Lawsuit Could End DirecTV's NFL Sunday Ticket, Force a la Carte Sports Offerings

By Markets Fool.com

Cable companies have come under fire in recent years for forcing customers to buy packages of channels rather than allowing them to pick just the ones they want on an a la carte basis. This method, consumers argue, forces them to pay for things they don't want and drives bills up.

Continue Reading Below

Sports leagues haven't come under the same scrutiny, yet they're doing the same thing with digital and out-of-market game packages. These offers, which include DirecTV's NFL Sunday Ticket, Major League Baseball's Extra Innings, and the National Hockey League's Center Ice, all sell fans the right to watch pretty much all out-of-market games.

What these packages don't offer is the ability to pick only the team or teams you care about and pay a lower price for access to just their games.

That could change, as a federal judge in Manhattan is considering whether to allow a lawsuit brought by a number of fans against MLB and the NHL to receive class action status. Depending on how the suit is resolved, it could determine whether all sports leagues (not just baseball and hockey) are allowed to force fans to buy all the games, rather than just the ones they want.

Major League Baseball's Extra Innings forces fans to buy all out-of-market games. Source: screen shot.

Continue Reading Below

What's being argued
The fans bringing the lawsuit want MLB and the NHL to stop using forced bundling. They want people to be allowed to buy packages for individual teams at a lower price than what is currently charged for the current packages, which offer more or less every out-of-market game.

For me, as a New York Rangers fan living in Boston Bruins country, that would mean the ability to buy just my team's games and not have to pay the roughly $199 a year the full package costs. Under current conditions, I would have to pay the full price, which would give me up to 40 games a week whether I want them or not.

The leagues say that forcing them to offer a la carte or team-based packages would drive overall costs up. The plaintiffs in the case say that's not true, reported the Associated Press. They argue that prices should drop as more fans buy access to only the teams or games they're interested in.

The lawsuit challenges "the territorial restraints, the systems that prevent the individual teams from broadcasting their games nationwide," saidEdward A. Diver, a lawyer for the plaintiffs, the AP reported. It also takes issue with whether the leagues have a legal right to use all-team packages to monopolize the out-of-market distribution of games.

The leagues, as you might imagine, disagree, saying that for the lawsuit to deserve class action status, the plaintiffs must show "the kind of common injuries that would qualify large groups of people as a class," according to the AP.

A big hurdle
While the plaintiffs have a point, the sports leagues don't operate under the same rules as other businesses.

The Sports Broadcasting Act of 1961 exempts all four major professional sports leagues from antitrust violations for negotiating television contracts, according to John Vrooman, a Vanderbilt economics professor.

''The reasoning of Congress in passing the SBA was that collective negotiations and even revenue distributions would lead to increased competitive balance in the Big Four sports leagues,'' the AP reported him as saying. He added, ''The classic behavior of a sports league cartel is to charge half as many fans twice as much.''

What this all means
While only MLB and the NHL are named in this case, if U.S. District Judge Shira Scheindlin decides the class action suit can move forward, it has the potential to set a precedent for all sports packages, including the incredibly lucrative NFL Sunday Ticket. Of course, this is only the first step in what could be a long battle.

If Judge Scheindlin does rule that the lawsuit deserves class action status, for example, that simply means it moves forward. It doesn't guarantee an end to the forced packaging of games.

No matter what the judge decides, this could be a case where the genie has gotten out of the bottle and the leagues will struggle to put it back in. Fans want the right to buy just their team's games without having to pay for content they don't want.

It might make sense for the major sports leagues to find ways to deliver that to their audiences before the courts force them to do so. That might give them more ability to set prices that make individual team packages possible, but perhaps less financially attractive than buying all the games.

The article Lawsuit Could End DirecTV's NFL Sunday Ticket, Force a la Carte Sports Offerings originally appeared on Fool.com.

Daniel Kline has no position in any stocks mentioned. Let's go Rangers! The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.