MLB Goes To Court To Defend Antitrust Actions That Go Against All The Progress MLB Has Made

Legal Issues

from the swing-and-a-miss dept

We have talked quite a bit about Major League Baseball for a technology site, in no small part due to many of the forward-thinking things the league has done regarding operating its business in the digital age. In the realm of sports streaming, I’ve typically referred to MLB.TV and the league’s Advanced Media products as the gold standard and I think I’m on pretty solid ground in saying so. Beyond that, the league seems poised to embrace expanded streaming options and the dropping of some of its more intrusive blackout rules, positioning the league well in the midst of the cord-cutting epidemic winding its way through the cable television industry.

Which is why it just feels so damn strange to see the league preparing to go to court along with DirecTV and Comcast to argue that it needs many of the practices from which it is actively moving away in order to not only provide more customer choice, but indeed to keep smaller-market teams in business entirely.

The background on this is that in 2014 a court decided that baseball’s antitrust exemption could only be applied to core aspects of the business of baseball. Those core aspects traditionally, going back over a hundred years, referred to how MLB interacted with competing leagues and how player contracts would be handled given that players crossed state lines as part of their jobs. In more recent times, MLB attempted to use the antitrust exemption to allow for how it handles broadcast rights and blackouts, specifically arguing that allowing its member teams to negotiate their own national broadcast contracts would allow teams to get a free-ride on the league’s popularity, and the court’s opinion rejected those arguments in 2014. After that, the court agreed to certify a class action on behalf of fans looking to force Major League Baseball into allowing more inter-competition among its own member teams, which the fans argue would allow for national broadcasts (or national streaming) of any team anywhere in the nation.

MLB is now defending that action in pre-trial documents, apparently with the argument that giving teams more ways to get their product to their fans would result in small-market teams folding up completely, because the Yankees.

Defendants’ position, which will be substantiated at trial, is that the territorial rules enhance the overall quality of MLB live telecasts, which in turn enhances the ability of these telecasts to compete with other programming. (See Defs. Trial Mem. at 12-13.) The evidence will also show that eliminating the territorial rules would reduce the ability of certain small-market teams to invest in players and other resources, hampering their ability to compete on the field—and could, over time, prevent certain clubs from remaining viable.

This is similar to comments made by league commissioner Rob Manfred during deposition, where he specifically cited the New York nine as an example of why allowing more broadcast options would eventually limit broadcast options by eliminating teams and markets entirely.

“[A] lot of New Yorkers go down to Florida, and we think that [if the Yankees] go down [it] would kind of destroy that market for Tampa,” he said. “[T]here are certain iconic, generally large market clubs that I believe have national appeal that would put them in a position to present a threat to the viability of certain of our smaller market clubs.”

It’s an argument that essentially claims that MLB must limit the number of broadcast options customers have to choose from because not limiting them will eventually lead to even less options when teams fold. This argument rests on MLB’s revenue sharing practice, where teams negotiate their local broadcast rights and leave the national rights entirely up to the league, which then doles out national broadcast (and streaming) revenue democratically through the league, meaning the popularity of the Yankees and other large market clubs is resulting in income for small market teams (like the Tampa Bay Rays).

Here’s the thing: everyone knows this argument’s time was twenty years ago. Fans know it, because they use the internet and streaming services and they embody the desire of customers to watch more teams in more ways without blackout restrictions. MLB knows this as well, as you simply can’t make sense of all the work the league has done to expand its streaming options without that knowledge. What they are trying to save in all of this is a bit of the right to still handle national streaming rights the way they handle national broadcast rights. It’s about retaining control. But the league itself is what allowed for the expansion of the league into small market areas. For them now to rest the argument for their antitrust exemption on the un-viability of those markets, resulting in harming consumer choice, doesn’t make any sense. It’s essentially asking for a kind of bailout for some teams via the exemption. Put another way, MLB’s argument amounts to: some of our teams don’t have enough fans to sustain themselves, so we need an antitrust exemption to keep them afloat, just because. How is that in the public’s interest, even if MLB’s assessment is correct?

And here’s the other thing: they’re probably wrong. Major League Baseball is enjoying an immense level of popularity at the moment, finally recovering from the player lockout all those years ago. How does it benefit a small market team for the government to bless MLB’s ownership of that team’s ability to reach more fans, new fans, and other markets via its own negotiation of national streaming rights? Artificially limiting the reach of teams in an era where the ability to do national streaming is less costly doesn’t enhance that team’s viability; it limits it.

We’ll have to see how this plays out, but the good news is that MLB knows all of this already. I’m actually a bit surprised it is even bothering with any of this.

Filed Under: anti-trust, baseball, streaming
Companies: mlb