Sports Law Blog
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Friday, February 02, 2007
 
I Want My [Direc]TV.






Following the first televised sporting event in the United States—a 1939 baseball game between Princeton and Columbia—the New York Times predicted that televised baseball had no future:

Seeing baseball by television is too confining…..To see the fresh green of the field as The Mighty Casey advances to the bat, and the dust fly as he defiantly digs in, is a thrill to the eye that cannot be electrified and flashed through space….What would Christy Mathewson, Smokey Joe Wood, Home Run Baker, Eddie Collins, Frank Chance, Tris Speaker, Ty Cobb, Rube Marquard and those old-timers think of such a turn of affairs— baseball from a sofa! Television is too safe. There is no ducking the foul ball…

Baseball commissioner Ford Frick would later agree, expressing fear that televised baseball games would drive fans from the stadiums to their couches and bankrupt the sport. Frick thus pushed to limit the number of games broadcast on television and radio. Frick and the New York Times were, to put it mildly, a bit misguided.

Last week, Major League Baseball announced a proposal to carry its out-of-market “Extra Innings” television package exclusively on DirecTV for $700 million over seven years, thus cutting off access to most non-local games for the millions of people without access to a DirecTV satellite. Senator John Kerry quickly declared that he planned to bring the pending deal before the Federal Communications Commission, because, among other things, “a Red Sox fan ought to be able to watch their team without having to switch to DirecTV.” This followed on the heels of Senator Arlen Specter’s announcement that he plans to draft legislation repealing the NFL’s antitrust exemption under the Sports Broadcasting Act because the “football fans of America…are being gouged” by the shift from the broadcast of NFL games on network television to ESPN and DirecTV.

Congressional scrutiny of the “siphoning” of televised sports by cable and pay channels is not new. Several bills regulating sports broadcasting have been proposed by various members of Congress over the past thirty years, including the 1991 “Fairness to Fans Act”, which required professional sports leagues to limit the number of games broadcast on cable or pay television.

The current Congressional inquiries and the possibility of legal challenges to the MLB and NFL deals with DirecTV raise some interesting antitrust questions. I will briefly set forth some of the bigger issues here and hopefully address some of them at greater length in future posts. As an initial matter, it is worth noting that a group of fans actually filed a class action suit against the NFL in 1998, claiming that its deal with DirecTV violated the antitrust laws. The suit was settled before a court could ever reach the merits.

Before the case (Shaw v. Dallas Cowboys, et al., 172 F.3d 299 (3d Cir. 1999)) settled, however, the court did address a threshold question that is raised by the current (and pending) deal. That is, does the Sports Broadcasting Act (“SBA”) provide any antitrust protection for the NFL and MLB. The answer is clearly no. The SBA provides an antitrust exemption for the pooling of television rights of "sponsored telecasting" for the "organized professional team sports of football, baseball, basketball, or hockey." “Sponsored telecasting” is defined by the SBA and “does not include pay-per-view broadcasts,” such as DirecTV. The legislative history is similarly clear—for example, at the hearings before the House Antitrust Subcommittee in 1961, then-Commissioner Rozelle explained “that this bill covers only the free telecasting of professional sports contests, and does not cover pay TV.” (An interesting question to ponder for another day—that might become more relevant if the Beckham-ization of the MLS is successful —is whether or not the SBA applies to the pooling of broadcast rights for the sport of soccer, or is limited to the four enumerated sports).

A more difficult question, however, is whether the judicially created “baseball exemption” provides any protection for MLB. The Curt Flood Act of 1998, 15 U.S.C. § 27, et seq, lifted the exemption only as it pertains to labor issues for major league baseball players, and left the remainder of the exemption untouched. What remained untouched is unclear, and depends in large part on one’s view of the scope of the original (pre-Curt Flood Act) baseball exemption. On one end of the spectrum, courts have held that the original exemption only covered major league player labor issues (Piazza v. Major League Baseball, 831 F. Supp. 420 (E.D.Pa. 1993)), and therefore the exemption no longer exists at all. On the other end, courts argue the exemption covers matters central to the “business of baseball” (Major League Baseball v. Crist, 331 F.3d 1177, 1183 (11th Cir. 2003)), and therefore restrictions on television broadcasts of games are exempt only if such broadcasts are central to the game (the Southern District of Texas has already ruled that restrictions on radio broadcasts of baseball games are not exempt— Henderson Broadcasting Corp. v. Houston Sports Ass'n, Inc, 541 F. Supp. 263, 265-72 (S.D. Tex. 1982)).

