The Chicago Cubs’ ongoing quest to cash in on wave of television broadcast rights money has always been taking place against the backdrop of a significant shift in consumer viewing habits. We know that the Cubs intend to launch their own regional sports network after the 2019 season, when their various TV contracts expire, and we know that those kinds of deals have guaranteed megadollars to the involved teams in recent years.
But we also know that the times-they-are-a-changin’, and viewership is fractured among not only so many channels and events, but also so many platforms for viewing. The massive bundling of cable packages that allow channels like a sports team’s RSN to charge a huge per-subscriber fee from the distributors (which is ultimately passed on to the subscribers, many of whom have no actual interest in that particular channel) is fading. That’s led in no small part to serious troubles with respect to the Dodgers’ distribution, as well as the previous iteration of the Astros’ RSN.
The Cubs are sensitive to these issues, and, in some ways, they are fortunate to have had other teams’ problems play out before they came to market. Now the Cubs have the opportunity to learn, and to safeguard – as best as reasonably possible – against the shifting landscape.
But this model – not just the streaming aspect, but the entire TV deal model – is predicated in large part on the idea that, because baseball is a regional sport, teams should have exclusive broadcast territories for their “local” rights. Not only does that allow the teams to cash in big with cable channels, but it also allows MLB to sell out-of-market streaming rights (think MLB.tv) to subsidize some of the smaller markets. Further, it allows smaller market teams a little protection against incursion by larger market teams who want to broadcast their games outside of their “local” market.
I am, of course, talking about MLB’s regional blackout policy. In short, if you’re in a team’s local market – which is often enormously defined – you cannot watch games streamed on the Internet, and you’re often blacked out of that team’s games when they are otherwise on a national broadcast. The idea there, of course, is that if you are a local viewer who could watch the games if only you’d subscribe to your local cable provider, then the rights for those games would be all the more valuable to sell. So, then, generally speaking, MLB teams like this setup. Many fans, however, do not.
And, indeed, some believe it’s downright illegal.
Although baseball has its historic antitrust exemption, granted years ago by the Supreme Court for reasons that are almost certainly no longer appropriate, there has been a lawsuit making its way through federal court in New York for years that ultimately determined the antitrust exemption will not apply when challenging MLB’s exclusive regional territory policy.
That case, you should know, goes to trial next week.
If you care at all about these issues, you should read a fantastic summary of the case and its implications by Nathaniel Grow here at FanGraphs. The extremely short version is that it will be up to the judge to decide, after the presentation of evidence, whether MLB’s policy is too harmful to consumers to stand.
Although I framed the opening of this piece in terms of the Cubs’ future TV deal, I don’t want to get too deeply into the implications of a legal decision on the blackout policy vis a vis the Cubs’ deal. For one thing, that deal is still potentially years away, and could be structured in any number of ways that mute the impact of the legal decision (which will probably come long before the Cubs’ deal is finalized). For another thing, I think we know too little about what MLB’s plans would be in response to a legal decision, and that could impact how the Cubs proceed.
The long story short version is: a decision requiring the end of MLB’s policy of regional exclusivity could wind up disproportionately benefiting large market teams with national reach (the Cubs, Yankees, Red Sox, and Dodgers, most especially, I’d think), but that could, in turn, wind up harming the sport as a whole in significant ways.
After all, that’s why MLB is fighting so hard to keep this policy in place.