North America’s Major League Baseball (MLB) has taken control of San Diego Padres broadcasts after domestic partner Diamond Sports Group (DSG), a subsidiary of the Sinclair Broadcast Group currently going through bankruptcy proceedings, failed to make a scheduled rights payment for its regional sports network (RSN) Bally Sport to continue broadcasting games.

MLB announced today (May 31) that it has taken over control of the production and distribution of Padres games going forward, with yesterday’s (May 30) match against the Miami Marlins being the final Padres game broadcast by Bally Sports San Diego.

In a statement, DSG said it had “decided not to provide additional funding to the San Diego RSN that would enable it to make the rights payment to the San Diego Padres during the grace period and will no longer be broadcasting Padres games after Tuesday, May 30.

“While DSG has significant liquidity and has been making rights payments to teams, the economics of the Padres’ contract were not aligned with the market realities. MLB forced our hand with its continued refusal to negotiate direct-to-consumer (DTC) streaming rights for all teams in our portfolio despite our proposal to pay every team in full in exchange for those rights.

“We are continuing to broadcast games for teams under our contracts.”

DSG was in the middle of a 20-year, $1.2 billion deal with the Padres for Bally Sports San Diego to broadcast the team’s game through 2032.

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However, Bally Sports San Diego is not part of DSG’s bankruptcy filing as it is a joint venture between the Padres and DSG and there are no bankruptcy law protections that can overcome a missed payment. The missed payment means media rights revert to the Padres, with MLB producing the team’s game in Miami on Wednesday.

MLB will stream Padres games on its streaming platform, as well as the and websites for free through the end of the weekend. After that, in-market fans will be able to stream games for $19.99 per month or $74.99 for the rest of the regular season.

The league already has broadcast deals with local cable operators DirecTV, AT&T U-Verse, Cox, Spectrum, and FuboTV to also carry Padres games.

MLB’s chief revenue officer Noah Garden said: “As commissioner Manfred previously stated, MLB is ready to produce and distribute Padres games to fans throughout Padres’ territory.

“While we’re disappointed that Diamond Sports Group failed to live up to their contractual agreement with the club, we are taking this opportunity to reimagine the distribution model, remove blackouts on local games, improve the telecast, and expand the reach of Padres games by more than 2 million homes.”

MLB has previously stated its wish for DSG to fulfill its contracts with its teams but has longer-term plans to centralize broadcasting rights under its umbrella. The league recently launched a local media department to navigate broadcasting rights in the post-DSG streaming world.

Billy Chambers, MLB’s executive vice president of local media, said: “Through the power of MLB and the Padres, we are working to elevate the game broadcast experience of all Padres fans.

“New technology, better picture quality, and increased access are just a few of the items we are working on to better tell the story each and every night.”

Padres chief executive Erik Graupner commented: “We have been preparing for this groundbreaking moment. The Padres are excited to be the first team to partner with Major League Baseball to offer a direct-to-consumer streaming option through without blackouts while preserving our in-market distribution through traditional cable and satellite television providers.

“Our fans will now have unprecedented access to Padres games through both digital and traditional platforms throughout San Diego and beyond.”

DSG has been navigating bankruptcy proceedings since March amid significant financial losses caused by the initial $10.6 billion it paid to purchase rights for 21 US teams from Fox in 2019. Court filings had shown its RSNs had also lost 22 million subscribers and $810 million in revenue over the last four years.

Since then, DSG has gained the rights for its RSNs to broadcast the games of 42 teams across ice hockey’s NHL, basketball’s NBA, and the MLB. Teams who are not paid their rights fees are free to break their contracts, with Padres being the first to exit.

The Padres were one of the 14 MLB teams broadcast by DSG via its Bally Sports RSNs – the others being the Arizona Diamondbacks, Atlanta Braves, Cincinnati Reds, Cleveland Guardians, Detroit Tigers, Kansas City Royals, Los Angeles Angels, Miami Marlins, Milwaukee Brewers, Minnesota Twins, St. Louis Cardinals, Tampa Bay Rays, and Texas Rangers.

DSG has paid only half its rights fees to the Cincinnati Reds, Texas Rangers, Arizona Diamondbacks, and Cleveland Guardians, with a hearing scheduled today in Houston over DSG’s claims it should pay fewer rights fees to those teams to account for the market forces that have reduced the traditional cable model in recent years.

Earlier this month, the Phoenix Suns, of US basketball’s top-tier NBA, were blocked from moving ahead with their intended new local-area television and streaming rights deal with broadcaster Gray Television and video technology firm Kiswe.

Bankruptcy judge Christopher Lopez ruled that the deal would violate the rights of the Suns' current broadcast partner DSG and that the team cannot yet move on from that contract.

Image: Jim McIsaac/Getty Images