I love good courtroom dramas. When flipping through the channels of live television, as if anyone does that anymore, and finding a movie like A Few Good Men, I’ll stop what I’m doing and soak in the rest of the film, for I can handle the truth.
I’m a sucker for Runaway Jury, The Firm or any other John Grisham novel turned blockbuster. But there’s a trial going on, one that has been going on for seven years, that the NFL doesn’t want you to know about, a trial that will cost the league upwards of $5 billion, a trial that just might halt, or at least alter, how this league and others auction off their product to the highest bidding streaming services.
And it all started because of a single bar owner.
Thursday nights of going out with friends, eating chicken wings and drinking beers until your heart’s content are a thing of the past and we didn’t even notice. Remember when Thursday Night Football didn’t belong exclusively to Jeff Bezos? Bezos paid one billion dollars for exclusivity to a bunch of average Thursday Night NFL games. This is a man who generally doesn’t make bad business decisions. He didn’t once again. Suddenly, America went from going out on Thursday nights to staying in because bars don’t get Amazon Prime.
Ultimately, bars and private residents that paid their hard-earned money for the NFL Sunday Ticket were not given access to all the games they’d been promised. The Sunday Ticket first came about in 1994, a concept credited to, believe it or not, Jon Taffer. It turns out the NFL reneged on its obligations, and now must reimburse its consumers to the tune of five billion, or at least I think that’s what happened. As with any cinematic courtroom drama, what happens in real life is far more complicated, which is why it’s so easy for the NFL to pull the wool over our eyes.
It is at times like these where I turn to people much smarter than me with the hope that someone with a law degree will help dot my I’s and cross my T’s. He will always be my Atticus Finch.
Dr. Milhouse, it is good to have you back on the internet. Can you please explain to us in layman’s terms why the NFL is being sued? What were they not doing that warranted them to ultimately pay back $5 billion in revenue to consumers? And what does this mean for the future of NFL negotiations with streaming services now willing to pay any price to showcase its product?
Milhouse: Like with any good legal question in America these days, there’s a lengthy, esoteric answer that’ll require a few pages of precedent and context, and there’s a very boiled down answer. We’ll stick with that one for our purposes and focus solely on the NFL.
Background
A Monopoly, other than being the board game that tore apart families and made everyone realize why Aunt Ruth went through four divorces, is when a single entity controls the entire market for a product or service, meaning they can control the price. If our favorite Chump ran the only bar in town, he’d be able to charge whatever he wants for a pint of Guinness. Antitrust laws were designed to prevent monopolies, meaning that they ensure there’s other places to buy that pint of Guinness, so you’re not paying more than you should.
The biggest sports leagues in America, though, were able to get an exemption to these laws in 1961, solely when dealing with their broadcast rights. This law allowed the broadcast rights to televise sports to be sold to the highest bidder. More than fifty years later, we’re now seeing how this gigantic loophole created the sports juggernaut we see today.
Why are we here?
The Sports Broadcasting Act of 1961 allowed sports leagues to pool the broadcasts of all their games to be sold to one national distributor instead of teams selling to local stations alone. This evolved to the AFC/NFC distribution packages, and eventually the “Thursday Night/Monday Night/Some Designated Friday Night/Wild Card Weekend” packages we see now.
The main catalyst to the change, as Chump described above, was the invention of Sunday Ticket in 1994. With this invention, we introduce our entirely fictional sports fan, Don. Don grew up in New York City but moved to Tampa for both work and rehab. Don is a massive New York Jets fan, but the NFL broadcast rules mean that he primarily only sees Tampa games. The NFL’s product allowed fans to pay annual fees to be able to watch a game they’d see for free in another part of the country. It also allowed sports bars to be able to purchase a license to show every game in the country. These licenses were, as you would expect, outrageously expensive. These licenses were then diluted when games were being excluded from Sunday Ticket for the expansion into Thursday/Friday/Saturday games by the NFL.
The owner of a sports bar, along with thousands of other Plaintiffs, filed a lawsuit against the NFL saying they overstepped what the 1961 law was designed to do, and they’ve turned broadcasting into a cash grab at the expense of the customer. Last month, a jury agreed, and ordered the NFL to pay nearly five billion in damages, which could increase depending on how the rest of the case goes.
What did the NFL do wrong?
The NFL claims they’re providing their games to the highest bidder in accordance with the exemption from monopoly laws they’ve had since 1961.
The sports bar owners and fans who filed the lawsuit say the 1961 exemption only applies to “telecasted” games, which was intended to be on over-the-air television (think CBS/NBC/ABC) and not streaming over the internet.
The sports bar owner/fan argument takes on a new twist because the NFL did something with its broadcast packages that the other major American leagues (MLB/NBA/NHL) didn’t do. In baseball, for example, out-of-market TV fees (like MLB.TV) get put into a central fund that is divided up amongst the teams, meaning the teams and league have an incentive to make MLB.TV usable and affordable, because they’ll turn a profit.
