It is no longer breaking news that regional sports networks (RSN) are in financial trouble.
The Diamond Sports Groups (Diamond, DSG), the largest conglomerate of RSNs in the US, filed for Chapter 11 bankruptcy protection on 14 March. As reported on these pages, the filing resulted from a missed interest payment of US$140M in February.
The Diamond RSNs are operated under the Bally Sports Regional Sports Networks moniker, with a total of 19 outlets across the US.
The financial collapse of the DSG RSN tracks back to the fall of 2022 when rumors first circulated about looming debt payments.
The number of dollars being discussed in this sordid story line is staggering.
Diamond missed its interest payment in February, triggering a filing to protect the core of the enterprise. Diamond also paid a major creditor, JPMorgan Chase, US$190M, in February to cash out the investment bank from its preferred equity position in Sinclair Broadcasting, the owner of the Diamond RSN group.
“DSG will continue broadcasting games and connecting fans across the country with the sports and teams they love,” Diamond Sports CEO David Preschlack said in the statement last week.
That’s going to be a neat trick given that DSG has a reported US$425M in cash on hand. That may seem to be enough to run a business, but the RSN holds US$8.67B in debt.
Yes, that is with a B for billion.
Earlier this year, the DSG payments to Major League Baseball clubs were considered, light in the envelope.
Where this problem becomes crisis for sports is the number of teams affected by the chaos, including 14 MLB, 16 NBA, and 12 NHL teams.
The direct impact on the NHL will be felt in Los Angeles, Anaheim, Tempe, Dallas, St Louis, St Paul, Detroit, Columbus, Nashville, Carolina, Tampa, and Florida.
Last week, MLB’s Texas Rangers filed suit to disengage from DSG should the RSN owner declare insolvency. That action would mean the Rangers would be walking away from an annual stipend of US$111M.
As has been asked elsewhere, ‘how do the Texas Rangers propose to make up $111M’?
Well, for one thing, the fans are going to be mined right down to the lint in their pockets.
That is problematic as the television landscape continues to change. Cord-cutting of cable services, moves to streaming outlets, and apathy for live sports have conspired to form a perfect storm around RSNs who really should have known better when signing US$10B deals to buy RSNs in 2019.
The COVID-19 pandemic has also taken some blame for where the RSNs no find themselves. It is not necessarily the result of fans finding new outlets for sport, it is more likely viewers have discovered they don’t need games to be entertained.
Streaming services have been far more nimble in their programming and are able to entice eyeballs to their programming, and a few have sprinkled in live game streaming to keep it honest.
Comcast is among those outlets that have been adroit in cobbling together an array of outlets for cable and streaming.
As DSG filed its Chapter 11 action, MLB said it was prepared but also said there were expectations from the current agreement.
“Despite Diamond’s economic situation, there is every expectation that they will continue televising all games they are committed to during the bankruptcy process,” the MLB said in its statement.
That’s another neat trick.
As we reported here in late February, Warner Brothers Discovery RSN was divesting itself of material assets, and allowing MLB teams to take current staff and equipment to continue broadcasting games. If WBD and AT&T SportsNet are willing to leave high-priced equipment and staff behind, then one has to wonder the future of broadcast sport in general, not just RSN or streaming.
Use CodePHN15 and sit back and read a good book.
As stated above, this is no longer a breaking news item. What it is, is a cautionary tale. The money will need to come from somewhere to pay player salaries, employ stadium and arena personnel, keep organizations afloat, and teams in their cities. Cutting the cord will not reduce costs to viewers. It will simply shift the payment plan from one account to another.
The mining of fans’ wallets has already started. Reportedly, AppleTV+, which has broadcast MLB on Friday nights at no cost, will be charging $7 per month for the right to view games.
The RSN model has failed for so many reason, but greed certainly seems high on the list. Streaming services are not in the business of being magnanimous toward their customers. If sports fans want to watch live action, they will need to pay, and if their numbers dwindle further, each will pay more, and then more again.
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