By: Saphyone White
Diamond Sports Group, LLC (“Diamond”), a subsidiary of Sinclair Broadcast Group, Inc. and owner of Bally Sports operating 19 regional sports networks (“RSNs”), filed for bankruptcy on March 14th.[1] Things started to go downhill on February 15th when Diamond failed to make a $140 million interest payment on $9 billion worth of debt, triggering a 30-day grace period.[2] Diamond’s bankruptcy affects the local coverage for 14 MLB teams, 16 NBA teams, and 12 NHL teams.[3]
While the NBA and NHL seasons are coming to an end, MLB’s season is barely starting, making it much more urgent for MLB to ensure every game is available all season long. After filing for bankruptcy, Diamond has the option to follow through with its contractual obligations, renounce the deals, or renegotiate the contracts at lower rates.[4] Since Diamond has individual broadcasting deals with each of the 14 MLB clubs, renegotiations would be at the team level instead of league-wide through the Commissioner’s office.[5]
However, Commissioner Rob Manfred has been monitoring the situation.[6] Manfred noted that MLB is exploring alternatives to ensure those 14 teams do not lose their in-market broadcasting.[7] One option is for MLB.tv to go “à la carte,” picking up streaming those in-market games and allowing users to purchase both in-market and out-of-market broadcast packages.[8] Unfortunately, that still means millions of dollars of RSN rights fees drained from each team’s revenue stream.
Shortly after Diamond’s missed payment in February, MLB created the Economic Reform Committee (“ERC”) to address revenue disparity and local TV uncertainty.[9] Chaired by Dodgers chairman Mark Walter, the ERC is now tasked with working on a solution, which could mean a league-wide streaming service through MLB.tv that has fewer blackouts or none at all.[10]
However, a league-wide streaming service raises revenue disparity concerns as 16 clubs would still receive local broadcasting payments. With the fall of RSNs and the rise of cable-cutting, MLB may be looking to shift towards a national product with more centrally shared revenue, which could reduce payroll disparities between clubs.[11] MLB has already had success branching out to other streaming services, including TV deals for the postseason, which increases revenue sharing.[12] Regulating payroll disparity, however, is a long-disputed, contentious topic for MLB, the only American professional sports league without a salary cap.[13]
Although the next round of Collective Bargaining Agreement (“CBA”) negotiations is not until 2026, the decline of RSNs and increase in revenue disparity may provoke the owners to bring up the age-old salary cap issue once again.[14] The Major League Baseball Players Association (“MLBPA”) has steadfastly rejected the salary cap over the decades of CBA renewals and shown their willingness to go on strike to prevent any hard limitations on spending.[15]
Although labor peace may remain for the next few years, the issue with RSNs exacerbating revenue disparity foreshadows the upcoming difficult CBA negotiations regarding a possible salary cap that may push the MLBPA to go on strike.[16] However, the impact of the 1994-95 strike, which cancelled the World Series, has hopefully taught both players and owners that a costly work stoppage is the last situation anyone, especially the fans, wants to see.[17]
[1] Alden Gonzalez, Diamond, Owner of RSNs for 40-Plus Teams, Files for Bankruptcy, ESPN (Mar. 14, 2023), https://www.espn.com/mlb/story/_/id/35860875/diamond-owner-rsns-40-plus-teams-files-bankruptcy [perma.cc/SB6X-MJ8H].
[2] Lauren Bernstein, Diamond Sports Group, LLC’s Potential Bankruptcy and Its Effects on MLB, NHL & NBA Teams, Moritt Hock & Hamroff (Feb. 27, 2023), https://www.moritthock.com/wp-content/uploads/2023/02/February-Sports-Law-Alert.pdf [perma.cc/6HQQ-2TQ6].
[3] Id.
[4] Anthony Franco, MLB Monitoring Diamond Sports Group Uncertainty, MLB Trade Rumors (Feb. 22, 2023, 11:52 PM), https://www.mlbtraderumors.com/2023/02/mlb-monitoring-diamond-sports-group-uncertainty.html [perma.cc/WV68-E8L8].
[5] Id.
[6] Id.
[7] Id.
[8] Id.
[9] Nick Deeds, MLB Creates Economic Reform Committee, MLB Trade Rumors (Feb. 19, 2023, 12:41 PM), https://www.mlbtraderumors.com/2023/02/mlb-creates-economic-reform-committee.html [perma.cc/XFL7-T5ZU].
[10] Id.
[11] Id.
[12] Franco, supra note 4.
[13] See MLB Players’ Union Head: ‘We Will Never Agree’ to Salary Cap, Fox Sports (Feb. 25, 2023, 9:45 PM), https://www.foxsports.com/stories/mlb/mlb-players-union-head-we-will-never-agree-to-salary-cap [perma.cc/U78C-N4TQ].
[14] Franco, supra note 4.
[15] MLB Players’ Union Head: ‘We Will Never Agree’ to Salary Cap, supra note 13.
[16] Maury Brown, MLB Could See a Painful Lockout When Labor Deal Expires in 2026, and That’s Just the Start, Forbes (Feb. 22, 2023, 9:50 PM), https://www.forbes.com/sites/maurybrown/2023/02/22/mlb-could-see-a-painful-lockout-when-labor-deal-expires-in-2026-and-thats-just-the-start/?sh=7fadeea35615 [perma.cc/DL77-23EB].
[17] Id.
