Facing bankruptcy and a looming court deadline, Sinclair Broadcasting subsidiary Diamond Sports has proposed a significant cut in broadcasting rights fees to the NBA and NHL. The beleaguered broadcaster, in charge of the Bally network, is the largest regional sports network in the US and declared bankruptcy this March, burdened with $9 billion in debt. The move comes as a desperate attempt to avoid liquidation and ensure its survival for at least another year.
The New York Post reports a source directly involved says Diamond Sports has offered to reduce fees by up to 20% ahead of a September 30 deadline set by the bankruptcy court. The company currently pays around $600 million annually for NBA broadcast rights alone, making this reduction potentially worth up to $120 million. Contract details with the NHL have not been disclosed, but both leagues are reportedly considering the cut in fees.
The precarious situation also puts a strain on the NBA and NHL, which are ill-prepared for Diamond’s potential liquidation. The NBA has contingency plans to stream games in local markets should Diamond fail to reach an agreement. Such a failure could also impact the NBA’s salary cap, which relies partly on media rights fees, said an NBA executive.
Diamond Sports, which sold naming rights to Bally Sports, is also in the process of making more profitable contracts to allow some recovery for its creditors. Contracts include those with NBA teams like the Cleveland Cavaliers, Miami Heat, and Los Angeles Clippers, as well as NHL teams such as the St. Louis Blues, Dallas Stars, and Tampa Bay Lightning.
Moreover, the broadcaster has reached a one-year carriage agreement with Comcast and is in similar talks with DirecTV. However, negotiations with Charter Communications are still ongoing. Diamond is also in a legal battle with its parent company, Sinclair, alleging that Sinclair extracted $1.5 billion in dividends and fees even as Diamond was on the brink of bankruptcy.
The situation remains fluid, with no viable buyers for Diamond in bankruptcy thus far, despite MLB considering an acquisition earlier this year. The source also indicated that Diamond’s creditors might have a better financial outcome from winning or settling the lawsuit against Sinclair than renegotiating existing deals.
