The NFL Contends Its Teams Are Incapable of Producing Game Broadcasts

NFL Targets Massive Payday in Thursday Night TV Deal - H 2015
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Professional football this year will kick off with a bit of defense as the NFL looks to sack a putative class action over one of its multibillion-dollar TV rights deals. The lawsuit, currently being fought in California federal court, claims that the league and satcaster DirecTV are violating antitrust laws in the way that out-of-market game broadcasts are packaged and distributed to commercial establishments like bars and restaurants. If successful, the lawsuit has the potential to reshape televised football, which, given the immense popularity of the product, might lead to wholesale changes across the entertainment landscape.

In the litigation, the plaintiffs suggest an alternative reality — one where teams like the Los Angeles Rams and the Green Bay Packers compete against each other in the market for NFL football programming, which the plaintiffs say would "induce more competitive pricing and content." In this world, the 32 member franchises might individually stream their games online, and viewers would perhaps have the option of choosing gamecasts announced by team legends, other fans, or maybe nobody. Some football enthusiasts, after all, might just prefer to hear the ambient noise of the stadium.

According to a motion to dismiss filed on Monday by the NFL, however, this is not possible, as the "clubs' pooling of rights is necessary to distribute even a single football game." This is hardly the only justification given by the league to end the suit.

In antitrust law, there are generally two kinds of restraints that undergo scrutiny — vertical agreements between a seller and a buyer and horizontal agreements between competing businesses.

The vertical agreement at issue in this case is the eight-year, $12 billion Sunday Ticket licensing agreement between the NFL and DirecTV. The plaintiffs allege that the defendants "have colluded to sell the out-of-market NFL Sunday afternoon games only through DirecTV," at a supracompetitive price. The largest establishments — like Las Vegas casinos — are paying more than $120,000 a year for Sunday Ticket.

In response, the NFL argues that bare allegations directed at an exclusive distributorship aren't enough to carry an antitrust claim. To survive dismissal, the league says the plaintiffs must bring a plausible claim that the exclusive agreement is intended to or actually does harm competition. The NFL says the plaintiffs haven't carried the football past the first-down mark.

"Nothing in the Complaint suggests that it was unreasonable or inappropriate for the NFL to conclude that Sunday Ticket would be most attractively and effectively distributed by a single licensee with ample, undiluted incentive to enhance and promote the product," state the league's lawyers.

The real action in this case might turn on the court's interpretation of the horizontal agreements between NFL teams to collectively pool television rights. That's thanks to the 2010 Supreme Court ruling American Needle v. National Football League, which held that NFL teams are capable of conspiring when making licensing deals. The question now is whether the same sort of scrutiny applies to television as it does to merchandising.

The NFL is claiming immunity from the antitrust challenge because of the Sports Broadcasting Act of 1961, while the plaintiffs assert that this statute is expressly limited to "sponsored telecasting," which they construe to mean broadcast television and not cable or satellite.

U.S. District Judge Beverly Reid O'Connell will also be examining whether the pooling of rights among teams is anticompetitive compared with any alternative. As noted above, the plaintiffs envision what might happen if teams were free to produce or license their own games — but it's a "but-for world" that's under the league's pass rush.

"Plaintiffs ignore the fact that the NFL would be well within its statutory rights not to distribute any out-of-market NFL football games," states the league's court brief. "Indeed, before the launch of Sunday Ticket, these out-of-market broadcasts were not available to fans at all. Plaintiffs plead no factual support for their conclusory (and counterfactual) assertion that individual teams would or even could distribute these games."

The NFL attempts to bolster that last point with word that a single NFL football game broadcast requires cooperation and consent from "at least three entities — the NFL and two participating clubs," nodding to the intellectual property involved (and obviously steering clear of the current trademark troubles bedeviling the Washington Redskins). As for a bundled package, like multiple games maybe demanded by fantasy football enthusiasts who patronize bars, the NFL says it "requires the participation and consent of all 32 clubs and the NFL."

A footnote there expresses that the "necessarily joint nature of the broadcast rights at issue here distinguishes this case from American Needle."

Elsewhere in the brief, the NFL attacks the notion that "live video presentations of regular season NFL games" is a plausible relevant market for antitrust purposes. The league says NFL games compete for consumer attention with other sports and entertainment options, plus the league argues that the availability of free broadcasts of NFL games (on networks like Fox and CBS) represent a point — or seven — against the idea of restricted supply. For similar reasons, the NFL also knocks "out-of-market" NFL games as being a recognizable, defined market illegally being restrained.

Here's the full brief, which also takes issue with plaintiffs' standing to allege an antitrust injury. The NFL is also looking to defeat a claim of monopolization, saying the plaintiffs haven't adequately alleged a conspiracy between the league and DirecTV. The league is represented by attorneys at Covington & Burling as well as Wilkinson Walsh + Eskovitz.

As for DirecTV, a co-defendant in the case being represented by Kirland & Ellis, the satellite distributor has brought its own dismissal motion premised on the contention that the dispute belongs in arbitration because of its agreements with customers. Here's that brief as well.