9:00am PT by Eriq Gardner
NFL Asks Supreme Court to Hear Case That Could Shake Up Live Sports Telecasting
The National Football League is concerned that a revolution may be at hand with respect to the way that its games get televised to millions of fans. On Friday, pointing to how teams currently pool TV rights and then license packages to distributors, the league asked the Supreme Court to review an antitrust case with the potential of upsetting an arrangement that has served the league for more than a quarter century.
"Because any broadcast involves the active participation and intellectual property of at least the two participating teams and the NFL, an agreement regarding assignment of broadcast rights is essential if there are to be broadcasts at all," states the NFL's petition for writ of certiorari.
Highlighting the stakes, the NFL adds that if the Supreme Court doesn't step in and blow the whistle on a lower federal appeal court's decision last August, it could impact other sectors of the economy depending on joint ventures involving separately-owned assets. "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," continues the NFL's brief.
The case at hand concerns the league's "Sunday Ticket," a package of out-of-market games currently available through DirecTV. As most football fans know, watching a local game — the Los Angeles Rams in Los Angeles, for example — means tuning into a local over-the-air station. But if during the season a fan wishes to watch two non-local teams play — a New Yorker interested in a game between the New England Patriots and the Dallas Cowboys, for example — that's often only available though "Sunday Ticket," which is priced at nearly $300 per season for an individual and anywhere between $1,500 and $58,000 for commercial establishments like bars and restaurants (depending on size).
A class action lawsuit challenges the status quo.
If teams didn't pool rights and collectively license, theoretically each team could produce its own version of a game and maybe stream it online. So a game between the Patriots and Cowboys would result in two telecasts (and maybe more), and the injection of off-the-field competition might translate into lower prices and more choices for consumers. At least, that's what the plaintiffs in the case insist. A federal judge rejected the proposition that output was being limited, but then surprisingly, the Ninth Circuit Court of Appeals revived the case and ruled the plaintiffs should be able to move forward. The NFL now wants the Supreme Court to take another look.
The NFL believes that when it comes to an antitrust challenge over a joint venture's production and distribution of its joint product, a court should apply a "rule of reason" analysis, meaning a weighing of the pro-competitive features of a restrictive business practice against its anticompetitive effects.
Take professional football. In 2010, the Supreme Court held that NFL teams are capable of conspiring when making licensing deals but acknowledged that insofar as they cooperate in the production and scheduling of games, that "provides a perfectly sensible justification for making a host of collective decisions."
"In particular, fans’ interest in watching games — especially games not involving their favorite team — depends on a host of decisions made by the League," adds the NFL in its cert petition. "Those decisions involve everything from scheduling to rules designed to preserve and enhance competitive balance, i.e., teams of relatively equal on-field strength. Even a decision as basic as kickoff time is made by the League, not the participating teams, with an eye to maximizing the value, quality, and attractiveness to consumers of the overall product."
The NFL asserts that the Ninth Circuit shrugged off the pro-competitiveness of its joint venture by turning to the Supreme Court's 1984 holding that the NCAA's TV rights restraints violated antitrust law.
"The panel read NCAA to stand for the proposition that no legal or practical constraint 'requir[es] the teams and the NFL to cooperate in order to produce' NFL game telecasts," states the NFL's cert petition. "Accordingly, the panel (i) held that the Sunday Ticket licensing arrangements could be deemed a 'naked' restriction on output, (ii) excused plaintiffs from their burden to plead injury to competition, and (iii) held that 'plaintiffs were not required to establish a relevant market.' NCAA, however, did not involve an economically integrated venture that created, licensed, or distributed a joint venture product. This is a critical distinction."
Although the NFL doesn't get into particular detail about how this case might impact the entertainment industry, the league does nod to a 1979 Supreme Court case where CBS challenged issuance of blanket licenses to copyrighted musical compositions. At the time, the broadcaster asserted this was illegal price-fixing. The high court disagreed after applying the rule of reason. Given that ASCAP and BMI consent decrees are under Justice Department examination, should the DOJ move to terminate or modify those consent decrees, the NFL's "Sunday Ticket" legal struggle could have some sneaky implications to the public performance licensing of music.
That is, if the Supreme Court agrees to hear the case. Here's the full petition, which also presents an issue related to plaintiffs' standing given that "Sunday Ticket" purchasers only indirectly do business with the NFL. (They go through DirecTV.) The league is represented by Gregg Levy, Derek Ludwin, David Zionts, and John Playforth at Covington & Burling while DirecTV itself is represented by Paul Clement and Erin Murphy at Kirkland & Ellis.