A Bailout for Bally?

When FOX decided to sell off all of their regional sports networks a few years ago, Diamond Sports stepped in and bought them, keeping teams on local TV on the same channel, which was simply rebranded "Bally Sports Network."  That was in 2021.  Barely two years later, Bally Sports is in serious trouble and could very well declare Chapter 11 bankruptcy, completely upending the RSN model in the process.

There are 19 different Bally Sports Networks, as well as seven affiliates (including MSG, MASN and the Chicago Cubs' Marquee Sports Network) that air some BSN content.  Across the NBA, NHL and MLB, 41 teams have their games aired on Bally.  Eight of those are the local TV carrier for at least three non-NFL teams in that market.  So, needless to say, losing the Bally Sports Network would have a major impact on both those teams and their home markets.

This is especially significant with the six-month-long Major League Baseball season about to get going.  Nearly half of MLB teams (14) are broadcast locally on their respective Bally Sports Network.  What happens if Diamond can't pay those teams their rights fees?  (The total debt is $8.6 million, more than $2 million of which is owed in rights fees.)  Will they be left scrambling looking for someone else to air their games--on incredibly short notice--in 2023?

MLB Commissioner Rob Manfred has vowed not to let that happen.  Should it come to that, MLB is ready to step in and make games available to fans in their local markets, via both linear TV and streaming.  What that will look like is anyone's guess, but it's a prudent financial move by MLB, which has 35 different national streaming packages, but also knows how important those local rights fees are.  And, without those local rights fees, franchise values (and the size of free agent contracts the owners can offer) would go way down.

It's also significant that Manfred has committed to keeping teams' local broadcasts on linear TV.  All out-of-market games, of course, are already available on MLB.TV, but local games have always been blacked out (even the opposing team's broadcast if a local team is playing).  The blackouts are an issue that MLB wants to address, but that's a different issue entirely.  I wonder, though, if one of the ways MLB will step up to fill the void would be to no longer black out local games on MLB.TV.  (Although, that still wouldn't solve the problem of who would actually produce the broadcasts if Bally does indeed go under.)

One possible solution is using MLB Network.  MLB Network shows live games virtually every night picking up one of the teams' local feed, and they always do it regionally since the blackout rules still apply.  So, if say the Royals (a Bally team) are playing the Red Sox, they could show the NESN broadcast on MLB Network and not black it out in Kansas City.  MLB Network also produces some of its own broadcasts, so they could expand the number of those games, as well.

Streaming is the way of the future.  There's no way around it.  Virtually every network has its own streaming platform to accommodate the cord-cutters, and those that don't have either announced plans to launch one or have partnered with an existing streaming service.  There are even games that are exclusive to streaming, both nationally (Thursday Night Football on Amazon Prime, NHL games on ESPN+, MLB's deals with Apple TV and Peacock) and locally (the Yankees' package of Amazon Prime-only games).  And this is the first season of Apple TV's contract as the national broadcaster of MLS, which will see virtually all games only available via streaming.

We'll probably get to a point eventually where a team (or teams) decides to ditch the RSN model entirely and sign on with a streaming company for its "local TV" rights.  But we're not there yet.  And local TV rights fees are a huge source of revenue for both the teams and the league.  And, to put it simply, those rights fees won't be nearly as high coming from a direct-to-consumer source. 

Think about it.  With cable, you're getting the money whether people watch the channel or not.  If you go to the direct-to-consumer model, though, that won't be the case.  The only people paying for the content will be those who actually watch it.  Sure, you can charge whatever price you want and they'll pay it, but it won't make up the difference.  And, again, without an RSN to actually produce the content, someone else would need to pick up those production costs.  That someone would likely be the team.  There goes your entire profit margin!

Some teams, of course, have already done this.  The Yankees started the trend when they launched the team-owned YES Network in 2002, and a number of other teams have followed suit.  So, they don't have this problem.  For everybody else who still relies on RSNs to broadcast the majority of their games, though, they need a solution to the Bally bankruptcy problem.

Baseball teams aren't the only ones affected.  There are also 16 NBA teams and 12 NHL teams that would be impacted.  The NHL has made a similar statement as MLB, announcing that the league would step in if necessary to make sure teams' games are broadcast in their local markets.  The biggest difference with the NHL/NBA and MLB, though, is that those seasons are almost over, so they've got significantly more time to figure something out if need-be.  Because even if Bally Sports Network does shut down, it won't be until the summer at the earliest, when the NBA and Stanley Cup Playoffs will either be over or close to it.

Where it gets complicated is with the NBA.  Last summer, the NBA renewed its deal with Bally Sports+ for league-wide local streaming rights through the 2024-25 season.  That was before the bankruptcy filing, which obviously changes things.  How much is the question.  The NBA can obviously back out of the deal put its streaming rights back up for bid, but that would almost certainly kill off any chance Diamond Sports has at keeping the Bally Sports Network solvent.

As the details of the original contract from 2021 have emerged, it's become clear that this situation with Bally Sports Network was really kind of inevitable.  They didn't just buy some of the regional sports networks previously owned by FOX.  They bought all of them.  And they used credit to do it.  Credit that, unfortunately, has come due and they don't have the assets to cover.  Which has resulted in more than 40 teams in three major professional leagues being put in a very tight spot.

Ultimately, this will all get resolved.  Either someone will buy the Bally Sports Networks (and probably rebrand them) or teams will come together to create their own version of the YES Network or NESN, where they have more control.  And, who knows?  There could be a very positive outcome from this, too.  It could mean the end of local blackouts in MLB.  Something everyone hates and they've been looking for a way to get rid of anyway.