Diamond Stiffs Padres, Club to Break Loose From Bankrupt Bally Sports San Diego (Updated)

Updated: In perhaps the biggest undoing yet for the troubled regional sports networks business, Sinclair subsidiary Diamond Sports Group has opted not to continue paying Major League Baseball's San Diego Padres and will no longer be able to keep the team in the Bally Sports regional sports networks portfolio. 

“Diamond Sports Group (DSG) has decided not to provide additional funding to the San Diego RSN that would enable it to make the rights payment to the San Diego Padres during the grace period and will no longer be broadcasting Padres games after Tuesday, May 30," Diamond said in a statement provided to Next TV Tuesday later-afternoon.

"While DSG has significant liquidity and has been making rights payments to teams, the economics of the Padres’ contract were not aligned with market realities," Diamond added. "MLB has forced our hand by its continued refusal to negotiate direct-to-consumer (DTC) streaming rights for all teams in our portfolio despite our proposal to pay every team in full in exchange for those rights. We are continuing to broadcast games for teams under our contracts.”

Major League Baseball has already pledged its support for any of its teams that Diamond has stopped paying. The league has stepped in with a plan to control TV production for the Padres ... and probably other fleeing teams down the road. 

MLB will provide Padres games through its MLB.TV app for free through Sunday. After that, San Diego-area fans will be able to stream games for $19.99 a month or $74.99 for the rest of the regular season. Through this process, Padres games will no longer be subject to blackouts. 

Padres fans can also catch games on a new cable channel through a number of pay TV providers including DirecTV satellite, IPTV and streaming, Cox and Charter Spectrum cable, and Fubo vMVPD service.

 As part owner of the RSN they're fleeing, Bally Sports San Diego, the Padres employ their own TV production crew and announcers. 

For example, play-by-play announcer Don Orsillo, analyst Mark Grant and on-field reporter Bob Scanlan are employed by the Padres.

The team broadcasts and streams will start Wednesday when the Padres visit the Miami Marlins, first pitch at 6:40 p.m. EST. According to a DirecTV announcement put out Wednesday mornings, Wednesdays Padres game will be available in San Diego on a new channel called “MLB San Diego Padres.” It can be found on DirecTV satellite TV (channel 694-3), DirecTV Stream (channel 694) and U-verse (HD channel 1781).

The channel will show up on DirecTV program guides as "Padres."

"We have been preparing for this groundbreaking moment," Padres CEO Erik Greupner said in a statement. "The Padres are excited to be the first team to partner with Major League Baseball to offer a direct-to-consumer streaming option through MLB.TV without blackouts while preserving our in-market distribution through traditional cable and satellite television providers. Our fans will now have unprecedented access to Padres games through both digital and traditional platforms throughout San Diego and beyond."

The Padres and Diamond were in the middle of a 20-year deal worth $1.2 billion through 2032. 

It was perhaps Diamond's biggest money-losing deal, an insider told Next TV. But for their part, the Padres need the dough -- they have the third largest payroll in the Major Leagues. The team has committed to paying two players, Manny Machado and Fernando Tatis Jr., nearly a combined $700 million over the next decade. 

It's unclear as to how close the team's new TV arrangement with MLB can come to closing a $60 million-a-season chasm. 

It's also unclear at to whether other MLB teams aligned with Bally Sports will soon become free agents, too. But it seems likely. 

Sports media consultant Patrick Crakes told Next TV that Diamond can walk away from teams like the Padres that have set up their RSN as a joint venture. Others that are merely paid for local TV rights are tied up in the Diamond bankruptcy proceedings. 

As to the basic structure of the Padres' TV arrangement, Crakes added that not all that much has changed. 

"It’s a case of meet the new boss same as the old boss. It looks like distributors will keep the RSN (now operated by MLB) and the steaming component will be priced so that it doesn’t compete with the pay TV bundled price (just as Ballys Sports+ was)," Crakes said.

From earlier Tuesday:

As the bankruptcy restructuring of Sinclair's Diamond Sports Group has wound on this spring, there have been numerous reports about Major League Baseball teams, including the Cincinnati Reds, breaking loose from their regional sports network ties and streaming their own games.

Each time, however, Diamond has averted this outcome by paying the local TV rights licensing bill to the respective club at the very last moment, or by getting the Texas bankruptcy court to intervene.

But according to the most dialed-in sports media reporter, the San Diego Padres stand "a good chance" of actually breaking loose from Diamond's Bally Sports RSN group and following through with their own channel.

The grace period for Diamond to make its second local TV rights payment of the season to the Padres expires Tuesday (May 30).

And as Sports Business Journal's John Ourand reports, if that payment doesn't occur, the club gets its TV rights back. Like the Reds, the Padres own a piece of their Bally Sports channel and control their own production and announcing crews.

Diamond also initially chose to demur on payments to other MLB teams for which it has money-losing deals, including the Reds, Minnesota Twins, Texas Rangers, Cleveland Guardians, and Arizona Diamondbacks, aiming for the court to restructure the deals before it rendered another check.

The Reds were ready to break free from Bally Sports Ohio in early May, even negotiating in advance deals to put a new linear channel on DirecTV and Charter Spectrum. But Diamond rendered the team payment on the last day of the grace period.

Meanwhile, the court ordered Diamond to pay the Twins, Rangers, Guardians and Diamondbacks 75% of what it owes until a restructuring can be worked out, which the subsidiary did.

From the beginning, Major League Baseball's position has been that it will help any team not paid by Diamond prop up their own TV distribution.

Diamond reportedly loses money on its Padres deal, too. But with the team picked to usurp the Los Angeles Dodgers and win the National League West this season, the Sinclair subsidiary went ahead and paid the San Diego team its initial rights check back in late March.

Two months into the season, the Padres are a disappointing 21-25, fan interest is waning ... and Diamond seems to be rethinking its Bally Sports San Diego strategy.

And according to Ourand, Diamond's outlook on its money-losing MLB deals has changed, too. In addition to reworking those floundering contracts, Diamond entered bankruptcy in March hoping to leverage the nine of the 14 MLB teams in the Bally Sports tent which haven't yet given up direct-to-consumer streaming rights to subscription OTT service Bally Sports Plus.

But Diamond may be giving up on that quest and is now willing to walk away from certain teams who won't give up their streaming rights.

And first on that list appears to be the Padres.

Diamond is hoping to shed its money-losing deals and shed around $8 billion in debt. In 2019, Sinclair Broadcast Group paid $10.6 billion to acquire 19 Fox Sports Net channels, which it later rebranded as Bally Sports. Diamond Sports Group was formed as a subsidiary to manage this portfolio.