Bill to Establish Advisory Commission on Intercollegiate Athletics: A Critique

H.R 5528 aka CACIA Act of 2019 proposed by Rep. Donna Shalala to establish a Congressional Advisory Commission to investigate the relationship between institutions of higher education and intercollegiate athletic programs, and for other purposes." The findings listed in Section 2 lists several statements of fact many pertaining to the finance of college athletics. Some are mundane others propaganda (e.g. #7 and use of the term subsidize). The findings collection is not convincing of problem necessitating a federal commission. Importantly, the bill fails to address the fundamental failures of the current system. That being that the denial of basic property rights to athletes participating in intercollegiate sports.

The bill's crux is presented (Section 3) with the cynically vague [Commission shall] "review policies maintained by athletic governance associations and institutions of higher education with respect to ensuring that student athletes can succeed in academics and athletics." The NCAA's convention of entangling education and athletics to the detriment of athlete rights is clearly maintained. Note using NCAA's paternalistic term "student athlete" (sans hyphen), propaganda devised to help deny the right to an athlete's workman's compensation claim. The laundry list specifying the commission's duties, poses some fairly usual concerns and critiques of college sports; proposing it look into academic integrity, athlete safety and heath care, Title IX compliance, recruiting excesses, financial transparency, etc. Some things among those listed will appease reformers. But the list is one symptoms not its causes, and is at once in lock step with the NCAA, which is in fact demanding federal legislation, lobbying hard to let it off the hook from laws that apply to all else.

This bill is representative of the NCAA lobby. On the surface it's beneficial, or innocuous at worst. However, there are plenty reasons to be skeptical and see the lack of challenge to the NCAA's denial of rights for athletes and potential college athletes as a major red flag.  NCAA amateurism rules force athletes sacrifice all of their rights to negotiate or profit from the value of their human capital, and the property rights to their Name Image Likeness (NIL) as under challenge by state laws - CA & others. If amateur policy were addressed and corrected, many of the symptomatic problems would also be fixed. The bill does not consider questioning amateurism nor promise any review as to why standard federal antitrust, employment and labor law are not applied to the NCAA.

Rep. Shalala is a former Univ. president/chancellor at two Power Five institutions Wisconsin and University of Miami. To think that the bill contains anything to challenge her peers in Higher Ed is senseless. Much was made of reform potential when the athletic directors ceded NCAA control to presidents 20 years ago.The presidents of course had the same incentives as athletic directors. That is to grow the revenue/publicity of their sports programs & maintain the unlawful limit on the economic rights of athletes. Lots of lip service then about the academic mission. Nothing that mattered changed.

The expectations for change should be exactly the same for the Commission. However, more likely is this bill will open the door to a recommendation, and then an outcome, that will make meaningful reform in the future all but impossible. The bill itself does not mention the sought-after antitrust exemption. Yet, do not think that is not a primary goal as a solution to the listed concerns.

The Drake Group presents themselves as a primary influencer of this legislation and is doubtless lobbying for seats on the Commission. The Drake Group (and the Knight Commission on Intercollegiate Athletics) have a long and consistent policy position against fair compensation of college athletes. Drake has pushed an antitrust exemption for the NCAA to ensure that proscriptions on compensation cannot be challenged to fix what they believe is a distorted role of athletics in academia. Much of the concern about finances reflected in this bill is right out of the Drake/Knight playbook- i.e. suggesting that the primary problem is misallocated collection and distribution of funds.

Those misallocation problems typically identified as overspending on coach salaries and athletic facilities are mitigated if antitrust (Sherman Act) is applied and reallocated toward athletes. An antitrust exemption will simply shift the misallocation of resources elsewhere. The university president and athletic directors, who control the NCAA, want an antitrust exemption, not only because it takes away challenges to athlete compensation, but it also solves their prisoners' dilemma on coaches' pay. Of course, they would rather pay coaches less too. But it is a dream to think savings in coach pay (or facility investments) would be instead allocated to improve athlete welfare with anything other than nominal changes.

NLRB: Brief of Sports Economists & Professors of Sport Management

At invitaion of the National Labor Relations Board (NLRB) a group of more than thirty sports economists and professors of sport management have submitted an Amicus Brief in support of the Collegiate Athletes Players Association (CAPA) petition on behalf of Northwestern University football players. The entire document is available at the following link.
Amicus Brief 

A Comcast-TWC Merger will Matter to Sport Fans

Comcast and Time Warner cable are both major players in the sports television market. Comcast is the parent of NBC and its holdings include NBCSN (The NBC Sports Network) the Golf Channel and numerous regional sports networks (RSN) across the country. TWC is also becoming a  player in the RSN market, importantly in Los Angeles. For my take on this merger see Temple U economist: Why the Comcast-TWC merger is bad for the public in the Philadelphia Business Journal. Or, check out my radio interview on the same subject on WPHT 1210, CBS Philadelphia's Chris Stigall Show.

