically lasting somewhere between seven and 15 days, expires. That situation applies to the Reds, whose grace period is set to expire in early May, but the Rangers, D-backs, Twins and Guardians will have to wait a bit longer.
MLB, specifically commissioner Rob Manfred, has stated that the league is in position to immediately pick up the broadcasts for teams once they fall off from Diamond and will do so by providing both a streaming option and a way to watch the games through the traditional cable model. Through that process, blackouts would thus be eliminated within the respective markets. MLB has yet to pick up any broadcasts but believes, based on the rapid rate at which consumers are ditching their cable subscriptions, that it will possess the vast majority of teams' rights under its umbrella within two to three years.