Another interesting threshold question is whether the NFL or MLB would have any success arguing that they are single entities and therefore not subject to attack under Section 1 of the Sherman Act. Granted, major sports leagues have lost this argument virtually every time they have raised it, but the Seventh Circuit breathed some new life into the defense in addressing the NBA’s television restrictions on superstations. In that case, Judge Easterbrook noted that sports leagues may be more properly viewed as “hybrids” and suggested that “an organization such as the NBA is best understood as one firm when selling broadcast rights to a network in competition with a thousand other producers of entertainment.”

The actual merits of any potential antitrust claims also present some tricky issues. For example, what are the anticompetitive effects of the deals? Senator Kerry claims that the MLB-DirecTV deal causes a reduction in output, a classic anticompetitive effect, because MLB’s Extra Innings package is currently available to 75 million households through cable and satellite operators, but would only be available to 15 million households if shown exclusively on DirecTV. But, if all of the games are shown—as the MLB proposes to do—on MLB.com, is there any real reduction in output? And, even assuming there is a reduction, do professional sports leagues have sufficient market power to have an overall anticompetitive impact on the market, or are each of the leagues relatively small players in the overall market for sports (and entertainment) television with no ability to impact consumer welfare?

In 1984, the Supreme Court addressed some of these issues with respect to restrictions on television broadcasts of college football, but, putting aside the differences between college and professional athletics, the ability to broadcast games via the internet and other changes in technology call into question some of the conclusions made by the Supreme Court. Thus, while the NFL and MLB are likely to avoid even the whiff of antitrust litigation and possible exposure to treble damages, the DirecTV deals do raise a variety of slippery antitrust questions...





6 Comments:

This seems like a basic economic issue.

If demand to watch a given program is so high, its producer should be able to obtain whatever the equitable price for that programming is for the given demand level.

A baseball game on TV has a specific value, and in a free market firms should be able to charge whatever they feel balances price versus demand.

I love sports as much as anyone I know, and I wish I was a subscriber to all the special services. I'm not, because I'm apparently not "that big" a fan. Kerry and others are off-base in their assumption that organizations somehow owe us free access to their programming.

Anonymous tim -- 2/02/2007 8:02 PM  


But Tim, we have to consider the amount of Taxpayer support each MLB team receives and various Government Sponsored Advertising (Rose Garden Appearances, Congressional Resolutions, mayoral bets, Championship Parades) and laws (see the enforcement of the Draft).

It is not unreasonable to expect in exchange for all this public financed support, that every so often, the sports leagues sometimes need to leave money on the table and do something for the General public.

Blogger Michael -- 2/03/2007 12:49 PM  


Tim--

The level of output (and price) set by a single firm is a basic economic issue. When the single firm enters into an agreement with one or more of its competitors to set the level of output (and price), it becomes a (potential) antitrust issue under Section 1 of the Sherman Act.

If the leagues are a collection of competing entities (the individual teams), then league-wide agreements to restrict output and set prices are exactly the type of agreement Section 1 of the Sherman Act was designed to prohibit, and are much more than basic economic issues. If, however, the leagues are "single entities," at least with respect to the market for televised sporting events, then there is no "agreement," and therefore no potential Section 1 issues under the Sherman Act, and this is in fact just a basic economic issue (putting aside, of course, and potential Section 2/monopolization claims)

Blogger Gabe Feldman -- 2/04/2007 1:33 PM  


How does antitrust standing work in these types of cases? Can any consumer sue MLB for moving its games to DirectTV?

Also, given the emphasis on textualism in the courts, I can't imagine any court extending the SBA to soccer.

Anonymous Anonymous -- 2/05/2007 9:26 PM  


Arguably, yes, any consumer who had to pay more for the DirecTV package (or did not have access to the DirecTV package) would have the requisite antitrust injury/standing to bring an antitrust suit. Consumers brought the suit against the NFL in 1998...

Blogger Gabe Feldman -- 2/06/2007 7:21 PM  


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Anonymous Halk Bilimi -- 1/31/2009 4:20 PM  


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