The view of the ratings agency turned negative due to increased debt levels likely over the next 12 months. All sports broadcasters are coping with a mass exodus of viewers and advertisers after the entire sports world ground to a halt since mid-March due to the effects of COVID-19. While national networks have amped up re-runs or unscripted fare and are also starting to get live overseas action back on the air, U.S. regional networks are suffering a direct hit from the pandemic.
Even before the pandemic, though, Diamond had been in a carriage dispute with Dish Network, a major satellite operator, and the networks have been off Dish since last July. Asked by Wall Street analysts in recent days about any progress in the discussions, Ripley said he had no update. Dish’s outspoken chairman Charlie Ergen, famous for drawing lines in the sand, has said it could be the permanent end of the line for the RSNs on Dish, especially with the company’s pivot toward wireless.
Moody’s expects that Diamond’s debt-to-earnings ratio will hit 7.9 times (more than twice a typical level) by the end of 2020. Even in the scenario of Dish resuming carriage of the Diamond networks by the spring of 2021, leverage levels will be at about 6.4 times.
“The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines have created a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. Sporting events have been and continue to be significantly affected by the shock given mandates restricting crowd gatherings and sensitivity to consumer demand and sentiment.”
Despite the unfolding crisis, Ripley has asserted in recent days that Diamond is on solid footing. The Moody’s report noted it had $483 million in cash on its balance sheet as of March 31. Ripley predicts a return by the NBA, NHL and Major League Baseball in July or August, which would be an immediate boost to the 15 Diamond networks carrying games from all three leagues.
A proposal from MLB owners is being debated by the players but would call for large-scale quarantines and risk mitigation measures that could make it a non-starter for some players. Markets like New York or Chicago, disproportionately suffering from the effects of the pandemic, would be unable to host games, meaning their teams would spend months on the road.