The National Football League is asking the Supreme Court to hear a case involving how teams and broadcasters negotiate television rights for regular season games.
For access to out-of-market games, television viewers have typically been forced to sign up for the NFL Sunday Ticket, which is only available from AT&T. Customers must sign up for a basic DirecTV subscription, have a dish installed on their home and pay $300 a year to AT&T in order to receive out-of-market broadcasts of NFL games, though a little-advertised streaming service is also available through AT&T for customers who aren’t able to have a dish installed where they live.
AT&T has managed to keep a monopoly on out-of-market games because of the way the NFL and teams negotiate broadcast rights, but a lawsuit making its way through the court system would challenge this, presumably opening the door for individual teams to cover games through their own streaming services or forge partnerships with companies other than AT&T for a similar initiative.
The lawsuit argues that a “horizontal” agreement between the NFL’s 32 teams to band together in order to negotiate broadcast rights and the NFL’s “vertical” agreement with AT&T constitutes an illegal monopolistic hold that restrains would-be competitors as defined in the Sherman Antitrust Act.
Plaintiffs in the case wanted the NFL to end the practice of “blacking out” a game by holding it hostage unless customers signed up for DirecTV or the AT&T-powered streaming service. They argued the NFL’s exclusive contract with AT&T resulted in fewer games being available to the public and higher prices for DirecTV subscribers. But a federal judge in Los Angeles ruled against them in 2017, saying because the NFL provided the games to AT&T, there wasn’t a restriction on who could view them.
The case was considered dead until the Ninth Circuit Court of Appeals revived it, finding that plaintiffs had a compelling argument of a Sherman violation because the NFL and AT&T’s exclusive contract could limit the ability for teams to negotiate separate rights for non-network telecasts by making game broadcasts produced in-house available to cable, satellite and Internet-based distributors.
The appellate judges found that the model used by the NFL today was different from one used by individuals teams in the early 1950s. Then, individual teams — not the league — negotiated broadcast rights directly with the networks. But the NFL felt this gave certain teams too much bargaining power and could drive smaller teams out of business if their games weren’t show on network television.
To combat this, in 1951, the NFL amended its bylaws that forced teams to limit out-of-market broadcast deals with networks. The Justice Department sued over the move, but a judge found in favor of the NFL in part because revenue from television broadcasts at the time was marginal compared to ticket sales. But the judge did say the NFL couldn’t restrict a team’s ability to broadcast into another team’s hometown when the hometown team was playing an away game.
Things changed when the American Football League was formed — unlike the NFL, the AFL was not restricted from creating league-wide broadcast rights, and they did exactly that shortly after forming. In the early 1960s, the NFL began taking the same approach, banding together teams to negotiate carriage rights based on league divisions and conferences. The NFL successfully lobbed Congress to carve out an exemption to the Sherman Antitrust Act by allowing teams to band together to negotiate carriage rights to broadcast networks — and the NFL did this for more than two decades.
But the Ninth Circuit appellate judges said the exemption applied only to games carried on free, over-the-air broadcast stations — the exemption didn’t apply to similar coverage on pay TV systems like cable or satellite, nor did it apply to Internet-based TV services. Worse, the NFL’s agreement with AT&T forces customers to subscribe to games they may not want to see.
In a petition to the Supreme Court, the NFL says finding in favor of the plaintiffs could have a ripple effect across the entertainment industry when it comes to how separately-owned companies pool together to create joint ventures for the purpose of negotiating entertainment rights.
“Such ventures are common not only in sports, but also in the motion picture, recording, publishing, high-tech and other industries in which cooperation is commonly required to produce and license products protected by intellectual property laws,” the NFL said.
To defend itself, the NFL is relying on a 1979 Supreme Court case in which CBS challenged how licenses were negotiated en masse for musical recordings used in TV shows and movies. CBS claimed the practice by BMI and ASCAP amounted to illegal price fixing, but the Supreme Court disagreed, holding the practice didn’t violate the Sherman Antitrust Act.