Sinclair Broadcast Group’s large wager on regional professional sports went awry on Tuesday when the division of the corporation that broadcasts local events filed for Chapter 11 protection.
The corporation is attempting to restructure the more than $8 billion in debt it accrued in 2019 as a result of its acquisition of regional cable networks.
During the bankruptcy proceedings, Sinclair’s Diamond Sports Group indicated it will continue to program the Bally Sports-branded networks with live sports.
Diamond Sports broadcasts the games of over 40 clubs, including those from Major League Baseball and the National Hockey League. It has access to 19 channels.
The filing for bankruptcy was anticipated.
In a statement, Diamond Sports claimed it was “finalizing a restructuring assistance agreement” with debt holders and its parent company, Sinclair, “to remove more than $8 billion of the firm’s outstanding debt.”
The firm said it has filed a petition for Chapter 11 bankruptcy protection in the Southern District of Texas to expedite the reorganization.
Diamond Sports’ advisors and board of directors have been “considering strategic possibilities… in conjunction with creditors to position the firm for long-term success,” according to a statement from Diamond CEO David Preschlack.
After acquiring the networks from Walt Disney Co. for roughly $10 billion in 2019, Diamond Sports has been struggling with a severe financial burden. Within months after the conclusion of this transaction, the global COVID-19 pandemic was proclaimed, and worries about the virus spread led to a disastrous month-long suspension of professional sports, including Major League Baseball.
Also, the pace of cord-cutting has diminished the company’s anticipated income. Similarly, professional sports clubs have requested that television networks pay more for the rights to broadcast their games.
Technology businesses with large funds have entered the market, dealing a second blow to traditional cable channel owners. Apple TV+ has acquired the rights to broadcast Major League Soccer games, while Amazon Prime Video is currently carrying “Thursday Night Football”
Cable sports networks used to be among the most profitable channels available. Yet increasingly, the economics of broadcasting local sports has come under attack, especially outside the nation’s major media regions.
Warner Bros. Discovery, which purchased the AT&T sports networks last year, allegedly informed clubs of its desire to leave the industry. These channels cover Colorado, Houston, and Pittsburgh-based clubs.
This week, Diamond Sports must decide whether it will continue to pay fees to the Arizona Diamondbacks in a widely monitored market.
In February, Diamond Sports declared that it will not make $140 million in payments to its creditors. Moreover, sports analysts have been monitoring the situation in San Diego, where Diamond televises the increasingly popular Padres’ games.
Rob Manfred, the commissioner of Major League Baseball, has stated that the league will ensure that baseball fans can see their local teams play.
At a February press conference, Manfred stated that MLB teams might terminate their contracts with Diamond Sports if the company failed to pay its debts.
“Should Major League Baseball intervene, we would create the games,” Manfred stated at the time.
Formerly, the Bally channels were known as Fox regional sports networks. 21st Century Fox parted ways with them as part of its $71 billion sale of entertainment assets to Disney. Antitrust officials compelled Disney to sell the channels out of concern that Burbank-based ESPN would dominate the Televised sports market.
When Disney initially agreed to acquire Fox’s assets, experts believed that Fox’s regional sports network portfolio was worth around $20 billion. Sinclair participated in the auction in 2019 and ultimately decided to pay around half that amount.
Uncertainty surrounds the duration of the bankruptcy procedures and the eventual buyer of the channels.
“Diamond aims to use the procedures to reorganize and improve its balance sheet,” the firm said in a statement, adding that it is “fully capitalized with about $425 million of cash on hand to finance its operations and reorganization.”
Sinclair will continue to offer management services during the duration of the bankruptcy proceeding.