A simmering dispute between Major League Baseball and the Hunt Valley-based broadcaster Sinclair erupted into public view Wednesday in federal bankruptcy court.
MLB Commissioner Rob Manfred said in court that Sinclair’s executive chairman threatened to force its Diamond Sports Group regional sports networks into bankruptcy, potentially hurting the league, if MLB refused to give it baseball game streaming rights.
Manfred made the accusations against David D. Smith, Sinclair’s executive chairman, while appearing at a bankruptcy hearing in Houston for the struggling Diamond Sports, according to reports of the hearing.
Diamond, a Sinclair sports network subsidiary that broadcasts MLB, NBA and NHL games, filed for bankruptcy reorganization in Texas in March, burdened by more than $8 billion in debt and struggling as viewers increasingly stream live sports instead of paying for cable television to view matchups.
The rocky relationship between Sinclair and the MLB emerged during Wednesday’s hearing. Reports said the hearing was scheduled to decide whether Diamond Sports, in bankruptcy, should pay a reduced TV contract value for four of the 14 MLB teams for which Diamond holds broadcast rights or, as MLB has requested, pay the full value or give up rights to the teams. The teams under consideration included the Texas Rangers, the Minnesota Twins, the Cleveland Guardians and the Arizona Diamondbacks, according to The Athletic, a sports news website.
Diamond offered to pay full value if it was given direct streaming rights, a strategy MLB outside counsel James Bromley called “blackmail,” The Athletic reported.
Manfred said during the hearing that Smith had met with him in New York to pursue getting streaming rights for all of Diamond’s MLB teams, The Athletic reported. The broadcaster has been going after streaming rights while it was taking losses on the sports networks it bought in 2019 for $10.6 billion from The Walt Disney Co.
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Manfred said in court that when he told Smith that Sinclair would not get streaming rights, Smith replied, “‘I put $2 billion into the purchase of these RSNs … so what I’m going to do is I’m going to keep this going long enough until I get my $2 billion out, OK? And then I’m going to start squeezing your clubs to take their rights fees down, OK, in order to make sure that I stay profitable in the RSN business. And if they don’t agree to that, I’m going to put the entity into bankruptcy, and then I’m going to selectively reject contracts,’” according to The Athletic.
A spokesman for Sinclair did not respond Thursday to a request for comment on Manfred’s remarks.
Diamond Sports filed to reorganize its finances in bankruptcy in March.
Diamond Sports said Tuesday that it has decided not to pay a rights fee owed to the San Diego Padres.
“While DSG has significant liquidity and has been making rights payments to teams, the economics of the Padres’ contract were not aligned with market realities,” a Diamond spokesperson said in a statement. “MLB has forced our hand by its continued refusal to negotiate direct-to-consumer (DTC) streaming rights for all teams in our portfolio despite our proposal to pay every team in full in exchange for those rights. We are continuing to broadcast games for teams under our contracts.”
Meanwhile, MLB said Wednesday that it had begun to take over production and distribution of all San Diego Padres locally-distributed games. It said in a news release that the new arrangement gives fans the option of watching on TV or streaming digitally.
“While we’re disappointed that Diamond Sports Group failed to live up to their contractual agreement with the club, we are taking this opportunity to reimagine the distribution model, remove blackouts on local games, improve the telecast, and expand the reach of Padres games by more than 2 million homes,” said Noah Garden, MLB chief revenue officer, in the release.