MLB Blackout Policy Under Attack In The Courts

It won’t be long before the e-mails start arriving in your inbox. “Don’t miss any of the action! Watch all* out-of-market regular season games on MLB.tv. Purchase the entire 2013 season now and save!” And there will be glossy pamphlets from your cable or satellite provider: “Act now to add MLB Extra Innings to your viewing package.  Watch every* out-of-market MLB game from the comfort of your home.”

The asterisks are necessary because neither MLB.tv nor MLB Extra Innings provides access to every out-of-market regular season game to every purchaser of their product. For one, the games broadcast exclusively on national TV — FOX’s Saturday Game of the Week and ESPN’s Sunday Night Baseball — are excluded. Under the current MLB-FOX agreement, which will expire at the end of the 2013 season, only FOX may broadcast MLB games during a certain time period on Saturdays. That leaves many teams with the decision to either schedule Saturday games in the evening, outside the FOX window or have some Saturday home games not broadcast locally. And it leaves fans shut out from every game played on a Saturday afternoon, other than the one FOX broadcasts in their area.

There are other restrictions on the MLB Extra Innings and MLB.tv packages, particularly for fans who live in areas without an Major League Baseball team but within the broadcast territory of several teams. Iowa, for example, doesn’t have its own MLB team but is within the broadcast territory for the Cubs, Brewers, Royals, Twins, Cardinals, White Sox. That means fans in Iowa can’t watch those six teams on MLB.tv or Extra Innings because those games are considered “in-market” in Iowa. You can see the MLB broadcast territories on this map:

MLBBlackoutMap

Of course, without MLB.tv or MLB Extra Innings, fans don’t have access to any out-of-market games, other than those broadcast on FOX, ESPN and TBS. Taken together, the broadcast territories and the in-market and the out-of-market restrictions, are referred to as MLB’s Blackout Policy.

Last year, several baseball fans sued MLB, MLB Advanced Media, Comcast and several of its regional sports networks (RSNs), and DirecTV and several of its RSNs, claiming that the Blackout Policy violates federal antitrust law. The plaintiffs allege two types of antitrust violations. First, that MLB’s division of the United States into exclusive broadcast markets reduces competition because RSNs need not compete with each other to broadcast games in their local markets. And second, that MLB has monopoly power over the rights to broadcast out-of-market games and it uses that power to limit out-of-market viewing to either Extra Innings or to MLB.tv. The lawsuit contends that absent these restraints, RSNs would compete with each other to broadcast “out-of-market” games in other parts of the country, making games more accessible and more affordable.

At first blush you might think, “How can a lawsuit like this succeed? MLB has an antitrust exemption.” To an extent, it does. But that exemption is court-created and it dates to the early 20th Century and has origins in the reserve clause. MLB has been careful in recent years not to exert the exemption to justify collective decision-making, for fear Congress would overturn the courts and eliminate the exemption completely.

MLB did try to have the case tossed out soon after it was filed. But the presiding judge — U.S. District Judge Shira Scheindlin in New York — rejected those arguments and found the plaintiffs had stated plausible antitrust claims. You can read a copy of the court’s decision here.

At the heart of the plaintiffs’ lawsuit is the U.S. Supreme Court’s 2010 decision in a case called American Needle, Inc. v. National Football LeagueIn that case, an apparel company sued the NFL and its marketing arm, NFL Properties, claiming that NFLP violated antitrust law by granting Reebok an exclusive license to manufacture clothing and other merchandise for all 32 NFL teams. The lower courts had ruled that NFLP was a single entity making a league-wide business decision, and not 32 teams joining together to exclude other apparel companies from the market.

But the Supreme Court rejected that view. Instead, the high court said, that each NFL team is a “substantial, independently-owned and independently-managed business” and that NFL teams “compete with one another, not only on the playing field, but to attract fans, for gate receipts and for contracts with managerial and playing personnel.” Based on those facts, the court ruled the decision by NFL teams to license their individually owned trademarks in a collective fashion and only by one vendor “deprives the marketplace” of individualized decision-making. American Needle is nearing trial in the federal district court in Chicago.

In the antitrust action against MLB, the case will now proceed to the “discovery phase” when the plaintiffs and defendants exchange documents and question witnesses under oath. MLB will likely have to produce to the plaintiffs documents about the creation and maintenance of the broadcast territories;  MLB’s contracts with FOX, ESPN and TBS; and financial and business information about MLB.tv, to name a few. And MLB and RSN witnesses will have to testify on these and related topics. In these sorts of cases, documents and testimony are typically provided subject to a confidentiality order, such that they can’t be shared with the public. But if the case proceeds to trial, at least some of this information will become public. The court set an Oct. 15 deadline for the parties to complete discovery.

