The Baseball Deal: Who Won, Who Lost and What It Means

Consumers Still Can't Cancel Cable

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Sports fans may have gained a way to stream their local teams' games from outside their home markets, but they still can't cancel their cable bundle.
Sports fans may have gained a way to stream their local teams' games from outside their home markets, but they still can't cancel their cable bundle. Credit: Rhona Wise/Bloomberg News

Major League Baseball, Comcast Corp. and DirecTVthis week agreed to settle an antitrust lawsuit brought by fans over how games are broadcast. The class action, filed in 2012, challenged baseball's system of granting exclusive broadcast rights to regional sports networks, barring teams from telecasting or streaming games outside their home territories, and "blacking out" games that don't fit that picture.

The fans said the arrangement violated U.S. antitrust law by inflating prices and limiting consumers' choices. MLB said it was simply trying to prevent the teams in big markets from gobbling up all the TV deals and starving small-market teams, ensuring more games, more competition and more choices for fans. Comcast and DirecTV said they've just been playing by MLB's rules.

The settlement, which requires the approval of U.S. District Judge Shira Scheindlin, allows fans to watch their favorite teams without blackouts, or blocked games -- if they subscribe to a pay-TV provider and pay for a streaming service as well.

So who won?
On balance, Major League Baseball, said Gabe Feldman, a law professor and director of the Tulane Sports Law Program.

"They settled for a deal they were planning to offer anyway. They were going to offer single-team packages for a discount," Mr. Feldman said. "This still provides a significant source of revenue" to the league. Fans will now be able to buy a package of games for a single team at a discount, which "might invite new customers into the marketplace," he said.

That's in addition to the billions of dollars the regional sports networks, such as New England Sports Network and Yes, the Yankees Entertainment and Sports Network, pay the individual ball clubs for broadcast rights.

The fans won something, too, said Galen Clavio, director of the National Sports Journalism Center at Indiana University's Media School.

"This is not the home run [they] were looking to hit, but it's a solid double," Mr. Clavio said. "It makes it easier to watch the games we want to watch, rather than what's dictated to us."

Can sports fans cancel cable now?
No.

But at least they can follow their favorite teams from outside their market without having to buy MLB's whole package of streaming games. Under the pact, fans of a team outside the market they live in will be able, for the first time, to buy a single-team internet package without blackouts -- again, as long as they subscribe to a cable or satellite network. About half of all fans live outside the home territory of their favorite clubs, according to an expert witness for the plaintiffs.

How much will it cost?
Under the terms of the pact, you can buy internet-streamed broadcasts of single teams for the next five years for $84.99 starting next season (April 3). That's $25 less than the basic package MLB offered last season and $45 less than the premium package.

By mid-season, MLB will offer a "Follow Your Team" option as a $10 add-on to the basic, $110 MLB.TV package. That way you can watch the home-team broadcasts of the out-of-town ball club of your choice when it is playing in your region. A Phillies fan living in New York, for example, could watch Philadelphia broadcasters call a game against the Mets, currently blacked out.

The settlement "increases choices and lowers prices" said Jennifer Rie, an analyst with Bloomberg Intelligence, but, crucially, doesn't eliminate territorial exclusivity from the broadcast model. "These aspects of the settlement benefit MLB and pay-TV providers like Comcast."

Comcast, which owns regional sports networks in Chicago, Philadelphia and other cities, has spent billions of dollars for the exclusive rights to broadcast baseball games in those markets. Under the settlement, the teams will continue to enjoy those revenues.

The settlement follows one reached in June by the National Hockey League in a parallel antitrust case. Under that pact, the NHL will provide fans with single-team packages priced at least 20 percent below the bundled out-of-market package for the next five years.

Wait, isn't baseball was exempt from antitrust law?
Historically, yes. In this case, though, Judge Scheindlin said MLB's exemption, which it won in a 1922 Supreme Court case, didn't apply to its broadcast contracts. The two sides reached their settlement just as the case was going to trial on Tuesday, so MLB and the pay-TV companies never had to defend their practices on the merits.

The settlement is "more of an incremental change than any monumental shift," Mr. Feldman, the Tulane Sports Law director, said. "This still upholds the exclusive TV territories for non-cable subscribers," he said, though he noted the benefit to those who want to buy single-team packages and said fans "will get more access to the games of their choice" and, ultimately, "a system that is more responsive to consumer demand."

"I don't think they're giving away the farm or anything here," Indiana University's Mr. Clavio said of MLB and the broadcasters. "They didn't have to compromise the basic model. You still have to have a cable subscription."

Who lost?
Fans who have canceled their pay TV subscriptions. The pact doesn't really offer them anything.

"From a cord-cutter perspective, personally I don't think much, if anything, has changed," Mr. Clavio said. He said it's a loss for "the fans who want to watch the game in whatever version they want to watch it."

"You have to be a pay TV subscriber to watch your hometown team on your screens," said Lee Berke, a media consultant in Scarsdale, New York. "Once again, sports programming is providing a big assist to shoring up the market share of pay TV."

Will sports fans ever be able to get rid of cable?
Someday. MLB and the broadcasters may have bought some time for a system they're "desperate to keep," Mr. Clavio said. But if streaming revenues catch up to those from cable broadcasts, or revenues from pay TV drop to a level where it no longer makes sense to maintain its exclusivity, the current model won't survive.

"I think that will collapse sooner rather than later," he said.

The settlement is "where the marketplace is heading and where fans want to be," Berke said: "Watching their favorites across a range of screens."

-- Bloomberg News

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