Diamond Sports Group Is About to Survive Bankruptcy. Will It Matter?

Diamond Sports Group is inching closer to exiting bankruptcy, but numerous issues remain in front of the embattled parent of the Bally Sports regional sports networks, including core concerns relating to both what programming it will have and where it will be distributed. 

At a court hearing held this week in Houston, DSG received approval of a disclosure statement that outlines its plan to exit bankruptcy. That assent was another procedural step following the court’s prior approval of a legal settlement between DSG and its parent company, Sinclair Inc., as well as $450 million in debtor-in-possession financing to aid with its restructuring. 

The next big step for DSG will be a hearing on June 18, when the company is slated to seek confirmation of the full reorganization plan. But between now and then, several key questions must be resolved. Among them:

• What’s on the air? A $115 million bankruptcy exit financing deal with Amazon, in which the online retail and streaming giant will receive a 15% equity stake in DSG, is predicated on undoing prior deals DSG struck with the NBA and NHL that would return local media rights to those leagues after the 2023–24 season—pacts that were based on a previous assumption that DSG would be ceasing operations. DSG’s long-term status with MLB is also unresolved. DSG has presented proposals for longer-term agreements with the NBA and NHL that include “rights fee modifications” and also contemplate digital rights.
• Who will distribute DSG? The company recently struck a multiyear carriage deal with Charter, the country’s largest cable operator, but discussions are still ongoing with Comcast and DirecTV. If DSG is not able to reach agreements with the second- and third-largest distributors in the business, its ability to maintain a critical mass of subscribers and generate revenue would be severely impaired. In fact, DSG said about 81% of its distribution revenue is tied to those three companies, and distribution represents the vast majority of DSG’s total revenue. MLB also raised further questions about the economics of the Charter deal at the hearing, with Jim Bromley, a lawyer representing the league, saying, “We hope the debtors are going to be able to do what they have said they’re going to do.” 
• What will be the impact of the NBA’s national rights talks? The league is about to allow exclusivity periods for ESPN and Warner Bros. Discovery to lapse in ongoing talks for the next cycle of national media rights. That will open up the NBA for additional suitors, and discussions there are likely to have a material role in how the league ultimately approaches this regional situation. 

“We are focused on reaching long-term agreements with our partners to enable us to continue serving fans across the U.S. and delivering meaningful value to distributors, teams, and leagues,” DSG said in a statement.