Diamond RSN set to grant naming rights as MLB, NBA turn up the heat

Diamond Sports Group confirmed Tuesday 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 impending expiration of the company's previous deal with Bally's Corp.

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

“We recently entered into an agreement in principle with a third party on the rebranding of RSNs and we are working diligently to transform this agreement in principle into a documentary agreement,” Diamond's lawyer said, before noting that a A copy of the contract will be filed with the court shortly after it is drawn up.

Although Diamond has not disclosed the identity of its new business partner, Bloomberg reported this week that FanDuel is stepping in to replace Bally's. As part of the 91-page reorganization plan that Diamond filed earlier this year, the company revealed that it would withdraw from the previous naming rights deal that its former parent company, Sinclair Broadcasting, signed in 2020 .

At the time of the transaction, Sinclair received various warrants and options relating to Bally's common stock, valued at more than $184 million; For its part, Diamond was created to generate approximately $88 million in naming rights from Bally's over a 10-year period.

Bally's deal expires at the end of the 2024 MLB season. Speaking of baseball, the league once again took the opportunity to publicly question Diamond's chances of emerging from chapter bankruptcy protection 11. “We continue to have serious concerns about the viability of the debtors' business plan,” MLB attorney James Bromley told the court during today's scheduled update. Reiterating MLB's concerns about Diamond's failure to renew its distribution deal with Comcast, Bromley added that baseball remains in the dark regarding the details of DSG's current distribution deals.

“At this time, based on the information we have, we plan to file an objection and take the position that the debtors do not have a viable plan going forward,” Bromley said.

Diamond Counsel's return service included a bit of a verbal jab at the voluble Bromley. Acknowledging that the attorney's objections “have been well expressed, repeatedly, over the past several months,” the DSG representative argued that MLB's “concerns, at this point, are speculative.” Diamond's attorney noted that his league partners won't have enough evidence to approve or reject the reorganization plan until the end of the month, when official financial projections are expected to be filed in Judge Christopher Lopez's court.

Time is also running out for Diamond. In a filing last week, the company included a summary of its budget for the period May 18 to Aug. 16, a three-month period in which it expects negative net cash flow of $46.5 million. dollars. This is a significant improvement from the previous three months, in which Diamond forecast a deficit of $172.1 million.

As the summer budget shows, Diamond's weekly finances resemble a sine wave, as periods in which the company collects revenue from its channel partners are offset by payments to the teams under its umbrella. For example, for the week ending July 5, Diamond is forecasting a deficit of $71.5 million, while two weeks later its projected cash flow is expected to become positive again at $60.2 million.

As one might imagine, much of Diamond's money is diverted to his lawyers and various advisors. That said, if the company manages to emerge from bankruptcy, not only will it have wiped out more than $8 billion in debt, but it will also have ample liquidity on the other side. Under the terms of its previous agreement with creditors, Diamond will receive $450 million in financing from lienholders, an additional $495 million from Sinclair and $115 million in convertible notes to Amazon.

The NBA also expressed displeasure with Diamond's process, noting that the recent call to push confirmation from June 18 to July 29 will result in a hectic preparation for the 2024-25 season. NBA lawyer Vincent Indelicato said the urgency his client faces — if the reorganization plan fails, the league would be responsible for producing, distributing and marketing more than 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, does not appear to have a viable business this fall,” Indelicato said in concluding his speech.

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

The lawyer went on to point out that negotiations have stalled due to Comcast's “intransigence in negotiating its current position.” Generally speaking, the cable giant wants to move RSNs to a more expensive digital tier, while Diamond would like to strike a deal for a more gradual move away from the more widely distributed pay-TV platform.

Comcast began moving some of its RSN partners to the more expensive “Ultimate TV” tier well before its deal with Diamond expired, as ROOT Sports Northwest and SportsNet Pittsburgh subscribers discovered in recent months. If nothing else, “intransigence” is perhaps the most accurate way to characterize Comcast's approach to the prioritization system, as the company is not at all inclined to give in on its RSN strategy.

Late last month, a Diamond spokesperson said the company had reached long-term agreements with 10 of its 12 major distributors, before noting that the postponement of the confirmation hearing was intended to Help DSG put all its ducks in a row before the big reveal. “We have decided to postpone the hearing for a few additional weeks to focus on reaching rights agreements on mutually beneficial terms with our league and team partners and to finalize a well-updated business plan. ahead of the upcoming NBA and NHL seasons,” the rep wrote. in an email.

For his part, Judge Lopez suggested that it remains to be seen whether the failure to renew this key transportation agreement will cast a pall over Diamond's prospects. “I don’t know if Comcast is essential to a deal,” the judge said. “I think it’s time for everyone to put their cards on the table to see where we are.”

Barring further delays, the postponed confirmation hearing is expected 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 until it happens,” he said as he closed the hearing. “I encourage everyone to keep speaking out.”