Despite its naming rights deal with Diamond Sports Group (DSG), Bally’s Corporation is unlikely to suffer negative consequences from Diamond’s recent bankruptcy filing.
DSG controls Bally Sports regional sports network (RSN), which broadcasts games for more than 40 teams around the US. Diamond entered voluntary Chapter 11 proceedings after defaulting on a $140 million interest payment on $8.67 billion in debt.
Because of the connection between the two, some have wondered whether this is bad news for Bally’s. It appears, however, that whatever effects might come of it will be minimal.
If it leads to DSG canceling some partnerships, that could diminish the value of Bally Sports as a customer acquisition tool for BallyBet. However, given the challenges Bally’s is facing in the sports betting vertical, that may be the least of its worries. The company is pivoting to focus on its online casino product in any case.
Brand and Naming Rights for Bally Sports are Bally’s alone
During Bally’s Q4 earnings call, chief financial officer Bobby Lavan addressed the speculation around Diamond’s impending bankruptcy, which was still hypothetical at that time.
Lavan told investors Bally’s looked forward to working with Diamond’s management. He also confirmed Bally’s had little concern over the company’s high debt load.
In 2020, Bally’s acquired naming rights over Diamond’s regional sports networks. Sinclair Broadcast Group separately agreed to promote Bally’s brand over Sinclair networks.
However, the Bally’s brand and naming rights are owned by Bally’s alone. Bally’s has no liability related to Diamond’s debt and Diamond holds no equity or other ownership rights in Bally’s.
Diamond Intends to Operate Bally Sports Networks Throughout Bankruptcy
While it’s true Diamond has no ownership or equity in Bally’s Corp., its owner, Sinclair Broadcasting Group, is another story.
In 2019, Sinclair partnered with Entertainment Studios to form Diamond and take over Fox Sports regional networks.
(Entertainment Studios, founded by chairman and CEO, Byron Allen, broadcasts nine television networks — including the weather channel — and the Local Now streaming service.)
Not long after, Sinclair and Bally’s announced a partnership that would give Bally’s naming rights over the regional networks. In return, Sinclair received warrants and options for a minority stake (14.9% plus an option for an additional 10%) in Bally’s Corp.
However, the restructuring support agreement (RSA) between Diamond and its creditors requires DSG to become a standalone company, split from Sinclair. The deal also eliminates over $8 billion in debt.
Diamond intends to use the restructuring to strengthen its balance sheet.
The company also expects to continue to operate Bally Sports networks as usual during the Chapter 11 process, funded by $425 million in cash on hand.
“DSG will continue broadcasting games and connecting fans across the country with the sports and teams they love,” said Diamond CEO David Preschlack.
With the support of our creditors, we expect to execute a prompt and efficient reorganization and to emerge from the restructuring process as a stronger company.
We deeply appreciate the hard work and commitment of our employees, who remain focused on producing high quality sports games that our fans have come to expect. We look forward to working constructively with our team and league partners and all DSG stakeholders throughout this process and beyond.
Could Diamond Restructuring Impact BallyBet?
While Diamond intends to keep Bally Sports broadcasting as usual, bankruptcy proceedings could impact how that looks.
According to Legal Sports Report, Diamond’s restructuring could see the company canceling unprofitable contracts with its partnered teams.
Insiders told the New York Post that some of those deals have been costly:
Diamond, for example, is currently locked into a money-losing contract to pay the San Diego Padres $60 million a year through 2032, two sources said. Most of Diamond’s MLB contracts are unprofitable, while maybe half its NBA deals are losing money and a handful of its NHL agreements are in the red, according to a source.
Should that happen, DSG and Bally Sports would lose streaming rights to the teams in question. That loss of content would drag down the value of Bally Sports and Bally Sports Plus, Diamond’s direct-to-consumer streaming service.
In theory, that could impact BallyBet, as Bally Corp. expected Bally Sports to be a customer acquisition channel for its sports betting product. BallyBet currently operates in Arizona, Colorado, Indiana, Iowa, New York, and Virginia.
However, the realities of a competitive sports betting sector haven’t matched up to Bally’s expectations.
Bally Sports Not the Customer-Acquisition Driver Bally’s Hoped
Diamond has been having a rough go of things as well. Its third-quarter results showed an 11% drop in revenue from the RSN as customers continued to ditch cable services.
Unsurprisingly, Bally’s feelings about the value of the RSNs has cooled significantly since the initial announcement in 2020. Perhaps that’s partly because BallyBet currently has less than a 1% share of its active markets, despite an investment measured in billions.
With the deal’s announcement, chairman Soo Kim said the partnership offered Bally’s a chance to “revolutionize the US sports betting, gaming and media industries.”
More recently, during Bally’s third-quarter earnings call last November, outgoing CEO Lee Fenton was noticeably more subdued.
RSNs, Fenton said, still “form part of our plan, and we think we get tremendous best-of-branding benefit from it.”
Fenton will step down at the end of this month. His replacement, Robeson Reeves, is the current president of Bally’s Interactive division. Bally Interactive recently suffered a $390 million write-down as part of Bally Corp’s $425 million 2022 deficit.
On the same call, Fenton highlighted a shift in company strategy to online casino markets. Reeves echoed that commitment on a subsequent investors’ call to discuss the company’s Q4 earnings.
Having a tight grip on priorities is how we’ll move faster and deliver near and long-term results to investors. In North America, our upward trajectory on icasino continues.
The upside to all this is that whatever happens to Bally Sports is unlikely to have much of an effect on BallyBet, good or bad.
Even if it does, Bally’s digital focus is now on its online casino until the tech behind the sportsbook is solid.
Bally’s Doubles Down on Commercial and Online Casinos
By all accounts, the way forward for Bally Corp’s interactive business is its online casino.
As Bonus reported, Reeves considers enhancements to Bally Casino NJ a driver of the casino’s success. He also feels Bally’s Ontario online casino will achieve similar results.
Specifically, in 2023 Bally’s is looking to expand Bally’s Casino into Pennsylvania. The company has also pushed for its home state of Rhode Island to legalize online casinos. But while the idea has some support in the state Senate, we’ve yet to see a bill surface.
Outside of the above, it’s unknown if Bally’s intends to seek entry into other existing online casino states. It’s undoubtedly keeping a close eye on the big legislative prizes like New York and Illinois.
Legislation to bring online casinos to those states failed in 2023. However, it is a safe bet online casino proponents will try again in 2024.
Whatever happens, Reeves has reiterated Bally’s will be “iCasino first” from now on. And should any legalization efforts succeed, Bally’s is a likely candidate to jump into any new market.
In the meantime, the company has more concrete plans in the retail sector.
Bally’s Chicago Casino Resort to Open in 2026
The most significant is a $1.7 billion downtown Chicago build, set to open in 2026. In addition to the urban resort, Bally’s has formal approval to stand up its temporary casino at Medinah Temple near Chicago’s “Magnificent Mile.”
Another plan to open a mini-casino in State College, PA, is less straightforward. The partnership involved faces a Supreme Court challenge from a competing casino. If successful, the license awarded to Bally’s business partner Ira Lubert will be null and void.
And then there’s New York.
Bally’s is one of at least ten bidders for a new york downstate casino license. The company is in talks with Trump Golf Links to purchase land for the Bronx casino bid.