Amazon wants to invest in Diamond Sports Group, the embattled regional sports network operator, so Diamond can continue operating after this year. A bankruptcy judge ultimately has to approve that plan, which likely couldn’t happen any earlier than May or June.
Regardless of the outcome, three MLB teams that potentially were not going to be carried by Diamond in 2024 — the Cleveland Guardians, Minnesota Twins and Texas Rangers — are expected to remain with Diamond this season on one-year deals, a person briefed on the league’s thinking told The Athletic.
To better understand both the bankruptcy case and what the Amazon-Diamond relationship could mean for baseball overall, The Athletic interviewed two bankruptcy lawyers — Brian Davidoff of Greenberg Glusker, and Bradford Sandler of Pachulski, Stang, Ziehl & Jones’ — as well as two sports-media rights experts, Lee Berke and Patrick Crakes, who run eponymous consultancies.
The Athletic also spoke to two others briefed on the matter who were not authorized to speak publicly. Questions have been modified for clarity.
What is this plan?
Diamond carries the TV rights to 37 teams across MLB, the NBA and the NHL, and broadcasts those teams on its Bally-branded networks. Diamond filed for bankruptcy in March last year.
Before Amazon came in, Diamond was planning on winding down operations, laying the groundwork for a world in which 2024 was its last year. Diamond has now told the court that it can operate beyond this year with Amazon’s help and the cooperation of various creditors. Amazon is putting in $115 million, on top of $450 million that would come to Diamond from creditors. Ultimately, a new company would be formed to manage most of Diamond’s current assets.
So if it goes forward, can I watch games on Prime? What does it mean for watching in-market and out-of-market?
Let’s step back for a second. All of this has to do with watching games in-market. If you’re out of market, nothing changes: you sign up for MLB.tv or MLB Extra Innings, and that’s that.
If the plan goes through, not too much would change in-market either, at least not in the short term.
Say you’re a Cardinals fan living in St. Louis or the territory comprising the St. Louis overall market. There are two sets of rights to think about: linear/TV rights, and direct-to-consumer/streaming rights.
The linear rights are what bring you games when you sign up for cable or satellite or a digital service such as fubo. So if you get cable, and your cable provider carries a Bally channel, those are the linear rights at work.
Under this plan, Diamond would continue to broadcast games over TV. So long as you get the relevant Bally channel inside your market, you’d be good to go.
Then, the streaming rights govern whether consumers have another access point — a way to get games online without signing up for cable TV/satellite/fubo.
To that end, Diamond presently offers Bally Sports Plus, bundling together the teams for which it also holds the digital rights. For $20 a month today, you can stream your team’s games inside the market, so long as your team is carried by a Bally station.
With the Amazon-Diamond plan, the Bally name would go away entirely, so the package would be called something new. And the price would almost certainly increase. But the equivalent of the Bally Sports Plus offering would exist, and be marketed by one of the most powerful streaming services out there: Prime.
But it wouldn’t be included with the base price of a Prime subscription — it would require an additional fee, similar to signing up for Max or Showtime through Prime.
“This is part of channels, where you buy channels,” said Patrick Crakes of Crakes Media. “Same thing where you can buy Paramount Plus there.”
It’s not clear whether Prime would be the exclusive way to access the package, a person briefed on Diamond’s plans said. A press release said Amazon would be Diamond’s “primary” streaming partner, so it seems possible other options might exist.
How many teams would show up on Diamond’s online package?
Diamond is likely to have 12 teams’ linear rights this season, but only five teams’ digital rights: The Detroit Tigers, Kansas City Royals, Miami Marlins, Milwaukee Brewers and Tampa Bay Rays.So the Cardinals, for example, would not be newly included in any streaming package Diamond offers via Prime, unless some new arrangement was reached.
But MLB, which has had a highly contentious relationship with Diamond, is unlikely to grant new rights to Diamond itself. MLB would be more likely to grant digital rights to Amazon or a similar service directly — and the league has had an eye on creating some sort of national package that bundles multiple teams presumably without Diamond as a middleman. But that’s still far off.
It’s been unclear if Diamond would carry three MLB teams in 2024 that it carried in the past: the Cleveland Guardians, Minnesota Twins and Texas Rangers. What’s going to happen with those three teams if this plan goes forward?
All three teams are expected to remain with Diamond for 2024 on one-year deals, according to the person briefed on the league’s thinking. The deals are highly unlikely to include any streaming rights for those teams, which Diamond didn’t carry before either. Perhaps as early as this week, those deals will move closer to official — Diamond said in court it wants to know whether the teams will accept the terms that have been offered by Feb. 1.
As a technical matter, the Guardians and Rangers were in the same boat: both teams were under contract with Diamond for 2024, but Diamond was threatening to drop them unless they re-negotiated their rights fees. Meanwhile, the Twins’ deal with Diamond expired after 2023, so they’ve been working on a new deal.
