Back in January, Diamond Sports Group generated a lot of buzz over a plan that was intended to not only lift the company out of bankruptcy, but also position a behemoth behind it: Amazon. Diamond, the operator of a collection of regional sports networks, had filed for bankruptcy 10 months earlier, and looked to be heading toward liquidation until it proposed the Amazon-backed plan.
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But now Amazon has nixed its planned $115 million investment, as first reported by Sports Business Journal and confirmed by people briefed on the matter who were not authorized to speak publicly. In the wake of that decision, industry executives and experts hold mixed opinions on why Amazon made that choice, and what it means for Diamond’s future, which was already murky.
Amazon and Diamond declined comment.
Diamond holds, and pays for, the broadcasting rights to 34 teams across MLB (12), the NBA (13) and NHL (9), and has operated them under the Bally brand. In the scheme of things, the $115 million Amazon planned to commit is a relatively small amount. For comparison: At the beginning of the year, Diamond projected its linear TV operation alone would bring in $2.07 billion in revenue, with costs of $1.94 billion — to say nothing of the streaming side of the house.
“I understand the excitement around Amazon,” said Patrick Crakes, a media consultant who was a longtime FOX Sports executive. “Amazon’s investment was — I can’t say it’s not material. … $100 million dollars is $100 million. But it’s not gonna stop the (plan to get out of bankruptcy).”
Importantly, Amazon’s investment never was to be delivered right away, but instead once the company had emerged from bankruptcy — which hasn’t happened. That made it a low-risk opportunity, one that perhaps provided the company a valuable up-close look at Diamond’s operation.
“Amazon almost always has a way out,” said Crakes, who has advised some unsecured creditors in the Diamond bankruptcy proceeding. “Because they are so big, they can kind of dictate terms.”
As for Amazon’s possible motivations to exit, Crakes believes the company could have seen that Diamond was likely to safely emerge from bankruptcy, therefore limiting Amazon’s opportunity to grow its own sports-media-rights business further in the near future.
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“I think it was like, ‘What are we doing here?’” Crakes said. “Diamond looks like they’re going to come out of this. They’re going to be sturdy. They could run this business for a while. And there’s just not really any advance here.
“It’s a super small investment that maybe Amazon thought that they could lever into something big. You’re always looking to do that.”
Others took a more skeptical view. Multiple industry officials suspected Amazon backed away for the opposite reason: because it did not like what Diamond’s still-evolving business plan presented, particularly considering how the landscape has changed since January.
Amazon recently reached an 11-year deal with the NBA and WNBA worth about $1.8 billion per year.
“They got the NBA deal and they said, ‘Why do we need this?’” said an industry executive who spoke on the condition of anonymity.
In one wrinkle, if Diamond does eventually emerge, Amazon could still wind up as one of the streaming avenues available for accessing Diamond content and games.
Along with the investing plan, Diamond and Amazon reached a commercial agreement that would make Amazon Diamond’s new “primary partner” in selling streaming access to games.
“That deal can be done separately,” Crakes said. “They can still do that deal.”
Amazon Prime subscribers were not expected to be able to access games for free, but rather, as an add-on available through Prime. (Prime was never expected to be the only means of accessing the games, though.)
Diamond has been revising its business plan after the company indefinitely delayed a late July “confirmation hearing,” where the court would accept or reject its plan to avoid liquidation.
Diamond just reached agreements with the NBA and NHL that, if the court approves, commit Diamond to operating through both leagues’ upcoming seasons. The deals also cover Diamond’s operations with those leagues in the event the company does emerge from bankruptcy.
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No such deal exists in MLB, at least not yet. Three of the 12 MLB teams carried by Diamond this year are set to become TV free agents this winter: the Cleveland Guardians, Minnesota Twins and Texas Rangers.
Diamond has reached agreements with major distributors such as Cox, Comcast and DirecTV that also cover future years. The next hearing in Diamond’s bankruptcy proceedings is scheduled for Sept. 3.
(Top photo: Lynne Sladky / Associated Press)
