Many sports fans in Kentucky and around the country watch professional baseball, basketball and hockey on networks operated by Diamond Sports Group. The broadcaster’s regional networks own the rights to air games played by about half of the Major League Baseball, National Basketball Association and National Hockey League teams, but those relationships are now in jeopardy. That is because Diamond Sports Group filed for Chapter 11 bankruptcy on March 14.
Diamond Sports Group purchased its portfolio of regional sports networks from The Walt Disney Company in 2019 for $10.6 billion, and it took on debt to cover about $8 billion of the purchase price. The sports group’s major outgoings are rights payments to professional sports leagues and teams and annual interest payments. In February, the company failed to make a $140 million interest payment to its bondholders. Diamond Sports Group attempted to restructure its debt and negotiate new payment terms during a 30-day grace period, but those efforts failed to produce any new agreements. The company says that it will continue to air games and make rights payments during its business bankruptcy.
Like brick-and-mortar retailing, traditional broadcasting is struggling in the information age. Fans that once had to pay for a cable or satellite television subscription to watch professional sports can now find the action they want on streaming platforms that charge far less. The impact of these new entertainment choices is being felt the most by broadcasters that charge a premium over and above a basic cable or satellite subscription. Diamond Sports Group launched a streaming service in 2022 called Bally Sports+ that caters to cord-cutters. First-lien lenders will be unaffected by Diamond Sports Group’s proposed Chapter 11 restructuring plan, but other creditors will be asked to swap their debt for equity.
Many people now watch sports and other forms of entertainment on computer rather than television screens, and broadcasters that do not adapt to this new paradigm will find the coming years very difficult indeed. Steaming was already popular when Diamond Sports Group spent more than $10 billion on regional sports networks, but the company’s executives waited until 2022 to enter this lucrative market. This seems to be a bankruptcy filed by a company that reacted to a major market change too late.