The Arizona Diamondbacks may be in first place in the division standings, but they are (tied for) last in TV revenues received. The baseball team has not received a "signifcant portion of their total revenues" since Bally Sports' parents filed 30 bankruptcies last month.
Today, a Bankruptcy Court judge in Houston set a May 31 evidentiary hearing in the team's effort to receive its payments despite the court protections for Bally. (They list several alternative ways for the court to allow the payments.)
The Diamondbacks also received permission from the court this week to hide the amount of money they receive from the cable network for the broadcasts of most of their games.
Fans have complained that they have not been able to see the broadcasts, possibly due to other complications caused by the bankruptcies. Bally's is actually part of the "Diamond Sports" family of entities, and Diamond Sports is largely owned by the conservative Sinclair Broadcasting. The Diamondbacks are one of about 13 MLB franchises waiting for money from Bally's/Diamond/Sinclair.
The hearing will cover those other teams', as well; however, the Diamondbacks have separately - and, aggressively - pursued their creditor's rights in the bankruptcy. (They are being represented by Phoenix's Gallagher & Kennedy, as well as a Houston firm.)
The Diamondbacks justified hiding the amount of their broadcast rights by claiming it could hurt them. CFO Tom Harris said it "is both sensitive commercial information and subject to confidentiality. It is essential that the information sought to be redacted remain confidential to protect the Diamondbacks’ payment structure and amounts, which information is commercially essential to the Diamondbacks’ business and operations, and which information, should it be disclosed, would cause the Diamondbacks potential harm."
The Diamondbacks may eventually need to negotiate with other potential cable networks, but they are not clear about the potential harm. The Court has extended Bally's deadline to file bankruptcy schedules (which would contain the outstanding debts) until May 12.
The Diamondbacks' 20-year contract with the broadcasters is said to average $75M/year, and it appears that the payment due in March - reported to be more than $30M - was the first of a few installments for this year's sum. (There are other marketing and ancillary fees Bally's is supposed to pay to the Diamondbacks.
Before the bankruptcies were filed, Major League Baseball indicated that they would move to cancel Bally's/Diamond's/Sinclair's rights and would take over the broadcasts. Commissioner Rob Manfred acknowledged that such an arrangement would not match the Bally's revenue "in the short term."
The Diamondbacks' and MLB's bankruptcy strategy does not appear to focus on canceling the contracts. Rather, they are trying to get the Court to order Diamond Sports to make payments for the quarter of a season that will have passed before the May 31 hearing, and ongoing payments as they broadcast the game.
Bankruptcy laws are designed to provide protections for the debtor and to put creditors on fairer footing - to prevent more aggressive creditors from getting an unfair upper hand over similar creditors or destroying the ability of the debtor to reorganize its business.
"AZ Law" includes articles, commentaries and updates about opinions from the Arizona Supreme Court, U.S. Supreme Court, as well as trial and appellate courts, etc. AZ Law is founded by Phoenix attorney Paul Weich, and joins Arizona's Politics on the internet.
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