🛟 Amazon Resuscitates Local Sports

Diamond Sports Group thrown a life raft before sinking into the abyss

After spending most of our time writing about national cases, because we’re fancy like that, it’s time to check out something interesting at the more local level and hang out with the true diehards. This story will particularly appeal to the fans who love hearing their hometown broadcaster rave about their favorite team, who get excited after their local fast food chain ad read, and who simultaneously fall out of their recliner in excitement after the color commentator yelps after a big play.

Diamond Sports Group (DSG), regional sports operator for 37 different MLB, NBA, and NHL teams across their Bally Sports brand, agreed to a major investment and content distribution deal with Amazon after filing for Chapter 11 bankruptcy last March. Today, we go through the business of local sports, how this came about, where Amazon could run with this content, and why this is such a big deal.

How did DSG go bankrupt with so many teams attached to it?

• Fun Fact: Chapter 11 bankruptcy does not mean things are over for DSG—instead, it means they can continue to operate and are forced to pursue a reorganization plan.

• For years, regional sports networks (RSN), have only been used in a linear TV format (traditional TV content delivered via cable or satellite). Which means you’re only able to watch your local sports team if you have a cable package within that region (Yes, Vanna I’m ready to guess the word…Unsustainable).

  • In short, they are caught between expensive broadcast rights agreements and sports viewers' cord-cutting habits.

    • Examples of RSNs: Bally Sports, NBC Sports Regional Networks, AT&T Sports Networks, Spectrum Sports, TSN (Canada), etc.

• But for DSG, a Sinclair Broadcast Group subsidiary, the reason they filed for bankruptcy was because they only had $425 million cash on hand…and owed $9 billion to its lenders 😩 (It might be more surprising no one’s gotten wacked yet).

What’s a part of this reorganization plan?

• DSG has arranged a $450 million plan with creditors that would allow it to continue operating beyond 2024, pending the approval of a federal bankruptcy judge.

• Amazon is set to invest $115 million, which will result in a 15% stake of the company. There is also a plan in place that within nine months after the restructuring, Amazon will have an option to invest a further $50 million in DSG.

• DSG also has a deal with Sinclair where they will pay DSG $495 million to settle outstanding litigation.

• Talk about a restructuring clusterf🙊ck after DSG was on the brink of liquidation.

What does this mean for the teams and leagues involved?

• Bally Sports is the home for a number of teams across the country (see Table 1). Once Bally Sports introduced their streaming platform, Bally Sports+ back in 2021, it was apparent that streaming rights were the real gold mine. DSG has the streaming rights for the NBA (15 teams) and NHL (11 teams) under its portfolio, as well as 5 out of their 11 MLB teams — the other 6 are still in the midst of negotiations.

• Once bankruptcy was announced, both the NBA and NHL negotiated deals with DSG that if liquidation occurred, and no one came to the rescue, the rights would go back to the leagues ahead of the 2024-25 season.

  • Now that DSG has another life, they can maintain their portfolio. The company, with Amazon as a top notch partner, can step in and negotiate different deals with some teams or drop them entirely (All hail Lord Bezos am I right??).

    • Well…NBA Commissioner, Adam Silver might not be too happy bending the knee to the bald-headed space cowboy just yet. The NBA has been eager to take back streaming rights for its teams, especially since their national TV contracts expire after the 2024-25 season.

• The MLB, unlike the other leagues, rely heavily on their local viewership and RSNs (see Table 2). Their 30 teams generated a record ~$11 billion in revenue in 2022 from tickets, sponsorships, TV, concessions and other sources, including an estimated ~$3 billion from local TV deals. Their local TV numbers are nearly double what NBA teams earn and more than 3x those of the NHL.

  • Why is that? 1) Baseball skews to older-aged viewers, hence why linear programming is still important to the MLB. 2) There are twice as many games played in baseball than basketball or hockey, which gives RSNs the ability to sell twice as many ads during games. 3) Throughout the 1990s and 2000s, RSNs saw an opportunity for the MLB to thrive from a local viewership perspective and locked teams in on very long deals.

