More and more people today identify as “cord-cutters”—people who watch their favorite TV shows through services like Hulu, iTunes, or Netflix, instead of through traditional cable television. Major League Baseball offers a service to cord-cutters called MLB.tv, which allows subscribers to stream live baseball games directly on their smart phones, tablets, phablets, or (for people like me who have not moved into the 2010s) their “laptop computers.” MLB.tv., however, does not show a geographic market’s local games, which are blacked out online and broadcast through a regional station, such as Fox Sports Ohio. The regional station, of course, is limited to a defined geographic area assigned to each baseball team.
A recent case in the United States District Court for the Southern District of New York indicates, however, that baseball might have to change how it broadcasts baseball games. Laumann v. National Hockey League, Case No. 12-CV-1817 (S.D.N.Y. Aug. 8, 2014). In that case (which also involved the National Hockey League, which has similar broadcasting policies), the judge decided that baseball’s antitrust exemption does not protect its television broadcasting deals.
As I have previously mentioned here, there is a limited exemption to the antitrust laws for “the business of baseball.” This is a judicially created exemption based on outdated legal principles, but the Supreme Court has upheld it twice since its inception under stare decisis. Lower courts have varied in how they have applied the exemption, depending on what they consider to constitute the “business” of baseball.
The antitrust exemption came into play in Laumann because, although baseball allows each competing team to negotiate its own regional broadcasting deal, each baseball team cedes control of the national broadcasting rights, including for MLB.tv, to the league entity. The plaintiffs argued that this collective action is an illegal horizontal restraint, because each team should be negotiating its own contract. The plaintiffs argued that the broadcasting restrictions harm consumers by limiting their choices and forcing them to pay higher prices to stream live games.
The defendants pointed out, however, that baseball is a joint venture, and it would not make sense to have each individual team selling broadcasting rights that compete with those of the other teams. Further, defendants stated that the territorial exclusivity encourages the regional providers to invest in higher-quality products, and that collectively negotiating the national broadcasting rights preserves competitive balance by sharing broadcasting revenues between large-market and small-market teams.
The court, while not deciding the competitive merits of the broadcasting arrangement, held that baseball’s antitrust exemption does not apply to the territorial broadcasting restrictions. The court relied in part on a previous federal decision holding that radio broadcasting agreements did not fit within the exemption because they are “not central enough to baseball to be encompassed in the baseball exemption[.]” Henderson Broadcasting Corp. v. Houston Sports Association, 541 F. Supp. 263, 265 (S.D. Tex. 1982).
Fans of all sports should keep an eye on this case, as most major sports leagues (e.g., the National Football League, National Hockey League, National Basketball Association, and Barclay’s Premier League) have tied the ability to watch their games online, to at least some degree, to geographic ties and to cable subscriptions. If the courts find such arrangements raise serious antitrust concerns, and open up streaming options, then even more people might decide to cut the cable cord.