At this stage — and without access to the documents and information the parties will exchange in the next several months — it’s difficult to handicap the outcomes. We do know that, unless the parties settle the dispute, the litigation will be expensive and the ultimate resolution will take years.

In the meantime, MLB teams with expiring local TV contracts continue to make deals worth hundreds of millions — if not billions — of dollars based on the existing broadcast territory system. If the RSNs are smart, they’ve anticipated the possibility that MLB’s blackout policy will be found illegal by a court, and included language in the contracts giving them an out under such circumstances. And you can be sure teams will fight hard to keep their lucrative deals, particularly since they’ve signed expensive long-term player contracts.

For now, the MLB broadcast territories remain in place. MLB’s new national TV contracts with FOX, ESPN and TBS go into effect in 2014, and FOX has agreed to eliminate out-of-market blackouts for it’s Saturday Game of the Week. So starting in 2014, an Extra Innings or MLB.tv subscriber will be able to watch any FOX Saturday broadcast not being shown in her regional market that day. But all other blackouts will remain in effect.

That is, unless the courts say otherwise.

We hoped you liked reading MLB Blackout Policy Under Attack In The Courts by Wendy Thurm!

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Wendy writes about sports and the business of sports. She's been published most recently by Vice Sports, Deadspin and NewYorker.com. You can find her work at wendythurm.pressfolios.com and follow her on Twitter @hangingsliders.

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CD
Guest
CD

Iowa is also blacked out of the White Sox and (I think) the Cardinals as well.

Both Iowa and Las Vegas are blacked out of SIX teams each. Ouch.

As a Cardinals fan living in Jacksonville, we only play the Marlins six times a season, and most of those games are on locally, so it’s not a big of a deal for me. But the FOX Saturday restrictions REALLY piss me off. Preventing me from watching my Cardinals is NOT going to make me more likely to watch whatever game FOX decides to show.

I hope that we win this lawsuit.

NP
Guest
NP

I’m in a similar situation as you being a Mets fan living in Boston. For the most part everything works fine and I love MLB.tv, but the FOX Saturday restrictions are really terrible and make no sense. It’s not like FOX is going to show the Mets on TV in the Boston area. If I was back home in NY I would just watch them on FOX…but then I wouldn’t be subscribing to MLB.tv. So I’m left with no way to watch the team except for internet streams (which do not produce any money for the MLB), It makes no sense. Really idiotic on MLB’s part that they are not providing a service which people would gladly pay for.

I would gladly pay extra for a blackout free subscription or would not care if they showed TV ads for games that are supposed to be on FOX. This seems to be the common sentiment in this thread too. Why not just reproduce the FOX broadcast, commercials and all, on MLB.tv? Does that not make sense for all parties? FOX gets more viewers for its ads and MLB.tv subscribers are happy. What is the point in preventing me from watching a game I would gladly pay to watch?

Bilbo Baggins
Guest
Bilbo Baggins

How can you watch internet streams of live MLB games? That would save me lots of money on the cable bill.

cory
Guest
cory

great googly google!

John
Guest
John
gnomez
Guest
gnomez

Hey, here in parts of Indiana, we’ve got 5 teams blacked out… than again, I’m not sure what else I’d expect from the only state to have ever head three time zones.

Larry
Guest
Larry

As a Cardinal fan in east TN i can’t see them when they play Atlanta, Chicago, or Cincinnati and Ohio is 3 states away. I can see Atlanta is a hop skip and jump away, I can even see Chicago we have a Chicago tv station that shows the games. But Cincinnati?

Craig S
Guest
Craig S

I am a Red Sox fan living in NY and have already had TWO games blacked out on MLB Extra Innings. Both games had nothing to do with any blackout restrictions I am aware of, i.e the Saturday afternoon Fox situation or the Sunday night ESPN situation. First, the Red Sox home opener on Monday 4/8 at 2:05 was blacked out. Second, last night’s Boston vs Houston game at 7:10 was blacked out. In both situations, cablevison had no answers for me and simply said that “MLB can black out any game they want at any time”. In last night’s situation, cablevision told me it was a “last minute decision” by MLB. HUH??? As far as I know, both of these games were not subject to any of the criteria within MLB’s blackout restriction policy. Furthermore, both were listed on the cablevision channel guide all throughout the day when you’d go to that particular channel, even while the game was supposed to be on. The only response I received from Cablevision was that they would get back to me after checking with the programming director as to why these games were blacked out. I am not holding my breath.

William Dwyer
Guest
William Dwyer

I too am a Red Sox fan. I moved to Vegas 14 years ago and have buying the MLB season at $200 per. It absolutely infuriates me that six teams claim territorial rights. The worst is Oakland And San Francisco. Not only when those teams are playing the Sox but when they play in Fenway. Indefensible. MLB offers no explanation or justification for allowing those two cities being 700 miles from Vegas. And Selig still makes statements about caring for the fans. Right!