Diamond RSNs Near Naming-Rights Deal as MLB, NBA Turn Up the Heat

Diamond Sports Group on Tuesday confirmed that it has reached an agreement in principle on a new naming-rights sponsor for its 18 regional sports networks, a move necessitated by the looming expiration of the company’s legacy deal with Bally’s Corp.

Speaking in a virtual status meeting convened earlier today by the U.S. Bankruptcy Court for the Southern District of Texas, an attorney for Diamond said the framework of a new pact is now in place.

“We recently reached an agreement in principle with a third party on rebranding the RSNs and we are working diligently to turn that agreement in principle into a document agreement,” Diamond’s counsel said, before noting that a copy of the contract will be filed with the court shortly after it’s been papered.

While Diamond did not disclose the identity of its new business partner, Bloomberg this week reported that FanDuel was stepping in to replace Bally’s. As part of the 91-page re-organization plan Diamond filed earlier this year, the company disclosed that it would extricate itself from the legacy naming-rights deal that its estranged parent company, Sinclair Broadcasting, inked back in 2020.

At the time of the transaction, Sinclair received various warrants and options with respect to the common stock of Bally’s, valued at more than $184 million; for its part, Diamond was set up to generate approximately $88 million in naming-rights fees from Bally’s over a span of 10 years.

The Bally’s deal runs out at the end of the 2024 MLB season. Speaking of baseball, the league once again took the opportunity to publicly cast doubt on Diamond’s chances to emerge from Chapter 11 bankruptcy protection. “We still have substantial concerns about the viability of the debtors’ business plan,” MLB attorney James Bromley told the court during today’s scheduled status update. Reiterating MLB’s concerns over Diamond’s inability to renew its carriage agreement with Comcast, Bromley added that baseball remains in the dark as to the particulars of DSG’s extant distribution deals.

“At this point in time, based on the information that we have, we anticipate filing an objection and taking the position that the debtors do not have a viable go-forward plan,” Bromley said.

Diamond counsel’s return serve included a little verbal swat at the voluble Bromley. Acknowledging that the attorney’s objections “have been well-voiced, time and again, over the last several months,” DSG’s rep argued that MLB’s “concerns, at this point, are speculative.” Diamond’s advocate noted that its league partners won’t have sufficient evidence with which to approve or dismiss the re-org plan before the end of the month, when the official financial projections are set to be filed with Judge Christopher Lopez’s court.

Time is of the essence for Diamond as well. In a filing late last week, the company included a summary of its budget for the period May 18-August 16, a three-month stretch in which it projects a net cash flow of negative-$46.5 million. That’s a significant improvement compared to the previous three-month span, in which Diamond projected a deficit of $172.1 million.

As is evident from the summer budget, Diamond’s week-to-week financials look like a sine wave, as periods in which it collects revenue from its distribution partners are offset by payments to the teams under its umbrella. For example, for the week ending July 5, Diamond anticipates a $71.5 million deficit, while just two weeks later its projected cash flow is expected to be back in the black at $60.2 million.

As one may well imagine, a good deal of Diamond’s money gets diverted to its attorneys and various advisors. That said, if the company can successfully extricate itself from bankruptcy, not only will it have erased more than $8 billion in debt, but it also will have plenty of ready cash on hand on the other side. Per terms of its earlier deal with creditors, Diamond will receive $450 million in financing from the lien holders, another $495 million from Sinclair and $115 million in convertible notes care of Amazon.

The NBA also expressed dissatisfaction with Diamond’s process, noting that the recent appeal to push the June 18 confirmation back to July 29 will make for a hectic run-up to the 2024-25 season. NBA lawyer Vincent Indelicato said the urgency his client faces—should the re-org plan come up short, the league would be responsible for produce, distribute and market upwards of 70 games for each of the 15 teams currently under contract with Diamond—is exacerbated by the same lack of information decried by Bromley.

“Diamond, in our view, doesn’t appear to have a viable business come this fall,” Indelicato said as he wrapped up his remarks.

Earlier in the hearing, Diamond’s counsel confirmed that negotiations with Comcast remain “at an impasse” a month after 15 of the RSNs went dark in the cabler’s systems. Comcast, which closed out the first quarter of 2024 with 13.6 million residential video subscribers, accounted for as much as 16% of Diamond’s customer base.

The attorney went on to note that talks have stalled as a result of “Comcast’s intransigence to negotiate off their current position.” In the broadest strokes, the cable giant wants to bump the RSNs to a higher-priced digital tier, while Diamond would like to work out a deal for a more gradual shift away from the more widely distributed pay-TV platform.

Comcast began shifting some of its RSN partners to the pricier “Ultimate TV” tier well before its pact with Diamond expired, as subscribers to ROOT Sports Northwest and SportsNet Pittsburgh discovered in recent months. If nothing else, “intransigence” is perhaps the most accurate way to characterize Comcast’s approach to its tiering scheme, as the company is not at all inclined to cave on its RSN strategy.

Late last month, a Diamond spokesperson said the company has locked in long-term deals with 10 of its top 12 distributors, before noting that the delay of the confirmation hearing was designed to help DSG get all its ducks in a row prior to the big reveal. “We have determined to move the hearing a few extra weeks to focus on reaching rights agreements on mutually beneficial terms with our league and team partners and to finalize an updated business plan well in advance of the upcoming NBA and NHL seasons,” the rep wrote in an email.

For his part, Judge Lopez suggested that it has yet to be determined if the inability to renew that one key carriage agreement will cast a pall over Diamond’s prospects. “Whether Comcast is essential to a deal or not, I don’t know,” the judge said. “I think it’s time for everyone to put their cards on the table to see where we are.”

Barring another delay, the rescheduled confirmation hearing is set to take place in Houston on the morning of Monday, July 29. In the meantime, Judge Lopez advised all parties to keep the lines of communication open. “You never know what happens ‘til it happens,” he said, as he brought the hearing to a close. “I encourage everyone to continue talking.”