Diamond Sports Group, the largest owner of regional sports networks, has filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of Texas. The move comes after the company missed a $140 million in interest payments on debt. Diamond Sports Group provides local television broadcasts for nearly half of NBA, NHL, and MLB games. This bankruptcy filing highlights the challenges faced by companies in the changing media landscape as many individuals now stream sports games as opposed to watching the games via cable television subscription. The primary reason for Diamond Sports Group's bankruptcy filing is attributed to expensive broadcast rights agreements and sports viewers’ cord-cutting habits. The rise of streaming services has led to a decline in cable and satellite TV subscriptions. The pandemic exacerbated the company's financial struggles, resulting in the suspension of sports events and a decrease in advertising revenue.
Filing for Chapter 11 bankruptcy protection allows Diamond Sports Group to reorganize its debts and assets while continuing to operate. The company will then be able to work with creditors to renegotiate the terms of its debts and create a plan to repay its creditors over time. They will have time to reduce operational costs, such as closing unprofitable operations or renegotiate leases or contracts. They may be able to sell off some assets to raise cash and pay down debts. The current restructuring plan for Diamond is thought to eliminate over $8 billion in debt to bolster its dire financial status. The company has approximately $425 million of cash on hand to restructure. The company has stated its intentions to continue airing games despite its financial struggles. However, the outcome of the bankruptcy proceedings may affect the company’s operations and broadcasts in the future. The bankruptcy filing also highlights the need for regional sports networks to find new revenue streams to survive in a changing media landscape. It is important to note that not all companies that file for Chapter 11 are able to successfully restructure and emerge from bankruptcy. In some cases, a company may be forced to liquidate assets and go out of business. According to David Preschlack, CEO of Dimond, “The financial flexibility attained through this restructuring will allow DSG to evolve our business while continuing to provide exceptional live sports productions for our fans.”
Currently, Diamond Sports Group is owned by Sinclair Broadcasting Group Inc. (SBGI) whose shares have dropped 6% since January and down by 44% in the last 12 months. The plan is for Diamond Sports Group to separate from Sinclair Broadcasting Group and become a stand-alone independent company.
Of note, it is also essential to recognize that there is no relation between the Diamond Sports Groups declaration of bankruptcy and the SVB collapse. SVB Group, which operates Bally Sports regional networks, has also filed for bankruptcy. However, the reasons behind each filing are separate, and the companies have no direct ties.
Unfortunately, financial conditions are decompensating. More companies are expected to file for bankruptcy. The Federal Reserve is determined to keep fighting inflation by raising rates. This will create hard refinancing conditions for struggling companies. This environment will put more pressure on companies that are already struggling, and more bankruptcies may be on the horizon.
The bankruptcy filing of Diamond Sports Group highlights the challenges faced by companies in the changing media landscape. While the company has stated its intentions to continue airing games, the outcome of the bankruptcy proceedings remains uncertain. The increasing financial struggles and more bankruptcies expected in the coming months will have a significant impact. Companies will need to find new revenue streams to survive. Regional sports networks will need to adapt to the changing media landscape to remain relevant and competitive in the years to come.