Photo by Rich Graessle/Icon Sportswire via Getty Images
Yesterday, after a four-week trial, a Los Angeles jury awarded $4.7 billion in damages to fans who had purchased the NFL’s out-of-market Sunday Ticket package between 2011 and 2022. An additional $96 million was awarded to bar and restaurant owners who purchased the package. Under antitrust law, the damages could be tripled to a total of $14.39 billion. While numerous legal proceedings remain, if the outcome substantially holds, it will likely result in greater freedom of choice for sports fans.
The Professional Sports Television Model
In 1961, as a result of lobbying led by the NFL, Congress passed the Sports Broadcasting Act (SBA), which exempts professional sports teams from antitrust law when they come together to sell their television rights as a single package to free over the air cable channels. Prior to that point, lawsuits by the U.S. Department of Justice forced teams to compete and sell their rights individually, potentially resulting in economic discrepancies between the clubs.
The result of the SBA has been the core of much of the sports’ leagues business models ever since – the teams package some (or all in the case of the NFL) of their television rights and sell them for billions of dollars to the major broadcasters (CBS, ABC, NBC and FOX). MLB, NBA, and NHL teams are free to sell the rights to any regular season games not broadcast nationally to local broadcast partners, which they do for many millions.
That model leaves out one type of fan – the one who wants to watch a team that plays in a market different from the one in which the fan lives and which is not shown on national television. For example, a New York Giants fan living in Los Angeles.
The leagues’ solution was to create premium out-of-market packages. The NFL’s Sunday Ticket package, initially available through DirecTV but now on YouTube, permits fans to generally watch any game for an annual rate of $399. MLB’s Extra Innings, the NBA’s League Pass, and the NHL’s Center Ice all do the same.
The Lawsuit
The crux of the litigation was that the NFL’s Sunday Ticket package was anti-competitive in a way that harmed viewers. Specifically, the plaintiffs alleged that the teams should compete against each other for the sale of their out-of-market rights. In their world, the Dallas Cowboys could sell the rights to watch their games to fans not living in the Dallas area without the involvement of other teams and at whatever price the market would bear.
Instead, the fans alleged that the NFL forced viewers to buy all NFL games through the Sunday Ticket package. Thus, a Cowboys fan got their games but also got access to every Jacksonville Jaguars game even if they had no interest in watching those games.
The plaintiffs’ proposed world would potentially be bad for the NFL’s major television partners. If fans could simply watch the teams they want through a streaming package, they may be more apt to cut the cord and drop cable.
For similar concerns, the plaintiffs alleged, the NFL pushed DirecTV to charge a high price for the Sunday Ticket package so that the vast majority of fans would continue to watch NFL football through CBS and FOX. The jury apparently agreed and that perceived extra amount in price is generally what makes up the damages award.
The NFL still has a lot of legal road. It will argue to the Judge that the award is excessive and should be reduced and that as a matter of antitrust law, it should have won. Failing that, they will appeal to the Ninth Circuit Court of Appeals, though in a 2019 decision that court found the plaintiffs’ claims plausible. Finally, an appeal to the Supreme Court on the intricacies of antitrust law is possible. Perhaps importantly, in a 2020 opinion accompanying the Supreme Court’s decision not to review the Ninth Circuit’s ruling, Justice Brett Kavanaugh opined that “antitrust law likely does not require that the NFL and its member teams compete against each other with respect to television rights.”
The Potential Fallout
Even if the damages award is reduced, what matters most is whatever legal principles are established moving forward. If the courts generally approve of the verdict, a precedent will be established that the leagues’ out-of-market packages are quite likely in violation of antitrust law.
Indeed, leagues have likely already been exploring different options for the distribution of out-of-market games. The most fan-friendly version might be to let teams sell the rights to their out-of-market games which are not broadcast on national television individually.
This model may contribute to cord cutting and lower national television revenues for the leagues. Additionally, there may be significant differences in the amounts charged and collected by the teams for these rights. For example, the Los Angeles Lakers might sell a package for $400 to 100,000 people, while the Oklahoma Thunder are only able to sell a $200 package to 10,000 people.
MLB has other legal considerations. By settling a major case potentially headed to the Supreme Court last fall, the league continues to enjoy an exemption from antitrust law on issues related to the business of baseball and which do not concern MLB players. Whether MLB’s antitrust exemption would protect its out-of-market package is an open question and one that would almost certainly be explored through litigation.
Ultimately, while the leagues woke up this morning with a bit of consternation, they will adapt as necessary. Fans are going to keep watching one way or another. It is just that they may now have more ways of doing so.