By Phillip Swann
The TV Answer Man –@tvanswerman

Sports Business Journal reports that Diamond Sports has failed to make its grace period payment to the San Diego Padres which means the broadcast rights will revert back to the team. The publication writes that Major League Baseball will take over the broadcasts of the Padres games beginning Wednesday.

Diamond Sports issued a statement on Tuesday evening that said it had the funds to make the payment but decided “the economics of the Padres contract were not aligned with market realities.”

SBJ wrote on May 22 that Diamond, which declared bankruptcy in March with the intent to stay in business, was considering not making payments to teams whose broadcast rights the company deemed unprofitable. But this is the first time that Diamond has decided to willingly withhold a payment and give up its broadcast rights.

The Padres said it will make a statement later this evening on the team’s future TV plans.

The non-payment comes on the eve of a bankruptcy court hearing tomorrow in Texas where a judge will hear Diamond Sports’ motion to reduce its payments to teams due to declining carriage fees from pay TV operators. Major League Baseball is opposing the motion, saying Diamond should honor their contracts.

If the judge agrees with the RSN company, it could lead to a sudden reduction in team revenue for possibly every Bally Sports team. The implications of that are uncertain but it’s not hard to envision a scenario where some teams become less aggressive in pursuing free agents.

Diamond is already paying a reduced amount (75 percent) to four teams as approved by the bankruptcy court: the Guardians, Twins, Diamondbacks and Rangers. But the reduced payment levels are temporary until the judge rules on Diamond’s motion. If Diamond wins, it could move to make the reduced payments permanent for those teams and others.

The league today notified the court that it has six witnesses scheduled for tomorrow:

1. MLB Commissioner Rob Manfred
2. Robin Flynn, expert witness and former Kagan research executive
3. Richard Dorffer, Chief Financial Officer, Cleveland Guardians
4. Thomas Harris, Executive Vice President and Chief Financial Officer, AZPB Limited Partnership
5. Neil Leibman, President of Business Operations and Chief Operating Officer, Rangers Baseball LLC
6. David St. Peter, President, Minnesota Twins.

Diamond has three witnesses scheduled: Leo J. Hindery, Jr., co-founder of the Yes Network, and the company’s CEO and COO.

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— Phillip Swann
@tvanswerman