If the whole financial apple cart rides on the Cubs creating their own "Dodger" cable channel, then there are going to be more potholes in the road to 2020.
The Hollywood Reporter reports that MLB is facing its toughest anti-trust suit to date. It involves the very lucrative television rights revenue streams.
Major League Baseball could be on the cusp of enduring something
almost unimaginable: The end of the lucrative system by which
professional baseball games are televised by region, consumers pay high
prices for out-of-market package fees, and some digital telecasts are
blacked out in home markets.
With the prospect that sports broadcasting might forever change, the
league is seeking permission to file an interlocutory review of U.S.
District decision that ruled against MLB's motion for summary judgment in the claims in a proposed class-action lawsuit.
In Judge Scheindlin's ruling, she determined that MLB's antitrust
exemption doesn't apply "to a subject that is not central to the
business of baseball, and that Congress did not intend to exempt —
namely, baseball’s contracts for television broadcasting rights." As a
result, she allowed the plaintiffs to pursue claims that MLB, Comcast
and DirecTV have violated antitrust law by making anticompetitive
agreements that negatively impact the output, price and perhaps even
quality of game telecasts.
MLB is quite disturbed by the opinion and now wants to go before the
2nd U.S. Circuit Court of Appeals to present this issue: "Whether the
professional baseball exemption to the antitrust laws bars Plaintiffs'
claims against Major League Baseball with respect to Major League
Baseball's territorial broadcast rules and structure."
Baseball's antitrust exemption dates back nearly a century and has been
addressed in several big court cases, including Supreme Court rulings.
However, legal scholars have debated whether the antitrust exemption
merely covers labor matters like restrictions on free agency or goes
further. Over the years, Congress has adjusted sports broadcasting rules
but hasn't offered substantial clarity on the matter.
In a memorandum to support the interlocutory appeal filed on
Wednesday, MLB says that every appellate court has "held that the
exemption applies broadly to the business of baseball and is not limited
to any particular facet of that business."
The ruling is important because it could upset the original club power and control over territorial licensing fees. Washington and Baltimore are current in court over their television territorial rights and provisions which stem from the Expos relocation into part of the Orioles territory. The Oakland A's have been stymied by the Giants who have much of the territory south into Silicon Valley as their exclusive domain. The A's could not move to Santa Clara. Baseball was not happy about it, but it will not upset the club's rights set forth in their original charters.
Exclusive territorial rights extend to radio and television broadcasting games. The home team controls the airwaves in their own community (or share it with a dual club city like New York or Chicago). Any team that comes into a pre-existing team's market will have to pay to do so.
The concept of exclusive local broadcasting has been eaten away by MLB itself, with its own cable channel and national television contracts with several networks who push games to everyone just about every night of the week. The advent of digital mobile apps and streaming video has taken away the territorial reach of over-the-air broadcast signals. The league would like to continue to package baseball as seller; but clubs protect their local rights like a Tiger mom to her cubs.
If baseball loses it stronghold on local broadcast rights, and national television deals, the overall price for "baseball as a commodity" will fall. In some circles, like large market teams, that could be a significant loss of revenue. Further complicating matters is large cable carriers have stopped paying for more sports channels because the fee structure is not supported by their average customers. The new Dodger network wallows in obscurity in the LA market because no transmission deals were made with other carriers. Some reports say that three-quarters of LA fans have lost their ability to see Dodger games.
The Cubs are banking on a huge revenue boost with television money. This is betting on the old baseball revenue model which is being attacked internally and externally in the courts.
