Bally Sports’ decision to upgrade the RSN model sees MLB take over its own distribution

The signs have been there for a while, but when Diamond Sports Group’s Bally Sports collection of regional sports networks officially files for bankruptcy protection, it will begin the process of redefining the entire regional sports network model.

Rob Manfred saw it coming. There is little doubt that Adam Silver and Gary Bettman did as well. When Disney was forced by regulators to sell what was then the FOX Sports regional sports network for $10.6 billion to Sinclair’s Diamond Sports Holdings, it was a leveraged buyout. While subscribers to traditional TV packages had been peeling away for years, it accelerated the process when the pandemic hit. In 2022, Diamond entered into a transactional support agreement with lenders and bondholders for $600 million — a Band-Aid of sorts and a warning sign that the regional sports networks’ ability to pay their bills was on thin ice.

This week, the $140 million debt payment was skipped and Diamond officially entered into a 30-day grace period leading to what is sure to be court-controlled restructuring in which the teams collecting media rights will be at the end of the line behind the creditors.

As noted, the commissioners of the MLB, NBA and NHL were all aware that streaming was taking off while traditional TV has been on the wane, the bankruptcy news of the largest collection of RSNs is a disruption of significant proportions.

There are 19 Bally Sports regional sports networks broadcasting 14 MLB, 16 NB and 12 NHL teams. While MLB commissioner Rob Manfred said the expectation is that contractual obligations will be met — and that stance is surely what the other leagues are hoping — MLB, with the season underway, may be in the best position to go it alone.

“We’ve been very clear that if Diamond doesn’t pay, under every one of the broadcast deals, that creates a right of termination and our clubs will continue to terminate those contracts,” Manfred said during the media briefing in Florida on Thursday.

Manfred and the league have made it clear that all games will be made available to fans for the upcoming season. What happens to Bally may come in the form of all or just some of the RSNs not being able to work with MLB by fulfilling their obligations. How the league will cover the game could come in a couple of forms. First, the league today is poised to stream direct-to-consumer via its MLB.TV platform, which has been the gold standard for sports streaming services for years. An updated version of the service would bring games into the market, and with it, the league would take the opportunity to lift the blackout policy.

“Blackouts are kind of the flip side of the reach coin,” Manfred said. “We need to deliver products to fans who want to watch on platforms they typically use at a realistic price. That’s our No. 1 priority.”

For linear television, it is possible that the league could take over production given their history of doing so through MLB Network.

“If MLB stepped in, what we would do is we would produce the games, we would use our resource with MLB Network to do that, we would go directly to distributors, Comcast
CMCSA
Charter, the major distributors, and enter into a deal to have these games distributed on cable networks,” Manfred added.

What seems certain is that the collapse of Bally Sports will change the RSN model. Should MLB walk away and take back the media rights, it leaves a gaping hole in Bally’s programming. Baseball is by far the largest holding group of all the major sports given its 162-game schedule. With little else over the summer for Bally to plug into, the overall fabric of the RSNs appears to be collapsing.

But if Bally’s is the catalyst, it’s not the only RSNs on the brink. While it largely flew under the radar, three Warner Brothers/Discovery-owned AT&T
T
regional sports networks only partially paid the Pirates, Astros and Rockies this week.

While MLB seems prepared to address issues, the NBA and NHL have open questions. Both have made statements that all games will be available to fans, but with their seasons nearing the halfway point, it could be a wait-and-see game. On Friday, the NBA renewed its streaming rights for 12 months based on certain criteria that Bally must meet.

On MLB’s part, one wonders if there is superior faith that going it alone — while painful financially in one way — might not be in others. After all, if Manfred and the league saw this coming, so have the owners. Quietly, the league created a financial committee, and with it the change in the RSN model must have taken center stage. Can changes in income sharing be discussed? Could efforts to find new centralized revenues become more prominent? Some clubs, such as the Texas Rangers and San Diego Padres, were aggressive in free agency signings this offseason. Both clubs have agreements with Bally Sports RSNs. What the expenses look like in 2024 and beyond will be largely determined by the income going forward, which looks set to be less for some clubs as the model changes.

If there’s a joy in all of this, perhaps it’s this: if direct-to-consumer streaming becomes a bigger part of the local media equation, like Netflix
NFLX
, or Hulu, or Disney+, if you’re not offering quality programming, you’re hard-pressed to retain subscribers. It will put pressure on the clubs to work against competitive teams. In the past, with RSN deals locking in media rights fees, clubs have not had to worry about whether the teams they field perform well or poorly in the standings. Now it will have a direct effect on their subscriber base.

The younger demographic – those aged 18-24 – have flocked earlier. Now the older demographic will be pushed into it as the media landscape changes. And the Bally Sports bankruptcy is sure to be the biggest catalyst for change.