This has been a big week when it comes to broadcasts of MLB games. Marred in financial trouble, Diamond Sports Group decided it would not pay the rights fee to the San Diego Padres, triggering MLB to take control of the club’s broadcast rights. Diamond Sports Group, the Baltimore-based parent company of 19 Bally Sports channels, had already missed payments to the Arizona Diamondbacks, Cleveland Guardians, Minnesota Twins, and Texas Rangers this season. However, because the Padres and the company were joint owners of Bally Sports San Diego, the rights immediately flowed to the club and league when Diamond failed to pay up.
Ironically, the news that MLB would take over broadcasting Padres games in lieu of Diamond came right before a significant bankruptcy court case determining the fate of Diamond’s contracts with the four clubs it skipped payments to. Diamond, which filed for bankruptcy earlier this year, argued it should be able to pay less than the original contract mandated due to changes in market dynamics in the era of cord-cutting and the decline of cable television.
However, after a couple of tension-filled days in a Houston courtroom, Judge Christopher Lopez ruled in favor of MLB, stating that baseball games were an essential service and DSG was obligated to pay the full contract rate.
This was a huge win for MLB and the D-backs, Guardians, Twins, and Rangers because taking less than full price while still relinquishing broadcasting rights to Diamond would’ve been detrimental to their respective bottom lines. However, just because these teams are entitled to payment doesn’t mean Diamond will come through with the money owed.
Just as Diamond decided not to pay the Padres, the company will need to decide whether it will be able to keep the contracts or reject them. If they cannot pay up, there’s a strong likelihood more teams will be in the Padres' position soon.
This story has massive ramifications that go beyond how fans consume baseball. Local television money is a major source of revenue for every MLB team. While the exact amount of money each team rakes in varies by market, there’s no doubt that the last thing teams want is to miss out on these payments. Yes, MLB does have a lucrative national TV deal, and smaller market teams benefit from revenue sharing. But outside of the Yankees, Red Sox, Mets, Dodgers, and Cubs who either own or receive massive payments from their regional sports network, the decline of RSNs is a big development to watch moving forward. Fans might not care if their teams are making a profit or not, but when their team is hypothetically unable to sign the star free agent they want over the winter, they might be a little more concerned.
While the RSN downfall has many cons for teams, it isn’t all bad news. One of Rob Manfred’s top priorities currently is expanding the game’s reach. A big part of doing that is making the sport accessible to as many people as possible. MLB.tv is one of the league’s best products that enables fans to watch nearly every out-of-market game. On the flip side, because cable distributors pay high dollar for exclusive broadcasting rights for RSNs like Bally Sports, the in-market streaming on MLB.tv is often susceptible to local blackouts. However, with Diamond Sports potentially losing control of broadcasts, MLB could be on the precipice of being able to offer more in-market streaming opportunities. For example, the league is offering San Diegans the opportunity to stream Padres games locally for a little bit more than they would be paying for MLB.tv otherwise. We could see more of this in the future, especially if Diamond doesn’t pay up in Arizona, Cleveland, Minnesota, and Texas.
While MLB won the court case, this story is far from over. MLB isn’t the NFL where national television money can satisfy each of its teams. Local television money is a big facet of not just MLB teams, but NBA and NHL teams too. As cable television has seen many changes over the past few years, RSNs are definitely feeling its effects. The economics of baseball have been in the news lately with the return from COVID-19 in 2020 and the arduous CBA negotiations last year. How MLB games are broadcasted and what revenues are available to teams is something every baseball fan should be monitoring in the short and long term.
Brendan can be found on Twitter @_bbell5