Fan favorite Manny Machado is one of the reasons the Padres will be an NL contender this year — and a tough team for Diamond Sports to give up on.getty images
DirecTV’s top executives — including CEO Bill Morrow and Chief Content Officer Rob Thun — visited Major League Baseball’s New York headquarters Thursday afternoon for a high-level meeting with the league’s top brass, including Commissioner Rob Manfred and Chief Revenue Officer Noah Garden.
The meeting mirrored similar ones that MLB has set up with the country’s biggest distributors recently, like Comcast, Charter and YouTube.
The issue: What to do with local team rights if some start reverting back to MLB in the wake of Diamond Sports Group’s recent Chapter 11 filing.
These meetings took on a greater sense of urgency last week, as MLB believes it’s a week away from reclaiming the rights to the San Diego Padres, whose games are carried on the Diamond-owned Bally Sports San Diego.
Diamond Sports missed its most recent rights fee payment to the Padres earlier this month. The company has a cure period that lasts until 11:59 p.m. on Wednesday, when it can make the payment without penalty.
The Padres’ Opening Day is Thursday.
Diamond Sports’ independent board will vote by the middle of the week on whether it will allow the grace period to lapse without making a payment. Part of the holdup is that Diamond has been trying to obtain other rights, such as streaming rights, that the Padres have been unwilling to part with.
Even without those rights, Diamond may decide that the team is too popular and too good to risk losing.
Jim Day of Bally Sports Ohio interviews Joey Votto of the Reds. RSNs account for most coverage of games, making a long-term solution key for MLB.getty images
There’s still a realistic possibility that Diamond will make its payment to the Padres on time, sources said. The team is filled with star players like third baseman Manny Machado and outfielder Juan Soto, and is a major contender to make its first World Series appearance since 1998. As a result, its TV ratings in the San Diego market are expected to soar.
If Diamond allows the grace period to end without making a payment, MLB is prepared to approach the bankruptcy court the next day to ask it to allow the Padres’ rights to revert to the league.
If Diamond makes its Padres payment, MLB will wait until another team — such as the Cincinnati Reds or the Cleveland Guardians — has a rights fee payment that is missed.
Diamond already has allowed a grace period to end without making a payment to the Arizona Diamondbacks. Since that original payment was missed before Diamond entered bankruptcy, MLB believes bankruptcy rules make it harder for the league to obtain those rights.
Diamond executives have told the teams, including the Diamondbacks, that it still plans to produce and distribute their games — even if they have missed rights fee payments.
MLB has been active in trying to get distributors to back its plan. The league’s pitch has been simple: If — or when — rights revert back to the league, it has asked distributors to carry those teams’ live games at little or no cost, at least for this season.
The idea for MLB is that the league will pick up more rights as teams’ rights deals with Diamond’s Bally Sports-brand RSNs expire — a process that could take several years due to the length of many of those contracts. Once MLB can go to the market with the rights from several teams, it believes it will be able to work out better distribution deals that could pay it more.
The plan would have distributors carry the games — plus, likely, a pregame and postgame show — on an open channel. MLB has formed a local media division headed by Billy Chambers that would be responsible for producing these games, likely using freelance production crews in those markets.
With Opening Day this week, MLB still hasn’t closed a deal with any of its big distributors. But MLB’s pitch seems to be resonating with some of the bigger ones, sources say.
Of course, they are swayed by MLB’s asking cost for this season. Not only would they carry the games for little or no cost, but the distributors expect that they will be able to get a rebate from RSNs that lose such high-profile teams.
Distribution executives also like the idea of changing the current regional sports model around local sports. Generally, regional sports networks are among the most expensive channels on DirecTV or Xfinity’s lineups.
Importantly, Diamond’s deals with several top distributors expire over the next 12 months. Its deals with Comcast and DirecTV are up in the fall, and its deals with Charter and Verizon end early next year.