• Buckle up media rights lawyers, because DSG is already projecting their direct-to-consumer revenue will grow from $49 million in 2023 to $658 million in 2026, according to projections the company shared last week. (DSG - stay on the ground and keep kissing Bezos’ rings) 

Alright, all this corporate law talk is making my eyes scream. Where could this all lead to next?

• Prime Video in the live sports driver seat. With a rebrand in play behind Amazon’s minority investment, look for Amazon to use Prime Video to offer direct-to-consumer access to MLB, NBA, and NHL games, including pregame and postgame content of its various RSNs. They have already done an amazing job with Thursday Night Football, as viewership grew ~25% from last year.

• RIP linear programming. As we’ll slowly start to see these RSNs move towards streaming services like Prime Video, it’ll be even more apparent that linear TV is about to be a giant graveyard of old reruns, weird infomercials, and commercials of your local personal injury lawyer yelling at you to call him after an accident. Even Warner Bros. Discovery CEO David Zaslav confirmed his plan to shut down or sell their RSN business.

• New streaming services for a new generation of fans. This season the Phoenix Suns and Utah Jazz zagged the other way and created their own streaming service giving them full control of broadcasting rights. These aren’t revenue plays, as they would get more money sticking with an RSN. In their mind, they’re creating new ways to engage with fans if you subscribe to their streaming service (i.e. ticket raffles, behind the scenes video footage, team documentaries, etc.). The annoying part? it’s another subscription service password you have to write down.

• Streaming saturation is already upon us. It might have been more headache inducing to deal with a cable company, but my god at least it was easier to keep track of. We’re at the point now where we’re forgetting what subscriptions we’re paying for. When does it become complete overload for the consumer and will that affect subscriber numbers? I have YouTubeTV, Hulu, Prime, Netflix, Disney+, Paramount+, Peacock, and Max. Now I need to get NBA XYZ gold prime plus?! Let’s pump the breaks!

Quick Hitters

• 🏌️ On Sunday, Nick Dunlap, a 20-year old sophomore at Alabama, became the first amateur to win a PGA Tour event since 1991. Oh and because he’s an amateur (think college athlete or young gun), not a professional, he won’t be able to cash out that giant check worth $1.5 million. Instead, the prize money will be parsed out as if he didn’t even compete! (i.e. 2nd place finisher wins 1st place money, 3rd place finished wins 2nd place money, etc.). What an absolute buzzkill! Let the kid wet his beak, PGA!

• 🇸🇦 After one year of spending nearly $1 billion on player transfers (with names like: Cristiano Ronaldo, Ruben Neve, Riyad Mahrez, etc.), the Saudi Pro League (SPL) is on the verge of losing their stars. Jordan Henderson, former Liverpool captain joined Al-Ettifaq in the summer is set to transfer to the Dutch club, Ajax. Henderson had to terminate his contract with the Saudi club that was believed to be worth more than $20 million/year. He more than likely won’t see any of that money after deferring those wages to avoid a UK tax. Rumors are former Real Madrid star, Karim Benzema, might be leaving the SPL as well after signing a $100 million contract 😬. Does the saying, “you gotta spend money to make money” still apply here? Lol

• 🤠 Mama rumor has it I’m coming home…in 2026! According to a report by The Sun, the Dallas Cowboys home, AT&T Stadium, has beaten out New York’s MetLife Stadium to house the final World Cup match (catch me, I’m feeling faint). FIFA, the governing body of the World Cup, has not confirmed this report. But Dallas has leaned into an unrivaled advantage: unprecedented scale for the event. The head honchos involved in pitching Dallas for the final match include Jerry Jones (owner of the Cowboys) and Dan Hunt (co-owner of MLS’ FC Dallas). They are envisioning a ticketed event encompassing 200,000 people across the entire Arlington, Texas, sports complex which includes AT&T Stadium, Globe Life Field (home of your World Series Champs, Texas Rangers), and Choctaw Stadium.

• 🥩 Just this morning, Netflix announced it acquired the rights to air WWE’s popular weekly wrestling program “Raw,” marking Netflix’s first significant play into live sports. The exclusive streaming will supposedly begin next January and the deal is reportedly worth $5 billion over 10 years.