Amazon is backing out of a $115 million investment in ailing RSN operator Diamond. What happens next?

In January, Diamond Sports Group made waves over a plan that was intended not only to pull the company out of bankruptcy but also to put a giant behind it: Amazon. Diamond, the operator of a collection of regional sports networks, had filed for bankruptcy 10 months earlier and appeared headed for liquidation until it proposed the Amazon-backed plan.

But now Amazon has scrapped its planned $115 million investment, as first reported by Sports Business Journal and confirmed by people with knowledge of the matter who were not authorized to speak publicly. In the wake of the decision, executives and industry experts have mixed opinions about why Amazon made the move and what it means for Diamond’s future, which was already unclear.

Amazon and Diamond declined to comment.

Diamond owns and pays for the broadcast rights to 34 teams in the MLB (12), NBA (13) and NHL (9), and has operated them under the Bally brand. In the grand scheme of things, the $115 million Amazon planned to spend is a relatively small amount. For comparison, earlier this year, Diamond predicted its linear TV operation alone would bring in $2.07 billion in revenue, with expenses of $1.94 billion – not to mention the streaming side of the house.

“I understand the excitement around Amazon,” said Patrick Crakes, a media consultant and longtime executive at FOX Sports. “Amazon’s investment was — I can’t say it’s not material. … $100 million dollars is $100 million. But it’s not going to deter (the company’s plans to emerge from bankruptcy).”

Importantly, Amazon’s investment was never going to be delivered right away, but only after the company emerged from bankruptcy — which it didn’t. That made it a low-risk opportunity, one that might have offered the company a valuable, up-close look at Diamond’s operations.

“Amazon almost always has a way out,” said Crakes, who advised several unprotected creditors in Diamond’s bankruptcy proceedings. “Because they’re so big, they can dictate terms.”

As for Amazon’s possible motives for an exit, Crakes believes the company could have anticipated that Diamond would emerge safely from bankruptcy, limiting Amazon’s ability to further expand its own sports media rights business in the near future.

“I think it was like, ‘What are we doing here?'” Crakes said. “Diamond seems to be coming out of this. They’re going to be strong. They could run this thing for a while. And there’s just no progress here.

“It’s a super small investment that Amazon maybe thought they could turn into something big. You’re always looking to do that.”

Others were more skeptical. Several industry officials suspected that Amazon had backed away for the opposite reason: because it didn’t like what Diamond’s still-evolving business plan presented, especially given how the landscape has changed since January.

Amazon recently signed an 11-year deal with the NBA and WNBA worth approximately $1.8 billion per year.

“They got the NBA deal and said, ‘Why do we need this?’” said one industry executive who asked not to be named.

If Diamond does end up emerging, Amazon could still become one of the streaming channels offering access to Diamond content and games.

Along with the investment plan, Diamond and Amazon reached a commercial agreement that would make Amazon the new “primary partner” for selling streaming access to games.

“That deal can be done separately,” Crakes said. “They can still do that deal.”

The games were not intended to be free for Amazon Prime subscribers, but rather as an add-on available through Prime. (However, Prime was never intended to be the only way to access the games.)

Diamond has revised its business plan after the company in late July indefinitely postponed a “confirmation hearing” in which the court would accept or reject the plan to avoid liquidation.

Diamond has just entered into agreements with the NBA and NHL that, if approved by the courts, will commit Diamond to operate during the upcoming seasons of both leagues. The deals also include Diamond’s operations with those leagues in the event the company emerges from bankruptcy.

There is no such deal in MLB, at least not yet. Three of the 12 MLB teams Diamond has brought with him this year will become TV free agents this winter: the Cleveland Guardians, Minnesota Twins and Texas Rangers.

Diamond has agreements with major distributors such as Cox, Comcast and DirecTV that also cover future years. The next hearing in Diamond’s bankruptcy proceedings is scheduled for September 3.

(Top photo: Lynne Sladky / Associated Press)