The sports angle in indirect, but sports programming  is very important to the cable TV industry and viewers choices are sure to be affected one way or another. The price to watch and access to sports on TV are not all that matters. Franchise values and player salaries are also impacted by what happens.

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.

Is Baseball the New Football?

Thirteen years ago Major League Baseball’s thirty teams collectively fronted a $75 million investment and launched a vehicle incorporating all individual team’s web sites and other Internet activities under the league’s umbrella. All content delivery, including developing live steaming capabilities, became part of Major League Baseball Advanced Media (MLBAM) assets, and their format has been essentially copied by all the rest. At the turn of the millennium the Internet could be described as roughly at the same early stage of development as television technology when the Colts-Giants 1958 NFL championship game triggered the transformation of football into America’s TV game. Since, and primarily simply due to the nature of the game, baseball has been regarded by many as a dinosaur because of its (relative to football) lack of adaptability to television broadcasts. Yet now the Internet, and the associated technology and devices, is rapidly changing viewing options, as did television offer an alternative to live event attendance. Perhaps, in much the same way that the NFL thrived because of its adaptability to television broadcasts, a baseball renaissance is mounting because of the sport’s suitability to the Internet.

The Internet through its access flexibility, available through an increasing array of mobile devices, provides an environment that allows consumers to partake in other activities, sport related and otherwise, while at once viewing/consuming a game. In this case, the nature of baseball may make it the sport most apt for multi-dimensional consumption. Besides standard broadcast delivery for viewing and listening though live streaming—available to all but local market subscribers (more on this to come) on MLB.com since 2003—customers can access news, schedules, standings, and statistics from around the league and detailed information on each of MLB’s teams. Additionally, comes the opportunity to create and play in fantasy leagues. As consumption options have expanded beyond the simple and passive viewing of a game, baseball's deliberate pace, a liability for old fashioned broadcast TV, seems tailor-made for complimentary consumption options, and particularly for baseball because it is arguably the team sport whose fans are most consumed by supplemental statistics and information. 

MLBAM’s impact on MLB’s revenues was quick and clear. In 1999 MLB revenue totaled a little more than $3.6 billion, similar though about one-half billion more than the NBA at the time. By 2006 MLB revenues had nearly doubled to more than $6 billion, nearly keeping pace with the TV-rich NFL who returned $6.5 billion that year; meanwhile NBA revenues had grown only a bit, to just exceed $3.5 billion. Baseball business analyst Maury Brown wrote in late 2005 that MBLAM had become a money machine, and profitable in less than three years. USA Today reported revenues reached $380 million annually by 2006. Pete Toms revealed that by 2010 MBLAM annual revenues were excess of $500 million and the estimated value of the subsidiary enterprise was $2 - $3 billion. The MBLAM subscription price in 2013 topped out at $130 for all-year, full service access. The NBA and NHL followed MLB’s lead and each offer similar full service websites that include live broadcasts to subscribers for out–of –market games. These products are likewise popular and similar to MBLAM, and are able to charge annual subscription prices of  $150 per year, though both attract fewer subscribers than MLBAM.

The dinosaur this time around may be the NFL, ever cautious and always effective at limiting consumer viewing access for profit. Like its peers, the league maintains control over team websites and content. However they've left live steaming options to their contracted broadcast networks. For example ESPN is able to live steam Monday Night Football, but will do so only for its cable subscribers. Because of the volume of cash turned over by the networks for rights, there is for the NFL a more delicate relationship than the other league’s have with their TV partners; the networks collectively pay the NFL substantive rights fees—over $20 billion in 2011—12, and that amount will nearly double to $40 billion per year beginning in 2014—far and away the highest in sports.  At present, the surge in traditional broadcast revenue has kept the NFL on at the top of the heap in terms of revenue generation- as they are now nearing $10 billion in annual revenues as number two MLB approaches $8 billion. But the NFL trails the pack in internet delivery. NBC offered the first ever live steaming of the Super Bowl in 2012, but the decision on steaming in the future will be determined by the network holding the broadcast rights. General access to live steaming is controlled by the NFL’s satellite television partner DIRECTV, and before 2011 access had been limited to those only homes where that service was not available and then only to those with specific mobile devices. Live streaming of NFL games became available universally to all devices for the first time in 2012, and at a hefty subscription price of $300 for the full service package.

Traditional broadcast markets are still thriving and keep the NFL at the top in terms of revenue and value. However assuming that Internet technology develops in the next twenty years at least as dramatically as did television technology from the 1960s onward, MLB is the league best prepared to capitalize.