ST. LOUIS – There’s a bit of uncertainty surrounding one of the largest sources of revenue for the St. Louis Cardinals, and perhaps the chain effect of events that could follow.
The Cardinals are nearly halfway through a TV-partner contract with Bally Sports Midwest that, currently standing, pays the team $1 billion through 2032. Bally Sports Midwest is a regional sports network (RSN) operated through Diamond Sports Group LLC, an entity that could be on the verge of declaring bankruptcy.
The New York Post first reported the possibility of a Diamond Sports bankruptcy filing in September and noted last month that talks for the MLB, NBA and NHL to acquire its assets are “faltering.” Diamond Sports operates 21 Bally Sports RSNs, including the markets for competitive MLB teams like the St. Louis Cardinals, San Diego Padres and Atlanta Braves. Some teams earn up to 30% of their revenue through Bally Sports RSN rights.
In short, a bankruptcy filing could put the Cardinals at risk of having their current television contract downgraded or restructured. A source told the New York Post in September that Diamond Sports could keep broadcasting games on its Bally Sports networks if it goes bankrupt, but would have protection from creditors and not necessarily need to pay teams their rights fees, meaning a loss of revenue.
“We’re operating like it’s going to stay, but the reality is, there’s going to be change,” said Bill Dewitt Jr., managing partner and chairman of the St. Louis Cardinals on Monday during a Winter Warm-Up media session.
The fluid situation has been developing since 2019, when Sinclair Broadcast Group, the parent company of Diamond Sports, purchased the 21 RSNs previously owned by FOX Sports. The COVID-19 pandemic took shape the following year and sparked an unprecedented rise in cord-cutting. More cable companies have dropped Bally RSNs, and Diamond’s profits aren’t quite lining up with projections.
In the scenario that Diamond Sports declares bankruptcy, Sinclair could distribute Diamond Sports’ equity to creditors, who would then oversee a fire sale of assets to MLB, NBA and NHL.
“It’s especially important for us because we do have a regional fan base and our subscribers have been declining,” said Dewitt Jr. “We’ve lost subscribers, not because they don’t want to watch baseball, but it’s just not as available.”
Less revenue, the main consequence of stake, could make it more difficult for the Cardinals to pursue high-profile signings and stay competitive financially. There’s at least two reasons such a change could prove challenging to St. Louis’s ownership group.
The first, many National League foes, like the New York Mets, Philadelphia Phillies and San Diego Padres, have opened their wallets for several post-pandemic signings worth hundreds of millions of dollars. If the Cardinals lose money from the TV cash deal, it might be harder for the front office to justify long-term signings.
The Cardinals are currently 12th in revenue and 12th in payroll of Major League Baseball’s 30 teams, though there’s an alarming gap between them and the Top 6 teams in both facets, according to Dewitt Jr.
“We’ll do our best to compete with the biggest of spenders, but we’re not in a position to be the biggest of spenders [right now],” said Dewitt Jr., though before discussing the RSN uncertainty. “If opportunity presents itself, we can spend some money and improve the club, we will do it. But it’s hard to do.”
The second reason, not all Major League Baseball teams are under the Diamond Sports umbrella. Cross-state rival Chicago Cubs, for instance, broadcast their games through Marquee Sports, another extension of Sinclair. They earn an estimated $132 million per year on their current multi-year deal.
While the Cubs are working out of a team rebuild, they have been more aggressive in free agent spending this offseason, outspending the Cardinals $324 million to $120 million, per Sportrac. Even if the business models prove similar, there could be a willingness for teams with more secure revenue streams to make a splash on top-available talents now.
“Their models are actually not that different from ours,” said Bill Dewitt III, president of the St. Louis Cardinals, speaking alongside his father. “We have a piece of our network. The Cubs have a little bigger piece maybe, but the Cubs did their deal more recently.”
“It’s a concern of a fluid situation, there’s no doubt about it,” Dewitt Jr. chimed in soon after his son’s comments. “Something is going to happen sooner rather than later, and it’s a concern. It’s a big part of our revenue stream.”
Dewitt III noted that the Cardinals have been “cognizant” of the ongoing situation and MLB is working on a “contingency plan,” in the case the Diamond Sports -operated RSNs become a larger issue.
“MLB is doing a lot of work, and I really think they’re on the cutting edge of understanding that industry because every team’s dealing with it in one form or another,” said Dewitt III. “The bottom line is the overall economics of RSNs have been in decline, and that’s concerning to us and all of sports. It’s a risk-factor for us going forward, but I think MLB is on the case.”
If MLB takes control of the Diamond Sports-owned RSNS, there’s at least one other issue that would need quick resolve. MLB currently has blackouts in place for Cardinals fans from much of Missouri and other Midwestern states when they attempt to stream games online.
“You can imagine [the blackouts] create distortions because of the antiquated nature of it,” said Dewitt III. “There’s a lot of talk at the owners’ meetings about cleaning out. It’s a bigger issue than just us, but I think these blackout areas are really problematic in baseball. Everybody knows it. I think a lot of teams that used to protect areas because ‘those are our fans, we don’t want Cubs fans to get in there,’ that stuff for us needs to get cleaned up. We’re hopeful that some of that gets solved through a local media rights changing of the guard.”
“I think things are definitely going to change. MLB is on the case. I think you’ll see, I don’t know how long it’s going to take, but not too long of a period of time, it’s going to be a different delivery system where everyone will have an opportunity to watch Cardinal baseball. It’s complicated, but we’re hoping for the best, because it’s a big part of our revenue.”
Despite the uncertainty, the Dewitts feel confident in this year’s approach to building the Cardinals.
“We feel good about where we are and what our team looks like going into spring training,” said Dewitt Jr.
Other notes of importance from the Dewitts:
- The current contract of John Mozeliak, Cardinals President of Baseball Operations, is set to expire after this season. The Dewitts expect to meet with him one-on-one to discuss their visions in spring training.
- Finding an heir to Yadier Molina at catcher (Willson Contreras) was the team’s top priority and fulfilled. Mozeliak explored some other additions that didn’t pan out, including a left-handed bat.
- Both have been in contact with Bally Sports Midwest staff about a possible replacement to Dan McLaughlin (arrested for DUI last month) for the play-by-play job and could offer feedback, but the decision is ultimately up to Bally Sports Midwest. Candidates internal and external to St. Louis are being considered.
- Dewitt Jr. says it’s “exciting to see” some new rule changes for the upcoming season, like shift bans, pitch clocks and bigger bases.