With those three teams expected to be in the fold, Diamond would be carrying 12 MLB clubs in 2024. That trio joins the Los Angeles Angels, Milwaukee Brewers, Atlanta Braves, St. Louis Cardinals, Miami Marlins, Tampa Bay Rays, Cincinnati Reds, Kansas City Royals and Detroit Tigers.
It’s unclear just how much the Guardians and Rangers will have their 2024 rights fees reduced, but the person briefed on the league’s thinking said it would be 15 percent or less.
What is the likelihood that this plan (or some version of it, with Amazon leading the way) is confirmed?
Experts think it has a pretty good shot.
According to Bradford Sandler of Pachulski Stang Ziehl & Jones, “Especially considering how long the bankruptcy has been going on — because by bankruptcy terms, the case is long in the tooth — and with Amazon coming in to be the plan sponsor, I would think it is highly likely to play and it’s going to be approved.”
Brian Davidoff, of Greenberg Glusker, agreed: “Often, when the material parties, the majority of the main parties, have come together in a big case — you know the expression the train has left the station? It’s very difficult to make it go into reverse. … The fact that they’ve got this restructuring support agreement is a very solid indication that the parties are on the right path to plan confirmation.”
Is the plan actually sound long term?
Now you’re in the thick of it.
Baseball executives still wonder how Diamond will make ends meet. Diamond this year might owe more than $800 million in rights fees payments to 12 MLB teams. Contrast that with Amazon’s investment, which could grow to as much as $165 million early in the deal.
“It’s just not that much money when put in context of the problem that they have,” said the person briefed on the league’s thinking.
Diamond’s financial projections also face skepticism in baseball circles, the person continued, because Diamond has repeatedly “underestimated the decline on the revenue side, and wildly overestimated what they can do in direct-to-consumer.”
With the Amazon plan, Diamond is projecting that its earnings before interest, taxes, debt and amortization (EBITDA) will grow from $81 million in 2023 to $280 million in 2026.
With its streaming, direct-to-consumer product, or DTC for short, Diamond sees a $77 million loss in 2023 turning into a $369 million gain in 2026. (And before expenses, Diamond thinks DTC revenue would go from $49 million last year to $658 million in 2026 — a huge jump.)
How would Diamond make that happen? More details are expected to come out in court over time, but a person briefed on Diamond’s plans said “the revenue increase is really a function of the projected increase in subscribers and then a corresponding increase in ad sales.”
Diamond projects that its DTC subscriber numbers rise from 300,000 in 2023, to 1.7 million this year, 2.7 million the next and on to 3.6 million in 2026.
“A big piece of that is really having instant access to the Prime Video subscriber base,” the person continued. “There’s a consortium of sports fans who are already in there, it just makes it easier to build that subscriber base.”
Other onlookers are skeptical of the projections as well.
Crakes, who served as an advisor to debtors in the case, described them thusly: “Let’s just call them enthusiastically optimistic.”
Sandler said these kinds of projections often turn out to be overly rosy.
“I look at the rate of growth of the projections. And if they look like they’re a hockey stick, I usually think that they’re either full of s—, or they’re at best, unreasonably optimistic.”
A look at the current subscriber numbers makes those projections seem outsized, said Lee Berke, president of LHB Media.
“It depends on how (the streaming product is) priced, it depends on how it’s marketed,” Berke said. “And up until now, Bally Sports Plus has been at $20 a month, and that generated 220,000 subs nationwide, total. Which doesn’t get you anywhere close to the projections that they have there.”
In materials Diamond put out this month, it listed 300,000 DTC subscribers for 2023.
“Amazon generates substantial traffic and has substantial marketing resources and awareness, distribution,” Berke continued. “The question is, how many teams are we talking about? What are the leagues going to have to say about this? I think all this for me just poses a lot of questions.”
Davidoff was also surprised by the projections, though he was at least willing to entertain the possibility that the numbers might work.
“I guess maybe that’s the magic of Amazon,” he said.
“Those numbers are so big, they are surprising in and of themselves, yes,” he added later. They are just such significant increases. … But if you think about the Hertz bankruptcy case, they projected fairly moderate revenue increases and they have been fabulously successful, beat their projections. So it does happen.”
How much do those numbers matter to whether the plan is approved?
Even if the projections are optimistic, the parties involved still need to prove that they’re close enough that the plan will actually work.
“The plan technically has to be feasible, meaning, that it’s not likely to be followed by another bankruptcy,” Sandler said. “The way they do that is they’ll get an expert to come in and say, ‘Yeah, we looked at all the numbers, and if the company does X, Y and Z, we think that these are realistic targets.’ That’s what the judge will have before him, unless somebody challenges it, probably with either cross-examination or, better yet another expert.”
Would MLB have the power to stand in the way of the plan if it wanted to?
The big creditors like J.P. Morgan are the parties that matter most, and there are different classes of creditors.
The individual teams have contracts with Diamond Sports Group — the rightsholder agreements that allow Diamond’s stations to broadcast a team’s games. The teams therefore are considered “executory contract holders,” Davidoff said. And per Sandler, “every contract counterparty is a creditor.”
