MLB Strongly Defends Local Broadcast Territories In Court

Major League Baseball asked a federal court this week to toss out claims by several fans that the league’s broadcast territories violate antitrust laws. The fans claim that MLB’s divvying up of the United States and Canada into exclusive broadcast markets means that regional sports networks need not compete with each other to telecast a team’s games in the local market. Plaintiffs also allege that MLB has a monopoly over broadcast packages of out-of-market games through Extra Innings and MLB.tv, and that MLB uses that monopoly for anti-competitive purposes by imposing blackouts on local games. My initial post explaining the lawsuit is here.

This week, MLB filed a motion for summary judgment with U.S. District Judge Shira Scheindlin, who is presiding over the case in Manhattan. Under federal procedure rules, a party can file a summary judgment motion to argue that under a set of undisputed facts, the other side’s claims (or defenses) are legally untenable, and therefore a trial on those claims (or defenses ) is unnecessary. You can read a copy of the motion here.  

Note that several parts of the motion are redacted, which means they refer to MLB’s confidential business information. From what I can discern, most of the redactions relate to MLB’s national TV contracts and what would happen to those contracts should the plaintiffs succeed in blowing up the exclusive local markets. The evidence in support of the motion — documents and pre-trial testimony — is even more off limits, with much of it filed under seal. That means only court and the attorneys have access to it. The public does not.

Still, even with the redactions and the filings under seal, MLB’s position is clear.

At it’s core, MLB’s argument comes down to this: the territorial video rights structure among the 30 MLB teams, coupled with the explosive growth in live video streaming, means that virtually all fans can watch virtually all 2,400 MLB games through a combination of their regional sports network, nationally-televised games, and either Extra Innings or MLB.tv. That structure is reasonable, pro-fan, and pro-competition and to suggest otherwise is absurd.

As a legal matter, MLB argues first that plaintiffs claims are barred because federal antitrust laws do not apply to claims involving MLB’s structure and territoriality (this is known colloquially as MLB’s antitrust exemption). We’ve seen this argument succeed many times, most recently in the federal lawsuit by the city of San Jose against MLB over the league’s failure to approve the Oakland’s plan to move to San Jose. (That case is now on appeal.) Ironically, the A’s are a named defendant in this lawsuit, and filed papers “joining” MLB’s summary judgment motion. In other words, the A’s are arguing to the federal court in New York that issues relating to MLB’s territorial structure fall squarely within the antitrust exemption, while the team’s putative partner for a new ballpark — San Jose — is arguing in California that the antitrust exemption is invalid and doesn’t apply.

But the league doesn’t rely just on the antitrust exemption. Instead, it argues that even if the video rights structure is examined under the antitrust law’s rule of reason, it more than passes muster. The league lays out the following facts:

• Under cross-license agreements among the 30 teams, each home and each visiting team has the right to telecast each game through its regional sports network, save for those games broadcast exclusively by the national TV networks.

• The home team doesn’t charge a fee to the visiting team for the broadcast rights, because the home team knows that only its RSN can broadcast the game in the local market.

• Local telecasts are critical to connecting with and growing the fan base and promoting the team’s brand. That, in turn, promotes competitive balance.

MLB posits that if the court were to find that the league’s video rights structure violated antitrust laws, the plaintiffs wouldn’t necessarily be any closer to their stated goals of having access to any game, any time, through any medium. According to motion, plaintiffs put forth no evidence showing that teams would compete with each other to broadcast games in each other’s markets or that, absent cooperation among the 30 teams, the Extra Innings and MLB.tv packages wouldn’t be economically feasible.

Noticeably absent in MLB’s motion is any discussion of the breadth of each team’s broadcast markets or the fact that many broadcast markets overlap–factors which lead to significant blackouts in areas without one main local MLB team. Iowa, for example, doesn’t have its own MLB team but is within the broadcast territory for the Cubs, Brewers, Royals, Twins, Cardinals, and 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. The total lack of attention to blackouts in MLB’s motion is quite curious, give that regional blackouts were an impetus for the lawsuit in the first place.

We’ll learn more about the shape of these arguments and counterarguments after the plaintiffs file their opposition brief in the next week or so. I expect plaintiffs to come forward with sworn declarations and testimony of various experts in the fields of economics and telecommunications to poke holes in MLB’s claim that the current video rights structure is pro-competitive. I also expect a renewed focus on the overlapping broadcast territories and resulting regional blackouts.

Remember, the plaintiffs’ goal right now is to defeat this motion and get to trial. To do that, they’ll have to show the judge that evidence the current video rights structure isn’t as reasonable as MLB portrays, and that a jury must hear and weigh the evidence.