San Diego Padres could be in trouble over major TV issue

Sep 8, 2021; San Diego, California, USA; San Diego Padres third baseman Manny Machado (13) is congratulated in the dugout after scoring a run on a bases-loaded walk by left fielder Wil Myers (not pictured) during the second inning against the Los Angeles Angels at Petco Park. Mandatory Credit: Orlando Ramirez-USA TODAY Sports

A major development occurred on Tuesday that could put the San Diego Padres in some trouble.

Diamond Sports Group, which owns the broadcast rights for 14 MLB teams, filed for Chapter 11 bankruptcy in March to restructure its debt. On Tuesday, they made it known that they will not be making a rights fee payment to the Padres as part of a strategic move.

For Diamond, which is a subsidiary of Sinclair Broadcast Group, declining to make the Padres payment was done to terminate a contract they lose money on (approximately $20 million per year). Diamond was seeking to have the streaming rights to the team but was unable to get that from MLB, so they decided to not make payments.

“While DSG has significant liquidity and have been making rights payments to teams, the economics of the Padres’ contract were not aligned with market realities. MLB has forced our hand by 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,” Diamond said in a statement.

The Padres’ TV contract was a 20-year, $1.2 billion deal that expires after the 2032 season. The deal provided the team with $60 million in revenue per year. Now the team will have to make up that lost revenue in order to help meet their significant payroll obligations.

The TV rights for the Padres are reverting back to the team. MLB is going to work with the Padres to ensure the games continue to be televised. The games will stream for free on MLB’s website, app, and the Padres’ website through Sunday. There will no longer be local blackouts for those in the San Diego market looking to stream Padres games. The league also will make Padres games available through DirecTV, AT&T U-Verse and fubo TV.

Spotrac lists the Padres’ total tax bill at $307 million including both payroll and their tax for going over the competitive balance threshold.