The Houston judge overseeing the bankruptcy restructuring of Diamond Sports Group ruled that the operator of the Bally Sports regional cable channels must disclose sensitive information from its pay TV contracts with its pro-league partners, with some conditions.
“I think they need to see it,” U.S. Bankruptcy Judge Chris Lopez ruled on Friday, declaring that the NBA, NHL and Major League Baseball can’t effectively gauge the viability of Diamond without first reviewing firsthand the subsidiary's biggest revenue sources, distribution deals with Charter Communications, DirecTV and Cox Communications.
Judge Lopez had demurred on making such a ruling earlier last week, asking the two sides to work out a compromise. That didn't happen, so he ruled on the matter Friday.
Also Read: Everything You Need To Know About the Bally Sports Bankruptcy
Conditions were attached to the transparency — only outside counsel not directly employed by the leagues themselves can view the contracts.
The pay TV companies, most notably Cox, had stridently pushed back on the league's efforts to examine what they view are trade secrets.
The leagues are particularly anxious to examine so-called most-favored nation (MFN) clauses in Diamond’s pay TV contracts. The Sinclair subsidiary is currently locked in a distribution impasse with Comcast. Should it capitulate to Comcast’s demand that the 18 remaining Bally Sports channels be relegated to a pricier digital tier, the leagues are concerned that MFN clauses would be triggered in contracts for Charter, DirecTV and Cox, thus further eroding the viability of the league’s key local TV partner, Diamond.
In any event, as Lopez noted, it's all coming to a head on July 29, with Diamond is scheduled to finally present a restructuring plan to the court after what will be 16 months in bankruptcy. Diamond is seemingly out of time to delay the process any further.
The leagues are concerned that Diamond — particularly without a Comcast deal in place — will not be reliably able to pay the 38 remaining MLB, NBA and NHL teams on its networks for their local TV rights moving forward.
While, particularly in the case of baseball, the leagues have no love for Bally Sports management, they’d prefer to keep the regional sports networks paradigm in place, simply because they’re not in a position to directly replace the revenue it provides right now.
For his part, Lopez ruled that Diamond would have been “hamstrung” if it had to go into court on July 29 and present its case without key constituents examining its revenue potential firsthand.
