A League of Their Own

Major sports leagues are getting’ too big for their britches. Or so it seems to regulators, courts and Congress itself. Even a few sponsors. Scandals with a slap on the wrist… or, gee, I didn’t see the video/evidence when we ruled… a seeming pervasive “boyz will be boyz” attitude… the NFL/College Athlete “felon of the week”… High ticket prices with corporations getting big tax breaks for “sponsorship.” Blackouts. Bundled TV packages when you just want one game. Inability to see your home team on your current cable/satellite provider. Offensive names. The big antitrust exemption for professional teams, sports teams. Tax exempt “non-profit” status for the big leagues themselves. Even NCAA capitalizing on individual players’ names and likenesses without paying them.

Well, since everyone else is talking about the morality and pervasive permissiveness of allowing “bad boyz” too little in the way of control, even as National Football League player Ray Rice is “banned for life” (sort of) for his domestic violence moment on camera (his wife is going to be hurt just as much by his loss of income, by the way), there may be a bigger factor at work. Sponsor ire! “Anheuser-Busch, one of the league’s most prominent sponsors, said it was ‘disappointed and increasingly concerned by the recent incidents that have overshadowed this N.F.L. season.’ Nike, which provides uniforms, jerseys and other gear to the N.F.L., has pulled Adrian Peterson [the Vikings player facing child abuse charges for using a switch to discipline his 4-year-old] jerseys from its stores in the Minneapolis area, though not online, The Associated Press reported.” New York Times, September 16^th. But the bricks falling down on American professional sports are seemingly endless these days. NFL Commissioner Roger Goodell (above) is flummoxed with all the issues.

Oh, want some more pain, NFL, with all that publicity about concussions even in high school football practice? “Younger viewers are walking away from broadcasts of its games… The average audience between 18 and 49 for NFL broadcasts across CBS, Fox, NBC, ESPN and the NFL Network has declined by about 10.6% over the last four seasons, according to Nielsen data prepared by Horizon Media, to about 7.7 million in 2013 from about 8.62 million in 2010. Meantime, male viewers between 18 and 24 watching the sport have also fallen off, tumbling about 5.3% in the same time period, to approximately 847,000 in 2013 from 894,000 in 2010.” Variety.com, September 17^th. But that consumer “stuff.” Let’s get back to government’s role in all this sporting mishegas. Like the USPTO.

As the United States Patent and Trademark Office has ruled against the validity of patently (sorry) offensive “Redskins” moniker for this Washington, D.C. NFL team, it seems as if this all about football. Not really. The notion of old practices and old rules and regulations applying generally to sports teams is undergoing a litany of court rulings and regulatory/statutory reconsideration. Even as the concept of college student athletes perhaps having a right to organize into one or more unions under the National Labor Relations Act wends its way through the regulatory and judicial process, there is so much more going on.

Take for example the presumed antitrust exemption applied to big leagues in American professional sports. The issue – at the core of Garber et al vs. Office of the Commissioner of Baseball, Major League Baseball Enterprises Inc. et al(New York federal class action) –  that is stirring the hornet’s nest is summarized by my friend, Fox Sports executive, Robert Hacker: “The central allegations in Garber are as follows:  With the exception of nationally televised games, a multichannel video programming distributor (MVPD) subscriber gets access to their local RSN which only televises local ‘in-market’ games.  For a consumer to obtain ‘out-of-market’ games, they must purchase a league package (such as NHL Center Ice and MLB Extra Innings – [EXPENSIVE]) that includes all out-of-market games.  The leagues (NHL, MLB) control those rights and license them directly to the MVPDs.  The agreements between the RSNs [regional sports networks] and the teams include the same in-market/out-of-market restrictions, as do the agreements between the RSNs and the MVPDs.   Plaintiffs allege this is anti-competitive and constitutes an antitrust violation.” 

The leagues cried, “We have an exemption from the antitrust laws. Neah!” What? “The antitrust exemption dates back to a 1922 Supreme Court ruling, Federal Baseball Club of Baltimore v. National League, that dealt with a former competitor to the American and National Leagues. The high court's opinion held that baseball was ‘purely state affairs’ and not interstate commerce, even if players traveled, which was ‘not the essential thing.’ The Supreme Court got more opportunities to address the antitrust exemption in 1953, Toolson v. New York Yankees, and 1972, Flood v. Kuhn, which dealt with the restriction on player movement and compensation.

“Since then, there's been debate about the scope of the exemption — whether it covers labor matters or more — and faced with a challenge to its television territory rights system [in the Garber case], [Major League Baseball] invoked the antitrust exemption to bar the plaintiffs' claims.” Hollywood Reporter. Surely, thought the leagues involved in Garber, we are not going to be forced to change a damned thing.

But on August 8^th, major league sports where stunned by a preliminary ruling in the Garber litigation: “District Judge Shira Scheindlin [Yup, Judge Judy’s husband] rejected summary judgment motions brought by MLB, NHL, Comcast and DirecTV. And in the process, the judge decided that MLB's nearly century-old 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.’” Hollywood Reporter. Uh oh! Think about the broader ramifications of that that statement! I guess we can see this battle wending its way up the federal appellate structure for years to come, but the ultimate decision could reconfigure the economics of sports telecasting (digital and traditional) forever. Butt weight, there’s so much more.

The FCC is getting into the sports focus as well. FCC Chair Tom Wheeler announced a plan to reconsider the 1975 FCC-approved rights of sports leagues to require local telecasting blackouts when the physical events are not sold out, because he believes they are obsolete. That Time Warner Cable spent so much money to control telecasts of the Los Angeles Dodgers – and carriers like DirecTV refused to pay the exorbitant bill to get local carriage rights – denied access to most regular season Dodger games to 70% of Los Angeles viewers (the last few games were finally placed on local telecaster KDOC as a token gesture), seem to garner more than simple annoyance from both the FCC and prominent members of Congress.

But it really does seem as if it is the NFL (the country’s most-watched sport on television) that is drawing most of the ire, even if the result is a deep negative impact on all professional sports leagues in this country. Look at this nascent effort in Congress for example: “Amid uproar over the N.F.L.’s handling of domestic abuse cases involving some of its players, Senator Cory Booker, Democrat of New Jersey, has introduced a bill that would disallow major professional sports leagues, most notably the N.F.L., from claiming status as tax-exempt nonprofits…

“Under the tax code, N.F.L. teams pay taxes, but the league office, which is funded by dues from its franchises, does not. The league has enjoyed this status, which is similar to those granted to industry associations, since the 1960s… Other prominent leagues that have a similar status, including the N.H.L. and the women’s and men’s golf and tennis associations, would also be affected.” New York Times, September 15^th.  

Will these issues impact what we see, when we see it and what we pay for our national addiction to sports? Oh yeah! Since sports is one of the most valuable definers of who controls the future of television – Web vs. traditional telecasters – you can bet that this will be one of the most important arenas of media battles for years to come. After all, the value in this addictive mass appeal content is particularly salient for two huge reasons: 1. It provides hours of programming for a single event and 2. Time-shifting and illegal copying is not remotely an issue for events where the real-time outcome is what it is all about. Hang on, this is going to be a very bumpy ride!

 I’m Peter Dekom, and you thought watching sports on television was such an easy concept to understand?!