The 2023 NFL Week 1 Roundup | Diamond in the Rough
It Was Fun While It Lasted
The San Diego Padres have a bad debt problem. Over and above their on-field bad baseball problem, which is another ugly story for another ugly day. This past Memorial Day, heavily indebted regional sports network conglomerate Diamond Sports Group (which holds — err, held — the team’s local broadcast and streaming rights) missed a contractually-obligated $13M payment, off the back of a $1.2B/20-year rights package. And with it, questions were sparked league-wide as to whether and when other cleats would fall and what they would spell for breathtaking Team payrolls predicated upon ever-thickening rights fees. A worst-case scenario coming to fruition as a gloomy harbinger of things to come beyond baseball. San Diego might have a bad debt problem today but the grave reality facing sports is no longer one that can be dismissed as hypothetical.
It landed with a boring press release in August 2019. Sinclair Broadcast Group had acquired for $9.6B 21 so-called Regional Sports Networks (RSN) from the Walt Disney Company, as a Department of Justice divestiture demand allowing Disney’s impending purchase of 20th Century Fox. Inside the $10B neatly wrapped gift conveyed exclusive local broadcast rights to 42 professional MLB, NBA and NHL teams. Crucially, streaming rights included. A bonanza in a box; what could possibly go wrong? For a time, nothing. Sinclair organized its new mega-RSN into a subsidiary named Diamond Sports Group. It essentially warehoused former regional Fox Sports Networks affiliates and Fox College Sports. Later rebranded as Bally Sports, it enjoyed monopoly local televised and online access to such teams as the Rams, Buccaneers, Clippers, Heat and Red Wings and more. Nearly four dozen household names. But Diamond’s collection of 14 MLB team rights was by far its prized possession. Charging $11 monthly to all cable subscribers in its national geographic footprint in addition to selling advertising content on-air minted money for a time. These revenues, paid directly to MLB Teams, triggered an arms race for talent up and down the League. San Diego, in particular, went ham on a spending spree and is now anchored by an annual $250M glittery payroll obligation that comes along with it such superstars as Manny Machado, Xander Bogaerts, Juan Soto, Fernando Tatis, Jr. and many expensive others.
Forebodingly, the Sinclair/Diamond-Disney deal was signed amidst the afterglow of peak cable economics, despite clear indicators depicting the slow and momentum-gathering unraveling of cable packages in consumer living rooms nationwide. Cord-cutting began trending just as Netflix, Hulu, YouTube TV and all were just beginning to hit their stride. Diamond attempted to belly-up to the table with its own streaming option but was plagued with technology issues galore, user interface problems and a painfully slow rollout. MLB angrily accused Diamond of offering a sub-par online product to a savvy fan deserving of best-in-class technology, obliquely casting a harsh shadow over America’s pastime. And so the MLB licked its chops in taking over streaming rights and folding them into its award-winning MLB.TV service. But Diamond and the MLB could never agree on a price, Diamond hemmed in by suffocating debt service, thusly demanding an unrealistic price. And so the clock ticked as cable subscribers continued to jump ship.
IN March 2023, the nexus of deteriorating subscriber-based RSN fees and interest payments on amassed debt was met. Diamond filed for Chapter 11 bankruptcy and stopped making interest payments. Rights fee payments weren’t far behind. Soon, the Diamondbacks, Rangers, Guardians and Twins would go begging. Diamond, recognizing the value of its rights in San Diego and Cincinnati, groaned to make late payments in early May. Diamond’s bankruptcy immediately called in question San Diego’s ability to afford its roster moving forward. The Team tersely maintained no issues in meeting payroll. Back of the envelope math said otherwise. But by late May, San Diego’s next $13M installment was again missed as Diamond signaled an empty bank account and no stomach to made good on any of its 11 year-old promises. San Diego retaliated by terminating its 20-year $1.2B contract turning over streaming rights to MLB’s MLB.TV service. The MLB, in turn, enlisted Fubo, DirecTV, Spectrum and Cox to ensure broadcast visibility for fans in town. Further, the MLB incredibly declared that the League would backstop 80% of all Diamond deals should the group ultimately fail to pay. It remains unclear for how long the MLB can backstop the 14 Teams and from where the money will come. Whatever the case, the MLB certainly cannot afford the worst case scenario for long. Even considering the market rates being collected from MLB.TV customers and new broadcast partners.
