For as rough a time as the Cubs have had with Marquee Sports Network, from a poorly executed carriage strategy to tumbling ratings, they are in a much better spot than the Cardinals right now. That’s because the Cubs own Marquee in conjunction with Sinclair, the media giant that made an egregious blunder by spending nearly $11 billion to purchase 21 Fox-branded regional sports networks from Disney in May of 2019. It was a dumb move then and it looks even dumber now.
Diamond Sports Group, the Sinclair subsidiary that manages 19 RSNs now under the Bally Sports banner, has hemorrhaged money for the last few years and is now preparing to file for Chapter 11 bankruptcy. There was a thought back in November that the NBA, NHL, and MLB might band together to take over some or all of DSG’s ownership, but now it looks like the media outfit will have to restructure.
Just for the sake of clarity here, Marquee is not part of this mess and is not at risk of going down with the ship.
As Bloomberg reported, Prudential Financial, Fidelity, Hein Park Capital Management, and Mudrick Capital Management would become owners of the Bally Sports stations as Sinclair’s debt converts to equity. I’ll skip all the fun financial stuff about how a huge portion of that outstanding debt is trading at pennies on the dollar and get to what this could mean for a very pesky Cubs rival.
Media rights deals can be terminated or renegotiated as part of the restructuring, so teams relying on revenue from Bally RSNs might be in for a very rude awakening. The Cardinals are one such team and they are heading into the sixth year of a deal initially signed with Fox Sports Midwest that was to pay them north of $1 billion over 15 years. That means the Redbirds are in danger of losing more than $66.6 million in annual revenue just like that.
The bright side is that the Cards will probably get their competitive balance picks back Bally Sports tanks, plus they still have devil magic on their side. Oh, and we can’t forget Chip Caray. They don’t need money to fleece teams into paying them to take on All-Stars or to turn create-a-players into impact contributors. Of course, it’s a little easier to operate frugally when you’ve got the safety net of TV money secured for another decade.
If that media rights revenue really does vanish, Cardinals owner Bill DeWitt might look like less of a liar for saying baseball teams don’t make money.
“The industry isn’t very profitable, to be quite honest,” DeWitt claimed in 2020. “And I think [the players] understand that, but they think the owners are hiding profits and this and that. You know, there’s been a little bit of distrust there.”
There’s also been a little bit of distrust between MLB and Sinclair, particularly when it comes to the latter’s DTC streaming service, so you have to think this could open the door to the league trying to expand its own carriage efforts. Sinclair hasn’t gotten much traction on its stand-alone streamer subscription and may opt for a per-game option, but it won’t matter if rights fees get too low for teams to stomach.
After all, it’s not just the Cards that will be hurt here. The Angels, Braves, Brewers, Diamondbacks, Guardians, Padres, Rangers, Rays, Royals, Reds, Twins, and Tigers are all on a Bally Sports RSN. When you add in NBA and NHL teams, Diamond owes all of its team partners around $2 billion in fees to maintain existing agreements. That’s not easy to do with less than $600 million on hand.
What if MLB was able to bring most or all of its teams under one umbrella for a streaming service that didn’t black out local games or require a separate cable/satellite subscription? Eliminating the broadcast partners whose rights are at the heart of blackout restrictions sure would make it easier for the league to do something like that. This is definitely a situation to monitor over the next few months.