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Manfred’s Sinclair Brushback Returns Focus to RSN Debts

anthony crupi
·6 min read

For baseball fans of a certain age, MLB commissioner Rob Manfred’s recent dismantling of the league’s primary RSN partner was reminiscent of Goose Gossage giving Ron Cey’s skull a 98-mph Rawlings love tap during Game 5 of the 1981 World Series. When asked about Sinclair’s plans to launch a direct-to-consumer streaming service in 2022, Manfred wound up and fired a wild heater, and as was the case with the Yankees’ spite-‘stache-sporting reliever 40 long years ago, for a moment there, it seemed as if he’d just killed a guy.

For the purposes of this analogy, Sinclair CEO Chris Ripley is Cey’s stand-in, although the comparison probably begins and ends with the beaning. The Penguin, after all, got off the deck, hitting the go-ahead RBI single in Game 6 and earning co-MVP honors. It’s anyone’s guess how things are going to shake out for Ripley and his Bally Sports RSNs, but the MRIs don’t look all that promising.

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Roll back the tape a smidge, and let’s have another look at Manfred’s delivery. Speaking at the Oct. 11 CAA World Congress of Sports event in New York, the commish seemed to try to end Sinclair’s at-bats altogether. When asked about the company’s streaming ambitions, Manfred let fly: “Sinclair does not have enough digital rights from enough clubs in order to have a viable direct-to-consumer product.” THUUUNKK. “The other set of rights they’ve talked a lot about is gambling rights; they don’t have those, either.”

Manfred’s frank assessment of the Sinclair’s DTC scheme—in June, the company announced that it would launch a new streaming service that would operate in the local markets in which it owns the broadcast rights to MLB, NBA and NHL games—seemed to carry more than a hint of animus. Not only did baseball’s chief executive poke holes in Sinclair’s business model, but he then made a point of declaring that MLB wasn’t going to bail out the RSNs.

“We’ve been very clear from the beginning that we see [the streaming and gambling] rights as extraordinarily valuable to baseball, and we’re not just going to throw them in to help Sinclair out,” Manfred said.

That same day, NBA commissioner Adam Silver offered his take on the Bally Sports RSNs, and it was as if a member of the Yankees’ ground crew had sauntered over to the motionless Cey and clobbered him with an infield rake.

After suggesting that Sinclair overpaid for the RSNs—they scooped up the package in 2019 for $9.6 billion, which at the time was less than half what analysts expected the assets would fetch on the open market—Silver said that there was no getting around the creeping senescence of the pay-TV model. That Millennial and Gen Z fans have little interest in the trappings of linear TV—the NBA’s deliveries of adults 18-34 in recent years have fallen 70%—is of particular concern to Silver, who runs the youngest-skewing major sports league, one that airs the vast majority of its games on basic cable.

“You could argue that the bundle is being recreated through these streaming services. But putting that aside, I think at least for now, clearly the bundle is broken,” Silver said. “I mean, we’re seeing now an issue that is very topical at the moment is our regional sports networks, and Sinclair in particular. … We’re trying [to help] them work through those issues.”

Sixteen NBA teams have their games distributed via the Bally Sports RSNs, a roster that includes the defending champions from Milwaukee and the Los Angeles Clippers. The Brooklyn Nets are affiliated with YES Network, in which Sinclair’s Diamond Sports Group owns a 20% stake.

If you’re of a cynical bent, you’d be forgiven for imagining that Manfred and Silver’s remarks were part of a coordinated attack, a joint effort designed to help put Sinclair’s feet to the fire. Ever since Sinclair unveiled its DTC scheme, sports-business higher-ups have speculated that the RSNs are to be subject to a consolidated takeover bid from the NBA, MLB and NHL, one that would begin to coalesce as Diamond Sports succumbed under the crushing weight of its $8.1 billion debt load.

Some observers who know a thing or two have suggested that a Diamond bankruptcy may not be a fait accompli, noting that the company as yet has not failed to fulfill the terms of its agreements with its creditors. At the same time, the various money-raising proposals Diamond has put in play since it disclosed its DTC ambitions haven’t paid off. In a June 21 filing with the Securities and Exchange Commission, Sinclair acknowledged a plan to issue $500 million in new Diamond Sports notes to existing bondholders. Those debt-restructuring discussions were not productive.

In a subsequent 8-K doc, filed Oct. 7, Diamond made another set of overtures to its secured and unsecured bondholders—this time, with an eye toward raising $600 million in funds. That cash would be used “for general corporate purposes, including funding the operating needs of DSG and other capital expenditures.”

Sinclair is set to report its third-quarter earnings before the market opens on Wednesday, Nov. 3.

However things shake out with Sinclair/DSG, Manfred said he’s not interested in buying a piece of the proposed DTC service, should it come to fruition. “We believe the digital rights are crucial and we want to own and control the platform on which they’re delivered,” Manfred said at the CAA event. “The idea that late in the discussions we somehow demanded an equity stake [from Sinclair/DSG]—that’s just not accurate.”

Manfred didn’t offer an outlook on the viability of the Bally Sports RSNs, saying only that the future of MLB distribution is digital. While MLB almost certainly won’t go it alone—setting aside the leg up its MLB Advanced Media unit provides in the technical/infrastructure arena, the league is said to be exploring a deal to launch a new streaming service with the NBA and NHL—Manfred suggested the digital rights would remain under the control of the league and its 30 clubs no matter what form the product ultimately takes, or which entities are involved.

Silver expressed a similar interpretation. “My long-term view is that we need to be in the direct-to-consumer business,” the NBA commish said. “Exactly how it manifests itself I’m not sure. It may be in certain cases we’re part of multi-sport offerings, and in other cases are direct-to-consumer.”

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