January 8, 2007

The Ledger Domain

The Monopolizing of MLB's Extra Innings Package

by Maury Brown

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Last summer, I wrote in Blackout Blues how MLB's arcane territorial television broadcast system restricts consumer options for those that wish to see MLB games out-of-market through MLB.com or MLB Extra Innings. Now, MLB may be creating even more restraints on consumers.

John Orerand and Eric Fisher of the Sports Business Journal have reported that MLB is in advanced talks with DirecTV to make the satellite television company the exclusive provider of MLB Extra Innings. While Extra Innings was initially only offered on DirecTV in 1996, the package has been available on cable since 2001, and on Dish Network since 2004.

If the deal is approved, it is sure to raise the ire of cable interests like Comcast. In fact, the move would seem to be a game of high-stakes poker for MLB, considering that members of Congress and the NFL have been sparring over the latter's decision to use DirecTV as the exclusive provider of the Sunday Ticket package.

In early December, Senator Arlen Specter (R-Pa.) introduced a bill that would repeal the NFL's antitrust exemption under the Sports Broadcasting Act of 1961. Currently, the NFL negotiates the broadcast rights for all of its 32 teams. Specter's bill would repeal that ability and set up a scenario in which teams would negotiate television deals separately. "As I look at what the NFL is doing today with the NFL channel with the DirecTV ... a lot of people, including myself, would like to be able to have that ticket," Specter said. How Specter factors into the MLB deal with DirecTV has more to do with just his interest in protecting consumers. As noted, Specter is a senator from Pennsylvania. Comcast is headquartered in Philadelphia, and owns In Demand, the company that provides MLB Extra Innings on cable.

Specter's ability to strike fear in the NFL or MLB has lessened since November. Specter was the Senate Judiciary Chairman, but with control of Congress shifting to the Democrats this month, Senator Patrick Leahy (D-Vt.) takes control as chairman of the committee. While Specter is no longer chair, however, he still wields considerable power in Congress, and Leahy hasn't exactly been in MLB's corner in the past. Leahy helped narrow the scope of baseball's antitrust exemption during the 2002 Congressional hearings on the exemption, saying in his opening statement at the time,

Between the narrowness of the way the Supreme Court had perpetuated baseball's antitrust exemption-- only as it applied to labor-management relations-- and our work in the Congress, in which we struck the last remaining remnant of the judicially-created exception to the applicability of the antitrust laws, it seems that there is no longer any basis to contend that a general, free-floating baseball antitrust exemption somehow continues to exist.

As for DirecTV itself, the company has other ties to MLB than just a possible exclusive agreement for Extra Innings.

On December 22nd, Rupert Murdoch agreed to sell his control of DirecTV to Liberty Media in exchange for the $11 billion stake that Liberty Media had in News Corp. With that, Liberty gets control of three regional sports networks (RSNs), including Fox SportsNet Pittsburgh, Fox SportsNet Northwest, and Fox SportsNet Rocky Mountain. But the ties to MLB are about to go deeper than that.

As I detailed in late June of last year, the Braves are about to be part of a large and complex stock-swap scheme between Time Warner and Liberty Media. In other words, soon Liberty Media will own the Braves, several RSNs, and DirecTV, the company with which MLB is negotiating the exclusive agreement. (This is on top of DirecTV's deal with the NFL for Sunday Ticket and its deal with NASCAR.)

DirecTV has even approached the NHL about an exclusive deal for out-of-market games. Liberty's influence will soon reach far beyond just MLB: it will suddenly have holdings that stretch across a vast array of professional sports in terms of owning a franchise outright and controlling a large system of broadcasting outlets.

All of this sets up an interesting and possibly volatile situation with Congress, and a new and suddenly powerful force in MLB's ranks. An exclusive DirecTV deal with MLB will place the sport in the sights of Congress yet again. If the deal goes forward, it will be one more example of consumer restriction. There is already ill-will amongst those caught up in the convoluted blackout policy as it pertains to out-of-market broadcasts. There were approximately 750,000 subscribers to MLB Extra Innings last season. How do you think fans will react when they find out that not only are they caught in the "Blackout Blues," but that many will also have to jump from cable to DirecTV for that dubious privilege? One might surmise that there will be fewer subscribers this year than last.

If you've been watching Extra Innings on cable, you'll need to hold off until you see whether this deal goes the DirecTV route. You may have to start finding a nice place to mount that dish on your house.

Maury Brown is an author of Baseball Prospectus. 
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