The story of the Bally Sports bankruptcy is getting more interesting by the day. Recently Bally Sports’ parent company Diamond Sports, sued its parent company, Sinclair, arguing that decisions made by Sinclair have cost the network over $1.5 billion. Now Sinclair has filed with the court demanding that Bally Sports pay the $147 million it owes Sinclair for management services. If the money is not paid, Sinclair argues that Bally Sports should stop using its management services.
According to Sinclairs filing Bally Sports’ parent company Diamond Sports Group “should terminate the deal if it believes it’s too expensive,” but claimed the subsidiary is “dragging its feet because it wants benefits it gets under the deal while paying its parent company a significantly lower rate in bankruptcy.” Yesterday, Sinclair demanded Diamond “make a choice: either accept the management agreement and drop some of the allegations in its complaint or end the deal with its parent company”
This may seem a bit strange, as Bally Sports was owned by Sinclair. Recently though, Sinclair spun off its sports group into the Diamond Sports Group to help protect itself. Now it seems that Sinclair wants to be done with Bally Sports according to a report by Bloomberg.
At issue here is money that Diamond Sports Group wants back from both Sinclair and JP Morgan Chase. Earlier this year, Sinclair paid JP Morgan Chase $190.2 million to cover the majority of preferred equity units the bank bought for $1.025 billion in 2019. The money went towards Sinclair’s purchase of RSNs for 19 regional sports networks to create Bally Sports, which was caught in a downward spiral ending in the Diamond Sports Group bankruptcy filing earlier this year.
In the lawsuit, Diamond Sports says Sinclair is charging to much for management services and argues that Sinclair is profiting from the Bally naming rights deal with Bally Corp at the expense of the Diamond Sports group. When all of this money is put together, Bally Sports is arguing it costs them over $1.5 billion. Sinclair is saying it is giving Bally Sports a discount on its service.
Bally Sports is coming under a lot of pressure with money. It has contracts coming up with major cable TV providers, including DIRECTV, Comcast, and Spectrum. If deals here are not reached, Bally Sports may be extremely hard to find on TV. DIRECTV has already made it clear that they want a discount on Bally Sports as it no longer has as many teams. Now it looks like even more teams may leave if deals with the NBA and NHL can not be reached.
With expensive contracts with both sports teams and Sinclair plus the real risk of getting less from its cable TV partners Bally Sports seems to be hoping it can get money from Sinclair to help cover its costs.
The Diamond Sports Group is a subsidiary of Sinclair Broadcast Group, but it operates independently and manages the Bally Sports RSNs. Currently, it manages TV rights for 40 professional teams, including 12 MLB teams, 16 NBA teams, and 12 NHL teams.
Getting back some of the $1.5 billion would be a huge help for Bally as it struggles to make deals with these teams and networks. Though now it has to decide if it wants to pay Sinclair for the management services or maybe risk losing it.