Sports View: huge victory for freedom of choice

tsj column writers - sports viewBy Jordan Kobritz

Slowly but surely, fans are forcing sports teams and leagues to add to the limited viewing options they have historically offered us.

In what can only be described as a huge victory for freedom of choice, the NHL and its broadcasters recently settled their portion of a class action lawsuit that has been lingering in the U.S. District Court for several years.  MLB, also a defendant in the suit, is now left to singularly defend against allegations that they use blackouts to limit out-of-market games in order to protect local teams’ revenue.

The plaintiffs argued that MLB and the NHL currently require fans to purchase “bundles” of games, most of which they don’t care about, in order to watch some, but not all, of the games involving their favorite team.  A number of fans would prefer to watch the entire season schedule of their home team, hopefully for less than the cost of a bundle.  In essence, that’s what the NHL, Comcast Corp., DirecTV and Madison Square Garden Co. have agreed to do.

For at least five years, beginning with the 2015-16 NHL season, fans will have the option to purchase a single-team package for at least 20% less than the cost of a bundled package.  An additional discount will be offered for early bird, renewal and full season commitments, at least for the first season.  In actual dollars, fans who have been paying $159 per year for access to multiple games they don’t want to watch, will now pay as little as $105 to watch all the games of one team.

Last month, the presiding judge in the case, Shira Scheindlin, ruled that plaintiffs in the suit could not recover monetary damages from the defendants although they could pursue antitrust claims against the leagues.  That decision went down as a win and a loss for each side, which no doubt encouraged them to seek a negotiated settlement.  MLB’s portion of the case may be more difficult to resolve as the league is relying on its antitrust exemption as a defense.

This is the second major victory for television viewers this year, although the first one occurred in our neighbor to the north.  In March, Canada’s communications regulator required cable companies to allow customers to choose – and pay for – only those channels they want to watch.  Beginning next year, Canada will become one of the first countries in the world to make “a-la-carte” pay-television available.  Can the U.S. be far behind?

A-la-carte pricing may not lead to lower cable bills.  In the long run, cable operators are likely to increase their subscription prices for the most popular networks, including those that offer sports programming, in order to offset the expected short term reduction in revenue.  Particularly problematic for cable companies are the long term contracts with sports teams, some of which guarantee billions in rights fees over several decades.  Depending on consumers’ purchasing habits, teams and leagues may have to settle for lower rights fees when existing contracts expire.

As noted in a previous column, the current blackout rules may actually harm leagues in two respects.  First, the lack of access to local broadcasts may result in fewer league-wide subscriptions.  If customers can’t get their favorite team’s games, why subscribe?

Second, the effect of the rules is to generate additional revenue for Regional Sports Networks (RSNs), commonly owned in whole or in part by the team.  If that’s the only way fans are assured of watching the hometown team, they may reluctantly sign up for a subscription.  That income is not subject to revenue-sharing which applies to local team revenues that are paid into a pool and then distributed to individual teams in accordance with the terms of the Collective Bargaining Agreement.  As an example, MLB’s local revenue-sharing tab is 34%.

In the short run, the NHL settlement may reduce revenue for teams with RSNs, but may also lead to increased league revenue.  What isn’t in doubt is that sports fans benefit.  We now have a third option when it comes to watching sports on TV:  We can pay to watch the games of our choice – and at least for the time being, for less than the price of the other two options.  It’s not exactly a-la-carte pricing, but it’s a start.

Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner.  He is a Professor in the Sport Management Department at SUNY Cortland and maintains the blog: http://sportsbeyondthelines.com  Jordan can be reached at jordan.kobritz@cortland.edu.

 

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