How does looming bankruptcy for Bally Sports affect the Braves?

Jan 28, 2023 - 3:00 PM

As you may have seen in the news recently, it’s looking like the company that runs Bally Sports is heading for bankruptcy. Instead of trying to explain what’s going on like I’m some business genius, I’ll let the people who actually know what they’re talking about do the explaining. Take it away, Bloomberg:

After leveraging up to buy regional sports networks from Walt Disney Co. in 2019, Diamond Sports Group LLC is suffering from a decline in cable-TV subscribers, spurring negotiations with creditors and major sports leagues about its viability as a going concern. The outcome will have serious implications for the $55 billion world of sports-media rights: the company’s channels showcase Major League Baseball, National Basketball Association and National Hockey League games to fans from Detroit and Phoenix to San Diego.

With financial troubles mounting, the Sinclair Broadcast Group Inc.-owned firm will likely skip $140 million in interest payments due mid-February, kickstarting a 30-day grace period, according to people familiar with the matter.

[...]

Earlier this month, the league hired Billy Chambers, a former executive at Sinclair and Fox Sports, to a newly created position of executive vice president for local media. Chambers will work with baseball teams on the “most effective means to distribute games to fans in local markets throughout the country,” according to a league statement.

In a bankruptcy, Diamond would have the option of ending contracts with teams, potentially cutting off crucial industry revenue while also allowing teams to reclaim their media rights. The company could also halt payments to the teams while keeping the contracts in place. If a deal is not reached, both MLB and creditors are preparing for baseball teams not to be paid, according to two people.

That last line that talks about the teams not being paid is pretty concerning! It’s especially concerning when you consider that the Braves were actually looking forward to 2023 when it came to their TV deal. Now, we’ve talked about Atlanta’s TV deal on this website before and the gist is that the team locked themselves into a deal at what seemed like the worst possible time. Basically, it seemed like the Braves were simply poised to just wait out the contract until it eventually ended all the way in 2027.

Still, the Braves were looking forward to 2023 due to the fact that they managed to restructure their TV agreement so that they would receive a sharp increase in revenue. The restructuring was reported by the AJC to increase the per-year payment from $80 million under the previous agreement to going past $100 million in 2023 before getting close to $120 million by 2027. So despite the issues that the Braves had with their deal, it seemed like they had weathered the storm of a bad TV deal and were finding themselves near the pot of gold at the end of the rainbow.

Obviously that’s going to change now that it appears that Bally Sports is heading down bankruptcy alley, right when it appeared that the Braves were finally going to get a bump in TV money. Now the main and obvious question would be to figure out how this is going to affect the Braves going forward. As far as baseball is concerned, the Braves should still be fine once the smoke clears from this looming bursting of the TV bubble.

The Braves have basically been printing money for the past couple of years and as long as they continue to do well on the field and keep The Battery going strong, that will remain to be the case. I’m not going to predict how much of a hit they’ll take from Bally going bankrupt but I will go out on a limb and say that it shouldn’t be a crippling blow for Atlanta and their current business model. It’ll still hurt but it won’t be awful for the Braves.

What does seem interesting is the fact that the corporate overlords of the Atlanta Braves may have seen this coming back in 2019. Back when it was announced that Sinclair was taking over what used to be the Fox Sports regional networks, it was reported that Liberty Media was interested in buying up those networks. Obviously that would have included the channel that carries the vast majority of Braves games, but apparently the deal was too risky for Liberty Media back then. Here’s what Liberty Media CEO Greg Maffei had to say (as reported by Tim Tucker of the AJC):

“They clearly have a lot of visibility and high-profile aspects,” Maffei said of the RSNs. “They’re also products that … have risk in that they are among the most expensive programming on a per-engaged-viewer basis that most (cable and satellite distributors) look at. So unless you had confidence you could get sufficiently long contracts with (distributors) to ensure time and pay on rates that would be sufficient to ensure, as there’s potential cord-cutting and cord-shaving, you could get enough of your capital protected, we weren’t willing to go there.

“I think Sinclair was willing to extend themselves further than we were.”

So now here we are in a scenario a year-and-a-half where it appears that Sinclair over-extended themselves. This also could end up being a pretty deft piece of business on the part of Liberty if they find themselves as a creditor of Bally Sports via bankruptcy. If that’s the case, then Liberty Media might end up with ownership of what used to be Fox Sports South after all. Personally, I’m skeptical that a company as big as Liberty Media would stop with just taking ownership of just one network (again, they were rumored to be buying the whole collection of channels back in 2019) so it’s really hard for an extreme business novice such as myself to try to figure out how this is all going to shake out.

So while I don’t think this is going to be a source of severe pain and anguish for the Braves going forward, I do think that it’s going to be real interesting to see how other teams deal with this scenario. It’s pretty clear that the TV bubble in baseball (and sports in general) is getting close to bursting, as cord cutting has really cut into cable’s dominance and began to do so right when these big rights deals were being agreed to. I’d imagine that this won’t be the last time we see a story like this involving a collection of Regional Sports Networks and it’s going to have a huge effect on baseball going forward.