Thursday, September 12, 2013

Antitrust Law & Live Streaming of Games over the Internet

As documented in the last post, Major League Baseball Advanced Media (MLBAM) consolidates all team web sites and other Internet activities including the live streaming of games under the league’s umbrella. The NBA and NHL likewise control all clubs’ Internet services and streaming capabilities. The NFL is at least as restrictive in turning over live streaming exclusively to its broadcast partners. No heed is paid antitrust law’s conceivable application to collective league action of this sort. This was the case with American Football League, which sold broadcast rights collectively on start-up in 1960, jumping the gun by two years on the Sports Broadcasting Act, and likely helping the NFL convince Congress of the Act's necessity. There is of course nothing in the 1962 SBA that explicitly recognizes league control of live streaming games via the Internet. Moreover, the Act is very specific in limiting its application to television broadcasts of professional football, baseball, basketball, and hockey only. League control of Internet and website services has been challenged by individual clubs. However, last year the television and Internet blackout policies of MLB and the NHL each became the subject of class action antitrust lawsuits filed by customer groups. In December of 2012, a motion by the leagues to dismiss the now consolidated cases was rejected by US District Court Judge Shira Scheindlin; the case proceeds.

The plaintiffs allege that the leagues have violated the Sherman Antitrust Act by unfairly restricting fans' ability to watch local broadcasts through internet streaming or satellite television in two ways. First, consumers must purchase a package that includes all out-of-market broadcasts. For example a St. Louis Cardinals baseball fan living in New York City cannot simply purchase the feeds of Cardinals games, but a more (presumably) expensive package that includes all but the games of the Mets and Yankees. Second, the packages blackout any games broadcast locally via a CATV regional sports network (RSN). Customers cannot use Internet or mobile phone feeds to watch their local team play, but must instead purchase a cable subscription and watch televised games from an available RSN. This obstruction is particularly acute in areas with no well-defined local team, such as Las Vegas. Rather than making all games available, the area is instead designated by MLB as a local market for all six California and Arizona teams. Up to forty percent of the games played on a given night can be blacked out in Las Vegas…although that city is rumored to have other entertainment options. This is likewise the case in Iowa, parts of which is assigned by MLB as the home market for the several Midwest teams from the surrounding states (and which, after the state fair packs up, has slightly fewer entertainment choices than Vegas). The complaint charges that the exclusive broadcasting policies enable the RSNs to charge monopoly prices for their much sought after sports programming and to raise the subscription fees for cable consumers. The outcome of these lawsuits is critical to the access and costs of live sports programming for consumers. The failure by the plaintiffs to have the cases dismissed means the current situation will be checked to a degree. However, the lawsuits will likely be settled by negotiation before a court ruling is ever made. MLB and the NHL will most likely be forced to yield on the most extreme of their restrictions, like those described above; yet the rights to central control, and to  blackout in a more reasonably defined local market, are likely to remain.

As noted above, live Internet streaming is available to all but local market subscribers. Yes, that’s right, exactly the subscribers who should most desire live streaming! Like the fears from way back in radio days, that broadcasts would dampen live attendance, the substitution chance between Internet and the RSNs that deliver baseball and hockey to local markets, drives the leagues’ policy. The stakes are high and growing as RSN contracts for broadcast rights become increasingly more lucrative. With consumers switching to new delivery options for television shows and movies, live sports programming is the last stronghold of appointment television viewing, and this is driving rights values and contract commitments for live sports programming through the roof. However, these values are predicated on the considerable monopoly power of RSNs, often under joint ownership with their broadcast partner clubs (e.g The Yankees and the YES network). Statutory or court ordered weakening of the league-team-RSN monopolies likely bursts the broadcast rights bubble, and the leagues will dig in to protect their cash cow.

Notwithstanding, root of this problem is the allowance of league controlled streaming rights, which should be considered violation of antitrust law, and certainly are not protected by the SBA. This policy is unquestionably bad for consumers and there is no valid reason permit league controlled streaming and the accompanying restrictions on the product's delivery. Moreover, leagues have and will restrict broadcasts exactly to the level that they are allowed by law. Witness the NFL whose restrictions on Sunday free-to-air broadcasts often leave their customers with little choice and only unattractive games. Deadspin now rightly takes the league to task over this weekly. To evaluate what is taken from consumers, simply compare the availability of NFL games to NCAA football, which is not protected by the SBA on the basis of  the 1984 US Supreme Court decision (NCAA v. Board of Regents of the University of Oklahoma).  All the big NCAA games, and then some, are readily available to all markets. Consequently, without aggressive action by the courts, MLB and NHL fans and more will be able to watch their local team only with an RSN cable subscription, which will become increasingly expensive—good for the leagues, not the fans.

1 comment:

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