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On February 4th I shared the report that NHL viewership was down around 22% from last year (373K this year compared to 478k at the same point last year). The next day Bettman announced that he believed the NHL could hit 6 Billion in Revenue.
February 10th, just 4 days after Bettman’s announcement Disney released details of losses in streaming (3.5 billion) and overall losses of over 100 billion. Part of Bob Iger’s return after less than 2 years was splitting the company in 3 parts, with ESPN now being viewed independently of other streaming and broadcasting. 7k jobs were cut by Disney (with an announcement that 22k more cuts worldwide are coming) and programming budgets of 3.5 billion were being cut.
6 days later Sinclair, the parent company of Diamond Sports (which includes Bally) missed an interest payment of 140m and are now in a 30 day grace period to negotiate with debtors, investors, or file for bankruptcy. According to Sportico, the bankruptcy filing was already being prepared.
Yesterday the Athletic did a piece on what the Bally situation means for MLB, NBA and NHL in terms of broadcasting. This was forwarded to me by a friend and can be seen here:
Athletic piece (paywall) you can apparently get the whole article through a twitter link.
The approach is that this “doesn’t necessarily… mean that Bally will declare bankruptcy. The problem is that the parent company is nearly 9 billion in debt. We don’t know how much of the revenue owed to NHL for the past season has been paid, but with both ESPN and Bally (Diamond) reporting revenue losses along with other major streaming services such as Amazon Prime, Netflix and Hulu, things don’t look great.
My frustration is that the missed payment was expected. That usually means that either board members or ownership let it be known to their partnering agencies that they are going to miss making other payments as well. It would indicate that the league knew of the upcoming issue. So why make an announcement in February of “record earnings… just days before one of your major broadcast partners defaults on a payment that had been broadcast on the investor level?
We’ve seen the league deal with bankruptcy before on a much smaller scale (most of us weren’t around for the Great Depression). The Coyotes were run by the league until a buyer was in place. That was with all the other pieces in place (broadcasting, advertisers, etc) and was a point of contention.
If Bally sports goes to bankruptcy, usually a holding company is put in place to try to keep things operational until a sale or auction can be made. You may not remember “Veggie Tales…, but their first major film bankrupted the company. More than half the staff was let go and the rights were auctioned off. Netflix, I’ve talked about this before, had to refund ad revenue. The Bally and ESPN situations could warrant similar action.
Some of you remember the .com crash of the stock market in the 90s. Companies popping up with no product, just a name, and their stock took off like crazy. Once investors started to ask for tangibles, companies just disappeared. If you lived through that, there were people who lost most of their retirement 401K or portfolio. It was awful. In 2008 we saw the fanny Mae/Freddy Mac shut down. All the while there are reassurances that companies were “too big to fail…, etc. some of us have seen this scenario now 4 times in different markets.
Bally has until March 10th to announce their plan. ESPN isn’t even being mentioned yet. The most secure teams are those under the MSG and Maple Leaf Sports and Entertainment banners as they have their own broadcasting. The only thing I’m asking is for a bit more transparency on financial health. None of this came out of nowhere. We’ve known since November that ESPN was in trouble, the league is paying on a 1 billion dollar loan that was needed to help teams keep playing (taken out in 2021) and that same year every team announced revenue losses between 18M and 56M.
They sky isn’t falling, but the new broadcast deals that replaced NBC haven’t been in place that long and may already be on the brink.