So for now, Diamond’s bankruptcy case continues to trundle forward in court. It’s likely looking to discharge team-friendly deals as part of any court-managed reorganization. The Padres’ sweet $1.2B deal among them. The state of affairs in America’s Finest City bode ill for professional sports plural. That much is for sure. Ever-mushrooming rights fees are a direct byproduct of TV ratings and the underlying cable ecosystem that charges-out sports programming fees to all subscribers beneath. ESPN alone bills cable companies $113 annually per subscriber, which in turn is slipped into customer invoices in full. When subscribers do their own math and flee a cable bundle that no longer ticks and ties, an implosion of noisy media infrastructure can’t be far behind. At least, that’s how theory goes. Don’t tell the Leagues that, though. The NFL signed a ritzy new $113B deal with the broadcast networks in 2021. The NBA is looking for its piece of the pie as negotiations commence after the conclusion of the upcoming season. And the NHL recently began its own cozy little $625M deal with ESPN and Turner Sports. MLB is currently in the middle of its own $12B/7-year deal with Fox, TBS and ESPN. With all these firey numbers, one has to wonder where they’re harvesting all these money trees. Diamond found out IN 2023 what was flashing violently before their eyes in 2019. That the trees weren’t so evergreen after all. That the appetite for boilerplate fees among the masses is brittle. And that what was once thought to be a gift-wrapped home run ultimately slumped into a naked strikeout. Bad debt or bad idea? Yes. Relatedly, the Padres lost BIG to the Astros on Sunday and were eliminated from NL West contention. It was fun while it lasted, in more ways than one.
Turning now to the NFL’s debut week of the Season, WOW are we just getting started. For obvious reasons, the first week of the season is always the most unpredictable. 2023’s start lived up to this reputation and then some. Last night, it took precisely 212 days, 4 drives and ONE play for Aaron Rodgers and his slow star-studded rollout to come to a crashing halt. He went down within minutes of kickoff, the victim of a routine sack. He rushed to his feet then immediately reached for the safety of the ground immediately setting tongues wagging. He was ultimately helped off the field at which point armchair physicians got to work and diagnosed a likely Achilles tear; close-up HD rippling of his calf seemingly confirming the Jets calamity. Whatever the case, the opposing Bills failed miserably in taking advantage of the offensive hole and looked like ghosts of their 2022 selves all around. Sloppy gameplay overcome in the end by a shaky Jets takeaway. 24 hours before THAT, disaster on another front with NYJ’s co-tenants where the Giants were shutout by the Cowboys, 0–40. An embarrassing beginning for a team reaching for the daring unlikely heights of just last year. The Giants wilted against an oppressive pass rush and an 0–1 start resulted, neatly dovetailing with longtime NY fan expectations.
Elsewhere, Tua Tagovailoa bashed out of the starting gates with an outrageous start (28/45 466yds 3 TDs) that has his Fins and onlookers everywhere doing backflips off of Key Biscayne. LAC’s newly contracted superstar Justin Herbert, meanwhile, pushed forward an earnest performance but was letdown by a Defense incapable of extinguishing the Miami heat. IN Chicago, the Packers are doing just fine in the post-Rodgers era where Jordan Love received heart emojis all game long with his auspicious 38–20 debut. Sure the Bears picked up right where they left off in December and sure Green Bay won’t have the benefit of playing a team with Chicago’s reputation every week, but fireworks to start the season are never a thing to be underestimated. A bit further east, a Buckeye clandestine matchup resulted in abject humiliation with Bengals at Browns. Cinci QB one-time sensation and highest paid player in NFL history Joe Burrow may well have been playing pickle ball such was his urgency. A screen door offensive line certainly only added to the misery. He was benched in the 4th after punishing fans with a harrowing outing. On the other side of the ball, beleaguered Deshaun Watson did no favors for the Browns offense with a fair to middling performance. It’s the CLE Defense that rallied, as is typical for them, survived as the true all star. A 24–3 Cleveland WIN surfaced.
And finally in our Round Robin, Thursday Night Football enjoyed the season opener’s highest ratings since 2019 as the scrappy Lions snuffed out the 2023 Super Bowl champs in KC 21–20. Mahomes suffered a rare languid start sans Travis Kelce who is recovering from a bone bruise (whatever THAT is). Baltimore cruised to victory over the Texans, SF with a recovered Brock Purdy, returned to form nicely against a withered Steel City while the Commanders started off the season right with a wobbly 20–16 victory over the Kyler Murray-less Cards. Jimmy G arrived in Vegas and struck gold against the suddenly meh Broncos as Tom Brady received a hero’s welcome in Foxborough but the rah-rah-rahs stopped there as the Eagles stole a hometown win from the Patriots, 25–20. Taken together, it just gonna be one of them years. As witnesses, we’ll take every second of it!
