Amazon (NASDAQ:AMZN) is set to invest in Diamond Sports as part of a comprehensive bankruptcy restructuring arrangement, marking a significant move for the leading regional sports networks owner seeking to recover from financial challenges. Diamond Sports, responsible for 18 networks under the Bally Sports brand with broadcasting rights for 37 professional teams across MLB, NBA, and NHL, has been undergoing Chapter 11 bankruptcy proceedings in the Southern District of Texas since March of the previous year, revealing a debt of $8.67 billion in a late 2021 financial filing.

The specifics of this agreement were disclosed by Diamond Sports on Wednesday morning and subsequently presented to Judge Christopher Lopez during an afternoon hearing in Houston. Judge Lopez expressed interest in the development, recognizing it as a positive step forward for the company amid its bankruptcy proceedings.

Negotiations between Diamond Sports and various leagues were underway, with plans to finalize deals by the conclusion of the upcoming baseball season. While the NBA and NHL acknowledged receipt of the documents and were in the process of reviewing them, Major League Baseball adopted a more cautious stance, emphasizing the need to wait until concrete progress is made before offering congratulations.

Amazon, maintaining silence on the matter for now, will await approval from the bankruptcy court before proceeding with the agreement. The accord, crafted in collaboration with Diamond Sports’ primary creditors, aims to facilitate the company’s emergence from bankruptcy, ensuring its ongoing operations and averting a potential collapse of the regional sports network system. Such a collapse would necessitate intervention from the NBA, NHL, and MLB to assume control over the production and distribution of most teams.

Under the terms of the restructuring agreement, Amazon is poised to make a minority investment in Diamond, anticipated to be initially around $115 million. Simultaneously, the two companies will enter a commercial arrangement, providing Prime Video users with access to Diamond’s content. Local team content will be accessible through Prime Video channels where Diamond holds broadcasting rights, with pricing and availability details to be announced later. This content, however, is unlikely to be included as a free benefit for existing Prime subscribers. Moreover, regional sports content will continue to be available through cable and satellite providers.

Acknowledging the complexity of this bankruptcy case, the availability of games on Prime Video may take some time. Diamond has also reached a preliminary agreement with Sinclair Broadcast Group to resolve ongoing litigation between the two entities. Sinclair had acquired the regional sports networks from Disney in 2019 for nearly $10 billion. This acquisition was mandated by the Department of Justice as a condition for approving Disney’s purchase of 21st Century Fox’s film and television assets.

Despite challenges faced by the regional sports networks industry, Diamond Sports Group separated from Sinclair under a previous agreement with creditors. As part of the settlement, Sinclair will pay Diamond $495 million and provide ongoing services to support its reorganization, benefiting both creditors and investors.

Diamond Sports CEO David Preschlack expressed enthusiasm about the comprehensive restructuring agreement, emphasizing the support from Amazon and major creditors. The company’s immediate focus is on implementing the plan and emerging from bankruptcy as a going concern beyond 2024. Diamond has already secured agreements with the NHL and NBA to retain local rights for the current season, while discussions with MLB on revised agreements are ongoing.

As part of its broader sports content strategy, Amazon has secured direct-to-consumer rights for several MLB teams, including the Detroit Tigers, Kansas City Royals, Miami Marlins, Milwaukee Brewers, and Tampa Bay Rays.

Featured Image: Unsplash

Please See Disclaimer