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February 26, 2024

Amazon Invests $100 Million in Diamond Sports As Part of Bankruptcy Exit

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Jan 17, 2024

Amazon has agreed to invest $100 million in Diamond Sports Group as part of a restructuring agreement that will help the regional sports network operator emerge from bankruptcy. The deal gives Amazon the right to stream games from the 5 MLB teams broadcast on Bally Sports regional networks.

Key Details of the Restructuring Agreement

  • Amazon will invest $100 million and receive an 18% stake in Diamond Sports
  • Diamond Sports will emerge from Chapter 11 bankruptcy under the deal
  • Sinclair Broadcast Group will pay $850 million to acquire the 20% equity stake previously held by the former Fox RSNs
  • Diamond Sports will gain streaming rights to distribute games from 5 MLB teams directly to consumers via an app
  • The MLB teams include the Arizona Diamondbacks, Cleveland Guardians, Detroit Tigers, Miami Marlins, and Tampa Bay Rays

Background

Diamond Sports Group, the parent company of 19 Bally Sports regional sports networks, filed for Chapter 11 bankruptcy protection in September 2022. This came after Sinclair Broadcast Group was unable to reach agreement with creditors and teams over distribution rights.

The Bally Sports RSNs have distribution rights agreements with various MLB, NBA and NHL teams worth billions of dollars. However, they have struggled after being dropped by major cable and streaming providers like YouTube TV and Hulu Live. This reduced their subscriber base and revenue.

During the bankruptcy process, Diamond Sports has been negotiating with the leagues and Amazon over streaming rights. They have aimed to shift towards a direct-to-consumer streaming model.

What Amazon Gets

This investment gives Amazon exclusive direct-to-consumer live streaming rights for games broadcast on the 5 Bally Sports RSNs carrying MLB teams.

Amazon has been aggressive in acquiring sports streaming rights, including exclusive rights to Thursday Night Football. This deal expands their live sports footprint.

Analysts estimate these rights could be worth around $300 million per year to Amazon. It gives them valuable sports content to drive Prime subscription growth.

Outlook for Diamond Sports and Bally Sports RSNs

This restructuring agreement is crucial for the survival of Diamond Sports Group. It provides a cash infusion and resolves legal disputes to facilitate exiting bankruptcy.

With the shift towards direct-to-consumer streaming, the Bally Sports RSNs will be in better financial shape. No longer wholly dependent on declining cable subscriptions, streaming subscription revenue can sustain their operations.

However, only 5 MLB teams are included in this initial deal. The rights of other teams broadcast on the RSNs have yet to be negotiated. More streaming deals need to be secured for long-term viability.

If successful, the streaming model could be adopted across other Bally Sports RSNs carrying NBA and NHL teams in the future.

What Happens Next

  • The bankruptcy court will review the terms of the restructuring agreement and proposal for exiting bankruptcy on February 6
  • If approved, the deals with Amazon, Sinclair and creditors will go through to enable Diamond Sports Group to emerge from bankruptcy
  • Diamond will launch a direct-to-consumer streaming service later in 2023 on Amazon platforms carrying games from the 5 MLB teams
  • Further streaming rights deals need to be negotiated with other MLB, NBA and NHL teams broadcast on Bally Sports RSNs
  • The shift towards streaming could provide a template adopted by other regional sports networks

Financial Implications

The $100 million investment gives Amazon an 18% stake in Diamond Sports Group, valuing the RSN operator at around $550 million. Sinclair gains an 80% stake from the $850 million equity transfer.

For Diamond Sports, the $100 million infusion will provide liquidity after bankruptcy. Revenue is also expected to improve after launching a streaming service on Amazon platforms.

Amazon’s streaming rights deal carries risks, as sports rights typically involve high costs. But as the no.1 streaming platform, Amazon Prime Video has scale, tech infrastructure and subscribers to extract value.

Analysts estimate the MLB direct-to-consumer streaming rights could generate over $1 billion for Amazon over multiple years if adoption is strong. Boosting Prime subscriptions and engagement justifies the investment.

Reaction

The restructuring deal has been positively received across the sports media landscape.

MLB Commissioner Rob Manfred said “I fully expect that Bally Sports will meet its obligations to provide broadcasts of MLB games over the 2023 season while delivering another exciting year of baseball to fans all across the country.”

Media analysts have called it an elegant solution that salvages the broadcasts of 5 MLB teams on Bally Sports RSNs. It also provides a template for other RSNs to adopt streaming amid cord-cutting shifts.

Some caution that the streaming model is not yet proven for RSNs, and more deals need to be signed. But the Amazon deal sets a path for Bally Sports to rebuild through streaming subscriptions.

The MLB Players Association said “We welcome Amazon to MLB broadcasts and are eager to provide their viewers our exciting play on the field.”

Financial Tables

Key Valuations in Diamond Sports Restructuring

Description Value
Amazon Investment in Diamond Sports $100 million
Equity Stake Received by Amazon 18%
Valuation of Diamond Sports Post-Restructuring $550 million
Sinclair Payment for Former Fox RSN 20% Stake $850 million
Sinclair Equity Stake in Diamond Sports 80%

Projected Revenue Boost for Diamond Sports

Revenue Source Estimated Annual Value
Current Diamond Sports Group Revenue $600 million
MLB Streaming Rights Revenue from Amazon Deal $250 – $300 million per year
Total Post-Restructuring Revenue $900+ million per year

The tables above summarize the key financial components of the Diamond Sports restructuring agreement. The $100 million Amazon investment and improved streaming revenue from the MLB rights deal with enhance the financial position of Diamond Sports Group as it emerges from bankruptcy.

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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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