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MLB Commissioner Rob Manfred broke down the league’s fractured relationship with Diamond Sports Group, including what he sarcastically described as a “happy exchange” with Sinclair Broadcast Group Executive Chairman David Smith.
Before DSG sought bankruptcy protection in March, Smith traveled to meet Manfred in New York as Sinclair attempted to secure direct-to-consumer MLB streaming rights. Manfred said Smith threatened to put DSG in bankruptcy if it didn’t get those streaming rights for its Bally Sports RSNs.
“Well, unfortunately, sometimes people want something they aren’t going to get,” Manfred said he told Smith. “It ended badly. He wasn’t so happy when he left.”
The testimony came during a marathon emergency hearing as part of Sinclair’s Diamond Sports Group bankruptcy case Wednesday over DSG’s failure to fully make payments to the 14 MLB teams it broadcasts.
That number dipped to 13 teams on Tuesday as DSG missed a recent payment to the San Diego Padres as MLB assumed the broadcast and distribution responsibilities for the club.
Diamond Sports Group CEO David Preschlack was asked earlier in the day if it sought to blackmail MLB over the direct-to-consumer rights it failed to obtain.
“Absolutely not,” Preschlack responded.
In January, MLB offered to purchase the media rights for the 14 clubs broadcast by DSG. Preschlack said the offer was for $60 million, although Manfred said that the total package was around $400 million.
Either way, it was a no-go for Sinclair. Manfred said MLB never got a “substantive response” to that offer. Preschlack called it “a fraction” of the value of its deals with the clubs.
The two sides of this issue had been spelled out in numerous court filings as part of DSG’s bankruptcy proceedings.
DSG is seeking to renegotiate $8 billion in debt after what Preschlack described as a “precipitous” decline in revenue due to a dramatic drop in subscribers who had RSNs bundled with their cable and satellite subscriptions.
MLB — which bid for the RSNs purchased by Sinclair in a deal valued at $10.6 billion in 2019 — had no interest in giving up the streaming rights to DSG for free. Manfred said MLB’s bid was $900 less.
“It was worth nowhere near that,” Manfred said of Sinclair’s purchase of the RSNs that had been owned by Fox.
Manfred said that the long-term agreements have resulted in huge profits for the RSNs over the life of the deals that date back to before the Sinclair acquisition.
Even before the bankruptcy filing, MLB began to formulate a backup plan, using its MLB.TV as the backbone for distribution.
MLB lawyers are seeking all its clubs with DSG contracts to be paid in full. Judge Chris Lopez had previously ordered DSG to make partial payments to Texas Rangers, Arizona Diamondbacks, Cleveland Guardians and Minnesota Twins that MLB claimed the RSN were being held “captive.”
Minus the clubs being made whole, MLB has requested Lopez release the team from their DSG contracts.
Lopez is expected to make a ruling at the conclusion of the hearing, which will continue on Thursday.
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