The NFL, however, was selling and distributing the funds as a flat rate amongst the teams. This meant the NFL could charge whatever amount they decided, put whatever restrictions on the broadcasts they decided, and take games off the schedule and put them on another channel package without notice. And why? Because they had an antitrust exemption, and nobody was going to stop them. There was no incentive to make the broadcast available or affordable, it all boiled down to “Give us more money.”
Where do we go from here?
Short-term, July 31, 2024, is the next court date, where the judge will decide whether to accept that the jury’s verdict complies with the law. The judge has been skeptical of the Plaintiff’s case in the past, but overturning a jury verdict is a high bar to clear for a judge, because it must show that the jury didn’t have all the right information, or they didn’t have a justifiable reason to come back with the verdict.
Even if the judge lets the verdict stand, the NFL will appeal the verdict to the US Court of Appeals, and if that fails, they’ll appeal up to the Supreme Court, so this case will likely drag on for another year or two before there’s any finality.
However, if the courts keep this verdict in place, sports broadcasting may change wholesale very quickly. The simplest end game would be for the NFL to adopt something similar to Major League Baseball, with a central league-run place to watch games, and team-specific or month-to-month plans. You could end up with “Dallas Cowboys TV, only on Netflix” or “Patriots Prime” coming with a packaged subscription to Uber Eats.
However this saga ends, it’s going to have a generational effect on the next wave of broadcast deals, which starts with the NBA after the upcoming season.
SportsChump: Wow, that is some brilliant stuff, sir. Thanks for clarifying and laying it all out for us. This is exactly why I hit you up for this assignment.
I guess my follow-up question to you is, how long does the NFL want to go on with this? While $5 billion is no drop in the bucket, not even for the revenue-rich NFL, when (or even) will they decide to settle, cut a check to those that got screwed and redesign their business model, knowing they’ll get their $5 billion back in less than six months?
It seems to me the farther they go with this, the more they’re thumbing their nose at fans by saying, “We know we ripped you off but we’re proceeding with the appeal anyway.” Any American who has read a book in their lifetime understands that the NFL is just another institution designed to entertain us while making a buck off us in the process. Americans currently consume the NFL like it’s the last bottle of water on a desert island. But there might come a time, as we saw with how they bungled the Kaepernick situation, that some fans will say they’ve had enough.
While there might not be such a thing as bad publicity, doesn’t this smack of the NFL trying to fight back when they were essentially in the wrong? Somewhere along the line, did the NFL forget that the sport was about its fans? Not that this would ever happen but instead of trying to fleece us for every red cent, shouldn’t the NFL consider cutting their losses and moving on?
If you’re the lead attorney for this case, one with a conscience who is not getting paid a percentage of the five billion they get back if they win the case, what would you suggest they do next? At the risk of them firing you Jerry Maguire-style for even suggesting a mission statement so bold, isn’t this technically the right play?
Milhouse: The main reason the NFL will refuse to budge unless they have to is money. Sportico just put out a report that has the NFL at 13 billion dollars of revenue for 2023. So much of that revenue exists because of the broadcast deals (YouTube kicks in two billion a year for Sunday Ticket alone). There’s no sense in the NFL rolling over on that amount of cash, despite how it makes them look in the court of public opinion. This is exacerbated when you realize the media has treated this case like a junkie looks at a Rubik’s Cube. NBC Sports literally had a headline that said they had the trial transcript, “and we don’t know what to do with it.”
The secondary reason, which is what should make you concerned as a fan, is when you strike all these multi-billion dollar deals and have each channel vying to cover individual teams. This creates an environment like baseball, i.e., you quickly end up with deals where the most popular teams make the most money, which allows them to sign the best players, which makes the teams more popular, and so on. Teams could create their own networks like the Yankees did, teams could sell off their broadcasts to niche streaming services, you could end up needing a dozen different paid subscriptions to watch all the games.
My suggestion would be to acknowledge that Sunday Ticket packages getting chopped up and sold to the highest bidder (looking your way, Amazon) was a bad play. You make Sunday Ticket inclusive of all broadcast games on the weekend, make it affordable, and make the pay structure based on subscriptions purchased rather than a flat rate. This fits in more clearly with the established exception to antitrust law, allows you to use the infrastructure of the existing broadcasters, and salvage the incredible profit you make on the package. There are downsides to this idea (loss of exclusivity, would require renegotiation of packages, etc.) but the short-term harm would be outweighed by the revenue generated by creating a Sunday Ticket people actually want to use.
SportsChump: Ladies and gentlemen, this is why it’s always good to keep an attorney on the payroll. I once again present Dr. Atticus Milhouse. Thank you again, sir. Until the next porch episode.
Precedent ,Precedent we don’t need no stinking Precedent .
Either way, we’re about to have a new one, Deac.