Major League Baseball has promised the Padres not to receive less than 80% of what Bally Sports was due to pay the Padres for television rights this year, commissioner Rob Manfred said Wednesday. made it how? By paying the difference from the league vault.
“We arrived at this number to prevent financial difficulties at the club level and our inability to pay our players,” Manfred told bankruptcy court in Houston. “We felt we shouldn’t be in a position to guarantee payment for others, but we wanted them to have enough cash flow to prevent disruption to our business.”
The 80% guarantee is for this season only and will also apply to the other 13 teams that Bally Sports has games in, said a source briefed on the arrangement, who was not authorized to speak publicly. . Bally Sports and its parent company, Diamond Sports, were broadcasting partners for 14 MLB teams until midnight Wednesday when they pulled the Padres game. Diamond and Barry are in bankruptcy proceedings.
“The club was concerned about cash flow,” Manfred said. “We surveyed 14 clubs to see what their contractual commitments were to their players, what their cost structure was and what debt they had. Well, everybody needs to relax here, we need to get over this problem.” No matter what happens, we will backstop at 80 percent of what we expect to get on the media deal. ”
Manfred spent nearly two hours in the stands on Wednesday, being swayed by Leo Mazzone during cross-examination. In an aggressive and sharp tone, he criticized two senior executives at Diamond’s parent company, Sinclair, including an executive who alleged that Mr. Manfred had threatened to bankrupt him. It was
Overall, Manfred portrayed Diamond and Sinclair doing business in an impoverished environment.
“We had a lot of complaints from the club,” Manfred said. “They didn’t attend when we scheduled the meeting. It just didn’t work out.”
Manfred repeatedly stressed that MLB notified him less than a day later that Bally Sports would default on Tuesday’s payment to the Padres.
“They literally gave us notice 24 hours before the end of the broadcast that the Padres game was going to be taken off the air,” Manfred said. “They weren’t going to cure the default. The Padres… canceled that contract. MLB stepped in.”
“Because we were literally, literally, hours in advance that we were taking over the Padres midseason,” Manfred said at another point. “The idea of being able to generate meaningful ad revenue at this point is simply not possible. is one of
“We expect to see some revenue on the digital side of the market and some revenue from legacy cable bundles. At that point, we intend to make up the gap with Central Baseball (MLB).”
During cross-examination, however, Diamond’s attorneys disputed Manfred’s characterization of MLB’s notice regarding the Padres telecast. The lawyer said Diamond had offered to keep Padres in charge until June 30, but Manfred said he was unaware of the offer.
“You don’t know what the actual conversation was, do you?” asked Manfred.
MLB this year offered to buy back all MLB broadcasting rights owned by Diamond. MLB valued it at about $400 million. Diamond CEO David Preschrak was unsure of the valuation and felt the offer was clearly too low.
“The proposal really revolved around three different points. One was whether Diamond could bank profits for profitable RSNs for a period of time. said Pressschlack. “The other thing is that Major League Baseball was going to cover the loss of unprofitable RSN, and baseball ended up paying us $60 million in cash.
“It’s a fraction of the roughly $1 billion we pay for Major League Baseball a year in royalties.”
This isn’t the first time MLB has tried building a network. Manfred and MLB submitted a $9.6 billion bid to RSN when Sinclair won in 2019, but Manfred said the league’s bid was about $900 million less than Sinclair’s winning bid. said he believed.
Under the assumption that MLB was stupid for bidding at the time and Manfred should have been lucky to lose, or maybe he could have avoided some of the problems faced by Sinclair, MLB actually did. The idea is that it was good to win the bid in the first place. I’ve heard of Manfred before.
“People often say to me, ‘Wouldn’t it be nice to avoid that bullet?’ And not so much, not so much,” Manfred said.
Asked if he would go back in time and make another $9.6 billion bid, Manfred said he would.
“We thought Major League Baseball was best positioned to navigate through this period of change ahead,” Manfred said. “Our bid was really, very different from Sinclair’s. They leveraged $8.5 billion on a $10.5 billion bid, and I think you’re right about those numbers. We had some leverage, but it was $3.5 billion, and we had major media player Liberty Media as a partner…which puts us in a better position to have an alternative way to distribute our games. I thought I could stand.
“While the bidding process was going on, we were going to our distributors in advance and pre-negotiating the sales contract. …We have longstanding relationships with all of these entities.”
When Sinclair acquired RSN, the company’s CEO got Manfred wrong.
“From the time they made the acquisition, we were offended by public comments, mostly from Chris Ripley,” Manfred said. “He continued to refer to the development of digital businesses, including gambling, merchandising and ticketing rights, which he does not have. We were especially offended by those statements when it became clear that they were doing so.
“I’ve had a lot of discussions with Chris myself. You know, I can’t say publicly that we’re going to build this business on rights that we haven’t given you. And oh, by the way, It’s a chance.” Allow us to make decisions about how gambling works with our broadcasts. This is a basic business decision…it won’t happen, you are not without those rights. ”
Another Sinclair executive, David Smith, came to New York for a one-on-one meeting and demanded more rights than Sinclair had, Manfred said. Smith was then threatened with bankruptcy, Manfred said.
“I said, ‘Unfortunately sometimes people want things they can’t have and you can’t have that right,'” Manfred said. . “And he said to me, ‘Well, let me tell you what’s going to happen.’ He said, ‘I put his $2 billion into these RSN purchases.'” said. I’ve already spent a good chunk of that $2 billion investment on him,” he hinted at two things: The administrative fees that were being paid by the RSN entity to the parent company (the company) were annual I think it was $150 million.
“And he alluded to the fact that by this point he had entered into a naming rights agreement for Bally’s RSN, and alluded to the fact that capital was involved and passed to the parent company. He said, “So what I’m going to do is I’m going to keep doing this for a long time until I get $2 billion back, and then I’m going to start putting pressure on your club to lower the royalties.” to continue. And if they don’t agree to that, I’m going to bankrupt the company and then selectively reject the deal. ”
“So what I said back to him was, ‘Look, it’s your business, you have to do whatever you think is best for your business.’ threatens or refuses a contract, we are there to launch those broadcasts for the club so that fans are not disenfranchised.”
“RSN was making hundreds of millions of dollars from these long-term contracts, no matter who the owner was. I had a feeling that when it started to look like it wasn’t making much money, they would flip it over and say, “We’re going to squeeze you down and take away your lower rights.” The price” was not very favorable to us. ”
(Photo: Julio Aguilar/Getty)