'Brutal': The state of RSNs, bankruptcy and what it means for people who can't watch baseball

ROYCE LEWIS, the Minnesota Twins‘ magnetic, oft-injured star, recently returned from another prolonged absence and has been producing like one of the game’s best players. On Thursday afternoon, he cranked his ninth home run in 15 games, setting a franchise record, energizing a fan base and keeping the Twins within striking distance in the American League Central. But Minnesota residents with Comcast subscriptions were unable to watch it — or practically any of the Twins’ 47 games since the start of May.

Seven and a half weeks ago, Comcast pulled all of the Diamond Sports Group channels off its airwaves after the two sides failed to agree on a new contract, a circumstance so fraught it triggered an open letter from Minnesota-based Sen. Tina Smith urging Comcast to “return to negotiations and fix this.”

“My constituents,” wrote Smith on June 5, “are furious.”

Major League Baseball can only sit back and watch it all unfold through gritted teeth.

An industry that — through commissioner Rob Manfred — has frequently touted the importance of reach has had its scope significantly truncated and can hardly do anything about it. Comcast customers who reside in the markets where each of Diamond’s 12 baseball teams play have been shut out for nearly two months and will likely continue to be all season, with fans of the Twins, Atlanta Braves and Detroit Tigers — three clubs residing in regions where Comcast is most prevalent — among those most affected.

A high-ranking league executive, speaking on the condition of anonymity this month, called the Comcast situation “brutal” and lamented the likelihood that, in his mind, nothing will change in the near future — Comcast won’t move off its demands, exclusivity provisions won’t allow MLB to offer a streaming option for local fans and Diamond Sports Group won’t make up for the loss of revenue.

In about five weeks, it could all come to a head.

A confirmation hearing is scheduled for July 29-30, at which point a bankruptcy judge could determine whether Diamond, which runs the regional sports networks (RSN) for 38 MLB, NBA and NHL teams under the name Bally Sports, will move forward as a business or shut down entirely. It’s a decision that could expedite drastic changes in a rapidly evolving media landscape and one that will have a major impact on MLB’s strongly held desire to place media rights under a national umbrella.

Before enticing a partner like Amazon, Netflix, Hulu or ESPN+, the league needs the rights — blackout free, without the territorial exclusivity tied to traditional RSN deals — for somewhere in the neighborhood of 15 teams, according to sources. And that’s only possible if Diamond doesn’t emerge from bankruptcy.

---

DIAMOND’S CHANCES DRAMATICALLY improved in mid-January when it announced a restructuring support agreement that included partnering with Amazon for its streaming capabilities. Its prospects then took a major hit on May 1, when Diamond failed to secure a deal with Comcast, its third-largest distributor. According to sources, the deal fell apart because Comcast wanted to place Diamond teams on a higher, more expensive tier. Six weeks later, the two sides remain at an impasse, with no signs that anything will change.

MLB officials have spent the past 15 months bristling at Diamond, angered by the volatility that has created uncertainty over whether the league’s teams would be paid and openly skeptical about Diamond’s long-term viability. The past few weeks in bankruptcy court have seen representatives from MLB, the NBA and the NHL express frustration over a lack of information about Diamond’s financials, particularly as it pertains to its deals with distributors, prompting what amounted to a discovery fight.

None of the leagues seem to believe Diamond can remain a sustainable business without Comcast.

“I think it’s important, from the perspective of Major League Baseball, to understand exactly how devastating it is to lose carriage on Comcast,” MLB lawyer James Bromley said in bankruptcy court on May 15.

“Diamond, in our view, doesn’t appear to have a viable business plan come this fall,” NBA attorney Vincent Indelicato said during the last status conference in bankruptcy court on June 4. “And that’s very concerning as we approach the beginning of our season in a few months.”

Diamond recently asked to move its confirmation hearing from mid-June to the end of July largely to buy more time to negotiate deals with the NBA and the NHL, both of which were able to essentially take their digital rights back at the conclusion of the 2023-24 season. But the later date now bleeds uncomfortably close to the start of their upcoming seasons, ratcheting up the tension. Further complicating matters is the possibility that Judge Chris Lopez delays his ruling so that the company can sort through outstanding issues with its reorganization plan.

As NHL attorney Shana Elberg said June 4: “Time is of the essence.”

Diamond has defended its viability by noting it has secured long-term deals with 10 of its 12 biggest distributors, including the two largest, DirecTV and Charter. A source familiar with Diamond’s situation said it has also agreed to terms on a new naming rights deal with FanDuel, one that would allow the online gambling giant to operate Diamond’s direct-to-consumer platform on its website. (If allowed to emerge from bankruptcy, the name of Diamond broadcasts will switch from Bally to FanDuel at the end of the current MLB regular season.)

The company’s pitch to the leagues is simple: In an ever-changing media landscape rife with uncertainty, it offers something of significant value — guaranteed, multiyear distribution revenue teams can count on, the type they might not be able to replicate by branching out on their own.

Companies such as Diamond “created what for quite a long time was a juggernaut that produced ever-higher rights fees for teams and leagues and at the same time broad distribution and critical mass,” said Ed Desser, a longtime television executive who is now president of the media consulting firm Desser Media. “There’s no question that organizations like those provided a service for quite a long time. The question now is, ‘Has the pendulum swung so far as to mitigate that value?’ And there are differences of opinions. That’s not only a function of where you sit, but also a function of what you assume in terms of subscribers, distributors, programming, etc.”

---

IF DIAMOND EMERGES from bankruptcy, MLB teams would simply maintain their preexisting RSN deals. Some of them extend into the 2030s and pay as much as nine figures on an annual basis. It’s the type of revenue that will be difficult, if not impossible, to replicate elsewhere, according to industry experts, which is why Manfred has frequently stated a preference for teams to get paid through the life of their contracts.

That is the ideal scenario, but one the league seemingly no longer considers feasible. The worst-case scenario isn’t that those contracts disappear, but rather, that Diamond emerges on unstable ground, prompting more of the same uncertainty that clouded last offseason and, if owners continue to cite unstable RSN deals as an excuse for not spending, seems destined to stain the next one.

Somewhere between those two extremes lies MLB’s pivot plan — housing all media rights under one umbrella, rather than having teams cut RSN deals on their own. The approach would include maintaining a traditional linear-cable product while also bringing in a major streaming company that would serve as MLB’s digital home. Through this, MLB officials say, blackouts would cease and some of the current-day fragmentation that has frustrated fans would dissolve. It’s a plan some consider overly optimistic, packed with a lot of moving parts — and it might work only if all 30 teams ultimately join.

“There’s probably going to be like 25 teams that eventually go with it,” a high-ranking executive of a midmarket team said, “and then there’ll be like five others who are going to be a really tough sell.”

MLB currently holds the broadcasting and streaming rights for the San Diego Padres and Arizona Diamondbacks, both of whom Diamond cut last year, as well as the Colorado Rockies, who lost their RSN deal when AT&T SportsNet Rocky Mountain ceased business operations in October. The Texas Rangers, Cleveland Guardians and Twins, who negotiated one-year deals with Diamond in February, could join them over the offseason.

But big-market teams like the New York Yankees, Boston Red Sox and Los Angeles Dodgers, among a handful of others, have varying degrees of ownership stakes in their RSNs and make substantially more than other clubs in local media. Many are skeptical that those teams would have any interest in eventually sharing their profits under a national model. But others counter that they will eventually have no choice; the traditional cable model that for years propped up revenue is crumbling everywhere, at varying speeds.

Diamond’s fate will play a big part in determining the pace.