Lawsuit targeting MLB's blackout policy to proceed

The antitrust lawsuit aimed at blowing up Major League Baseball's lucrative television-rights territories and forcing the league to abandon its antiquated blackout policy will proceed after a federal judge Wednesday affirmed the claims that MLB's media structure is anti-competitive.

U.S. District Judge Shira Scheindlin said MLB's policy, which includes offering out-of-market games only in a package and blacking out in-market games, raises prices, reduces competition among teams and used "monopoly power" to restrict fans' ability to watch games.

"Making all games available as part of a package, while it may increase output overall, does not, as a matter of law, eliminate the harm to competition wrought by preventing the individual teams from competing to sell their games outside their home territories in the first place," Scheindlin wrote in a 53-page decision. "And plaintiffs in this case – the consumers – have plausibly alleged that they are the direct victims of this harm to competition."

The decision forces the league, which is named in the lawsuit along with the NHL, a number of regional sports networks, Comcast and DirecTV, to consider a handful of options. MLB could fight the suit and engage in a long, drawn-out trial that would include a discovery period that could reveal details about the league's inner workings and financial details of its media machine. Or, as is the case with many antitrust lawsuits that hit discovery, settle with the plaintiffs and adjust its policy.

[Related: View U.S. District Judge Shira Scheindlin's decision (.pdf)]

MLB declined comment, as did the plaintiffs' attorneys.

Baseball's infusion of local-television money has transformed the industry into a richer-than-ever financial behemoth. Multi-billion-dollar deals, including the Los Angeles Dodgers' expected $6 billion windfall for 25 years of broadcasts, are the product of a system that awards territories to teams and allows them a local programming monopoly. The regional sports networks purchase the TV rights then charge cable and satellite companies high monthly fees to carry the channel, a price passed along to subscribers.

Certain territories, including Iowa and Las Vegas, are awarded to as many as six teams and on some nights black out 40 percent of the games played. While commissioner Bud Selig has in the past said he wants to rid MLB of its blackout policy, the television money has grown so large, baseball will fight to preserve it.

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Were MLB to avoid settling and lose, the consequences could change the league's TV structure – for worse, it contends. The league fears a TV policy without restrictions would harm smaller-market teams, which would face competition from the Dodgers, Yankees, Red Sox and other high-profile, big-money teams looking to expand their reach beyond local markets.

The plaintiffs argue that prices for viewing games would go down with natural competition and a new system – perhaps one in which MLB offered a-la-carte games on the Internet or mobile devices – would benefit fans.

The parties will meet Dec. 18 and begin working out a timeline for the discovery period, which, if it proceeds, could take as much as a year.

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