An Amazon investment prevents the bankruptcy of Bally Sports Networks operator Diamond.
Amazon is investing in Diamond Sports Group, the Sinclair subsidiary responsible for operating the regional sports networks bearing the Bally brand.
Amazon’s strategic move aims to help Diamond Sports Group escape bankruptcy protection under Chapter 11.
Amazon’s ownership of a minority stake in Diamond is accompanied by an agreement between the parties that Prime Video will serve as the principal channel through which customers can acquire Bally Sports streaming privileges to follow their local teams.
The increased distribution strength is advantageous for Diamond, which introduced Bally Sports+ in the middle of 2022 for $20 per month.
The adoption of the direct-to-consumer product has been incremental, and Diamond’s bankruptcy filing in March 2023 significantly impeded the expensive process of advertising to and acquiring customers.
The post-bankruptcy strategy announcement underscored Diamond’s determination to maintain conventional carriage agreements with pay-TV distributors, which continue to generate substantial cash flows.
A group of creditors has also consented to furnish $450 million in financing, which Diamond will utilize to fund its operations and reduce debt during the restructuring process, in addition to its Amazon investment.
Upon hearing the news, the Diamond circumstance in recent years has caused Sinclair stock to surge 13%.
Fox Sports previously owned and operated the Bally RSNs, which broadcast the games of over 40 major athletic organizations throughout the United States, under the Fox brand.
Disney divested these properties in exchange for regulatory approval of its 2018 acquisition of the majority of 21st Century Fox.
In 2019, the networks were acquired for $10.6 billion by a consortium of investors led by Sinclair. Later, a deal with the gaming firm Bally led to the rebranding of the networks.
An additional crucial component of the declared strategy to emerge from bankruptcy entails Sinclair resolving an ongoing legal dispute with Diamond for $495 million.
Shortly after the RSN deal was finalized, Diamond established itself as a separate entity. However, it later filed a lawsuit against Sinclair, alleging that Sinclair looted its coffers for up to $1.5 billion.
The parent company allegedly gained unauthorized access to Diamond’s funds. During the late 1990s expansion of cable television, the litigation brought sharp focus to RSN’s beleaguered business model.
To avoid bankruptcy, Amazon will form a partnership with Diamond Sports under the terms of a reorganization agreement.
Diamond Sports is the largest owner of regional sports networks. Diamond owns 18 networks through the Bally Sports banner.
Chapter 11 bankruptcy proceedings have been ongoing in the Southern District of Texas since March of last year when Diamond Sports filed for protection.
In a financial filing from late 2021, the organization disclosed that it owed $8.67 billion in debt.
Diamond Sports made a public declaration regarding the conditions of the agreement on Wednesday morning. Amazon did not respond. Its approval by the insolvency court is still pending.
By reaching an agreement with its largest creditors, Diamond Sports can avoid bankruptcy, sustain operations, and avert the complete collapse of its regional sports network system.
Such a scenario would have required the NBA, NHL, and MLB to assume responsibility for the production as well as distribution of the majority of their teams.
MLB was forced to assume production and distribution responsibilities for the Arizona Diamondbacks and San Diego Padres during the previous season due to Diamond’s failure to make payment on lease rights to the Padres and its inability to reach an amended agreement with the Diamondbacks.
As part of the reorganization agreement, Amazon will establish a commercial partnership with Diamond and acquire a minority stake in the latter. In exchange, Amazon will grant Prime Video access to Diamond’s content.
Customers will have the ability to view the content of their local team on Prime Video channels to which Diamond possesses rights.
Customers will receive information about pricing and availability at a later time. Moreover, satellite and cable TV companies will continue to offer regional sports programming.
Furthermore, Sinclair Broadcast Group and Diamond have reached a preliminary agreement to resolve an ongoing legal dispute.
These networks own the broadcasting rights to 37 leagues, including eleven in baseball, fifteen in the NBA, and eleven in the NHL.
In 2019, Sinclair paid nearly $10 billion to acquire the regional sporting networks from the Walt Disney Company.
The Department of Justice mandated that Disney sell the networks to obtain approval for its acquisition of the film and television assets of 21st Century Fox.
Before Sinclair acquired the regional networks, the company was experiencing a decline in advertising revenue and cord-cutting as a result of entering into long-term contracts with certain teams.