The inevitable seems to have finally happened. The cost of paying for traditional broadcast rights for dozens of professional sports properties has outweighed the revenue brought in by that product, resulting in a possible Diamond Sports bankruptcy.
While that might not seem to have much to do with the gambling industry on its face, one prominent player in that space could have some decisions to make. Additionally, the results of the bankruptcy restructuring could open some doors for gambling companies to swoop in.
The details of the Diamond Sports bankruptcy
According to Rachel Butt, Erin Hudson, and Gerry Smith of Bloomberg, Diamond Sports is “headed toward a complex $8.6 billion debt restructuring in bankruptcy court.” At this point, however, Diamond Sports has not confirmed that it is seeking Chapter 11 restructuring.
Diamond Sports is the corporation that Sinclair Broadcasting formed to manage its regional sports network (RSN) business. Regional sports networks are television broadcasters that carry live sporting events specific to each region they operate in.
Sinclair Broadcasting purchased a complete package of RSNs in 2019 from the Walt Disney Corp. Disney acquired them as part of its 20th Century Fox takeover.
Sinclair took on debt to complete the purchase of the RSNs and it’s that debt that Bloomberg says has Diamond Sports in a precarious position. The $630 million loan has an upcoming payment of $140 million due next month that Diamond Sports reportedly cannot make.
If Diamond Sports does move forward with Chapter 11 protection, it could possibly end or renegotiate broadcast rights deals with dozens of Major League Baseball, National Basketball Association, National Hockey League, and other sports properties that came with the RSNs.
Beyond the debt servicing, that’s another significant cost for Diamond Sports. While the exact numbers aren’t clear, it seems advertising and other revenue forms aren’t keeping up. The Bally’s Corp. has been part of Diamond Sports’ revenue.
Possible decision time for Bally’s
Late in 2020, the Bally’s Corp. purchased the naming rights for all of Diamond Sports’ RSNs. While never officially confirmed, reports stated that cost Bally’s $85 million at the time. Exactly how a Diamond Sports bankruptcy would affect that partnership is uncertain right now.
Bally’s completely abandoning the deal might be unlikely. For one thing, Diamond Sports has already launched a direct-to-consumer streaming service delivering RSN content under the Bally Sports name. However, that service has been limited both in reach and success.
For one thing, it’s not a completely on-demand service. Streaming rights are highly specific to users’ locations and restricted to those in-market parameters. In August 2022, Sports Business Journal reported that the platform wasn’t exactly exploding in registrations.
Thus, it might still be early enough for Bally’s to exit and a bankruptcy filing might give them the opportunity to do so. Bally’s isn’t necessarily busting at the seams with extra cash at the moment, either. Earlier this month, it announced layoffs for 15% of its interactive division staff.
Getting out of the naming rights deal could be a way for Bally’s to cut costs. That might look especially appealing if it’s not super excited about the future of the streaming service, too. Other gambling companies could step in as well.
More in-app streaming for sportsbooks?
Bloomberg reports that Diamond Sports is going to bank on the success of its streaming product and Chapter 11 restructuring could lead to expansion of that platform. However, that will depend on how the proceedings go.
The various MLB, NBA, and NHL franchises probably won’t be too excited about the prospect of getting less money for their broadcast rights. They might want to test the open market instead. There are other possibilities and several of them.
If the rights hit the market, though, gambling companies could be players. Numerous gambling companies already offer in-app streaming of live sporting events. For example, Caesars Sportsbook has select NFL games available in its app.
At this point, there are a lot of hypothetical situations. As the old axiom goes, the only constant is change.
