Sports Blackout Rules in the Age of Cord-Cutting
Watching sports on television used to be a simple proposition. You had a basic cable package that let you to watch your local team on its television partner’s channel and certain national broadcasts. If you lived outside of your favorite team’s market or did not have cable, you were out of luck. However, the increase in internet streaming options and quality has put the traditional cable model under pressure. A recent study shows that 6 percent of cable subscribers are “extremely likely” to abandon cable, or “cut the cord,” within the year, and this figure does not include a growing number of millennials who have never even had cable. The major sports leagues have responded to this trend by offering packages that allow purchasers to view games online, such as MLB.TV, NHL Center Ice, and NBA League Pass. However, these packages remain subject to the blackout rules implemented by the leagues, the teams, and their television partners.
Under these blackout rules, the leagues “assign an exclusive territory to each team and its television partners.” This exclusivity prevents other teams and partners from showing their games within the leageus’ territories. For instance, if I lived in New York, I would be able to watch the New York Mets on my local cable channel, but not the Los Angeles Dodgers unless they were on a national broadcast. I could purchase the MLB.TV package, but I would have to pay a steep price for all out-of-market games, rather than just for the Dodgers. Further complicating matters are the cord cutters, who are forced to purchase the online package if they want to watch any baseball. However, the MLB.TV package does not allow you to watch your local team because the blackout rules prevent anyone in the local market from watching without a cable subscription. Continuing with the New York example, under this package I would be able to watch every non-NY team, but not the Mets.
The blackout rules were challenged in the 2012 case Laumann v. Nat’l Hockey League. Plaintiffs brought a class action against the NHL and MLB for violations of the Sherman Antitrust Act, arguing that the blackout agreements eliminate competition by restricting broadcasts to exclusive territories and that consumers pay supracompetitive prices for out of market packages that are only offered through the leagues. In 2014, the defendants moved for summary judgment, which the court denied, finding that the sports leagues’ antitrust exemption did not apply to territorial broadcasting rights and that plaintiffs had met their initial burden of showing that the blackout rules had a negative impact on competition and pricing.
However, prior to trial, both the NHL and MLB settled and agreed to change some of their policies. Both leagues agreed to lower their prices for the out-of-market online packages and offer a single team package that allows consumers to pay a lower price to have access to just one team’s broadcast. While this may ameliorate some consumer concerns, the leagues still maintain the regional blackout system for those who do not wish to purchase a package. Furthermore, the packages are not cheap, with the single team option on MLB.TV costing $83.99 per year and the full out-of-market package costing $109.99 per year. If you choose the single team option and you live in that team’s exclusive market, you must purchase a subscription to the team’s television network partner for another $10, and even then you only get access to the road team’s broadcast. A Mets fan living in New York who wants to watch a game against the Dodgers would be forced to watch the Dodgers feed with Dodgers announcers, rather than their local Mets announcers. There is still no way to watch your local team’s broadcast if you do not have cable.
As of now, it seems like these blackout agreements are still ripe for new antitrust suits. In fact, there is currently a similar case pending against the NFL—In re National Football League’s ‘Sunday Ticket’ Antitrust Litigation. While a case that reaches trial may result in the invalidation of the blackout agreements under the Sherman Act, there are other more organic factors that may force leagues to eliminate or at least rethink the blackouts. As streaming services continue to improve in quality and more and more content is offered, it seems likely that the cord cutting phenomenon will continue to grow. Consumers have already begun to push for “a la carte” or “skinny” bundles, which will allow people to pick and choose which channels they want and pay accordingly. Once cable companies begin offering these options, it follows that the sports leagues will face pressure to begin offering similar services. That starts with ending blackout agreements.
Adam Stein is a J.D. candidate, 2018, at NYU School of Law.