So MLB and the teams would certainly not be voiceless — “They have as much a role to play in this as anybody,” Berke said — even if they are not on the same footing as a major creditor.
To Davidoff, the positions of MLB (as well as the NBA and NHL) should matter to a judge, because of practicality. An environment where the leagues are forced to do something could make for bad business.
“Do they want to have that kind of relationship going forward? I tend to think that they wouldn’t,” Davidoff said. “There’s going to have to be cooperation by all the major parties in order for this to happen.”
But what probably matters most is whether under a new structure, Diamond is in a position to make good on its contracts. MLB would “have a pretty hard time going into court saying they’re gonna get screwed on the transaction,” Sandler said, so long as there’s a guarantee of payment.
So will MLB try to stand in the way of this plan?
It doesn’t appear likely, although the person briefed on the league’s thinking said no decision had been made.
Whether they should object, and whether the plan is good for MLB or not, remain open questions.
From an ownership and team perspective, what matters is getting paid. And within that, you can think of short-term and long-term considerations.
One way or another, 2024 was probably pretty secure for the 12 teams at this point.
Before Diamond brought the Amazon plan to the court, Diamond was working on wind-down plans for 2024. Diamond had reached a deal with the NBA and NHL on what that would look like for those leagues. A deal with MLB in the same vein had not been formalized in court, but terms had been agreed to behind the scenes, said the person briefed on the league’s thinking.
So the rub is whether or not Diamond can now actually successfully operate beyond 2024 — essentially, whether the Amazon plan is actually solid. MLB teams want certainty, and they have a lot of doubt right now, even with the Amazon plan.
The one wrinkle is that under the wind-down plan, the 12 MLB teams would have gotten all their rights back going into 2025. Combine that with the three other teams who don’t have RSN partnerships at the moment — the Diamondbacks, Padres and Rockies — and MLB would have had at least 15 teams it could have potentially sold to a place like Prime, starting in 2025.
(It’s possible three other teams — the Astros, Mariners and Pirates, clubs whose RSNs used to be with Warner Bros. Discovery — could be in that mix as well.)
From the perspective of giving fans more options to watch games, that was a really intriguing possibility. Commissioner Rob Manfred wants to try to create some sort of national streaming package — the in-market equivalent of MLB.tv — although it may take years, and it’s unclear how many teams he’d be able to get into that package, or which teams. There would be tricky negotiations, particularly with big-market teams who make a lot of money from their TV rights.
But the reality is that the old RSN model is not something that MLB teams want to disappear entirely. The money from the old cable model is very difficult —if not impossible — to replicate via streaming.
Diamond’s continued existence is “a good thing,” said Crakes.
“The system that generates the local-media value … has been and remains nearly 100 percent derived from the paid TV bundle,” Crakes said. “Nothing’s changed. Even though… we have media streaming businesses, nearly all of those businesses don’t make any money. And it’s not like streaming’s new.
“And the more segmented you get — by segmented I mean individual (offerings by a league like MLB), the less likely it is you’re gonna make money. And are you even gonna break even? So the paid TV bundle was a natural monopoly that scaled to nearly every US TV home in the United States. … That business worked really well.”
The old cable model had everyone paying for sports teams whether they were fans or not: if you signed up for Time Warner Cable in a given market, you signed up for your local team’s RSN.
Consumer choice via digital options has now threatened that model. But selling a package individually, where people might be making much shorter-term commitments, will come with a high price point, Crakes said.
So Diamond continuing to operate, and pay MLB teams, is not a bad thing from a cashflow standpoint for the clubs — but it does potentially slow the process of bringing about a league-wide streaming package, and therefore more access points to games for fans, who are ever frustrated with how difficult it can be to watch inside a given market.
(At the point such a package arrives for MLB, the price point is going to be interesting to see.)
Ultimately, Manfred has talked about a future with a hybrid model: RSNs, plus increased digital options available concurrently.
What comes next?
There are two major steps, Sandler said.
The plan requires a disclosure statement, with “adequate information for a hypothetical investor to know whether they should invest in the plan.” The standard is actually relatively low for a judge to approve the disclosure statement, he said.
Then, all the creditors have to vote. Sandler guessed confirmation could come in May.
“Let’s say it gets confirmed June 1, hypothetically,” Sandler said. “If the plan is subject to a transaction occurring, it could take weeks before the plan actually goes effective. … When a plan goes effective, that means it’s now binding on all the creditors and the company.”
What if the plan goes through, but then not long after, the company is in financial peril again?
“There have been more than one instances of what are (colloquially) called Chapter 22’s, where there’s a second Chapter 11, because the first one didn’t work,” Davidoff said. “Now, that tends to be the minority of the Chapter 11’s, particularly the large Chapter 11s.
“Sometimes, that second Chapter 11 is a liquidating Chapter 11, as opposed to a restructuring Chapter 11. But it tends to be the minority, because the whole idea of going through the (first) bankruptcy is to restructure the balance sheet.”
(Top photo: Todd Kirkland / Getty Images)