Can't see sports, Oscars without channel-bundle subscription you don't want? Let regulators know

Gencraft

I filed a comment today with the Antitrust Division of the U.S. Department of Justice regarding the Disney-Fox-Warner sport streaming deal, and more generally, the anticompetitive practice of streaming television sales with channel-bundling leverage and opt-out subscriptions.

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9 March 2024

Dear sir or madam at the Antitrust Division of the U.S. Department of Justice:

I understand you are scrutinizing the Disney-Fox-Warner sport bundling agreement, and you no doubt are sensitive to the situation in televised sport since the recent congressional hearings on sport media rights.

I draw your attention to two of this weekend's top offerings in sport and entertainment, because they are demonstrative of the problem now in the streaming industry—which is to say, for our times, in the television industry.

In sports, this weekend will see a meeting of the top two, closely matched soccer teams in the world contending for the Premier League championship, Manchester City and Liverpool.  NBC owns U.S. TV rights to Premier League matches in the United States.  NBC's practice is to break up matches horizontally, across its many media properties and contractual arrangements, compelling consumers to have to pay for multiple services to follow a single team in a single sport.

The practice is worse still: high-interest matches such as Sunday's are available only with the purchase of subscription bundles to channel packages consumers do not want.  Yes, the match is available from multiple electronic packages, but each is an expensive bundle: Fubo, Sling, DirecTV, and USA on cable television.  There is no one-off purchase option, nor even a one-channel purchase option.  The price of one month on one of these services far exceeds the market value of one match, or even four weekly matches.

This leveraged bundling, compelling consumers to buy what they do not want to get what they do want, especially in a billing format of opt-out subscription renewal, is an anticompetitive practice. It is ironic that Fubo has sued in private antitrust enforcement to stop the Disney-Fox-Warner agreement. Fubo's position seems to be that it wishes to profit in the vertical market from bundling leverage, but does not want providers to profit from the same model in a horizontal arrangement. In entertainment, the Oscars air on ABC Sunday night.  Like NBC in sports, ABC is making this popular program available only through bundled channel services such as Fubo, Sling, YouTube Live, Hulu Live, DirecTV, and ABC on cable television. Again, there is no one-off purchase option, nor even a one-channel purchase option. 

Again, consumers must buy access to content they do not want, again in a billing format of opt-out subscription renewal.  Media watchers such as Vulture advise consumers to purchase a television antenna to see the Oscars on ABC broadcast.  Is it not plain evidence of ABC's anticompetitive practice that in this day and age consumers would have to regress technologically to over-the-air broadcast to avoid paying for what they do not want?  Never mind the fact that old-fashioned broadcasters have substantially dampened their signal power, so that over-the-air reception is not feasible for many Americans, even on the fringes of large markets.

Disney-Fox-Warner argue that they must forge an agreement to meet consumer demand, so their agreement is in the public interest.  They are not wrong.  However, they are right only insofar as you already have permitted an anticompetitive market to exist.  For a player in this market to succeed, it must grow bigger, must exploit horizontal and vertical integration.

The fundamental problem is that the market already is dysfunctional.  Market actors are trying to replicate the cable model in a streaming world. But the cable model came about as a function of technological limitations, not market forces.

Is it not self evident that in a free market, consumers would be able to buy what they want and not buy what they do not want?

I entreat you not to approve of the creation of another integrated market player. At the same time, I entreat you, start taking a hard look at the anticompetitive practices that already are tolerated in existing horizontal and vertical integrations, especially through the strategy of channel-bundling leverage and opt-out subscription sales.

Sincerely,

Rick J. Peltz-Steele

(for information only:)
Attorney, Washington, D.C.
Chancellor Professor, UMass Law School

U.S. Soccer, FIFA lose antitrust appeal; defense shows short-sighted strategy to develop soccer in America

Cristiano Ronaldo plays for Real Madrid against Barcelona in 2011.
Jan S0L0 via Flickr CC BY-SA 2.0

U.S. Soccer and the Fédération Internationale de Football Association (FIFA) will have to defend an antitrust action in federal court for refusing to permit a Spanish La Liga match on U.S. soil, the Second Circuit ruled in March. 

In 2017, world famous football (soccer) clubs Real Madrid and Barcelona faced off in an exhibition game in Miami. The match was fabulously lucrative for the commercial interests behind it, including organizer Relevant Sports, LLC, based in New York.

World sport likes the United States, because our infrastructure practically prints money. Americans, especially the top echelons of the wealthy, have been habitualized by our unregulated and often subsidized sport-and-entertainment monopolists to pay more than people elsewhere in the world to see live events, both directly for seats and indirectly in media rights.

Incidentally, that's the principal reason that bringing the FIFA (men's) World Cup back to North America in 2026 was not really a hard sell, notwithstanding modest public enthusiasm and the theater of the global bidding process. The 2026 co-hosts, the United States, Canada, and Mexico, likely did not even have to pay the half-billion dollars that Qatar apparently spent, mostly to FIFA executive committee members, in, uh, let's say, "incentives," in siting the 2022 World Cup (about my World-Cup-2022-contemporaneous lecture; Qatar on this blog): check out the investigative exclusive by Armin Rosen for Tablet (link from inset), published late last month, using U.S. court records in collateral matters.

Understandably, then, Relevant Sports wanted to maintain the momentum of the 2017 exhibition match. The company proposed that the Spanish La Liga subsequently might site a regular-season, full-stakes match in the United States. 

However, FIFA rules say that a match cannot be held in a country foreign to both sides without the approval of the football federation in the host country. U.S. Soccer said no.

Relevant sued, alleging that the rule improperly protects domestic football from being overshadowed, and therefore diminished in interest and income, by high-profile competitors. U.S. Soccer and FIFA defend the system on the merits under antitrust law, and, saliently in this intermediate disposition, argued that the FIFA "rule" is not really a rule, because FIFA doesn't make the decision for U.S. Soccer or La Liga. They're free to make their own decisions, notwithstanding potential adverse consequences, such as exclusion from international competition for players, teams, or federations that don't play ball.

The instant Second Circuit decision is limited. The court remanded the antitrust claim to proceed, recognizing that FIFA's rule is rule enough to represent the kind of concerted action in violation of antitrust law that Relevant alleges.

Earlier this week, I wrote about Cory Doctorow's enthusiasm, which I share, for the federal government's antitrust agenda—including the Justice Department investigation of Google. (I canceled my Google Nest Aware subscription upon the 25% rate hike. Google's not the only game in town. Yet.) U.S. Soccer's loss in the Second Circuit represents a judicial step in the same right direction.

I'm not an antitrust expert. But to my relatively lay eyes, the fact that the federal district court dismissed the case in 2021 on the faint theory that U.S. Soccer was not formally bound by FIFA's command demonstrates how appallingly far U.S. antitrust law has strayed from basic fair-market principles. Or maybe the court just didn't understand the governance system in world sport and its facility for subverting the laws of nations.

USWNT celebrates in times happier than this year's World Cup.
rachael.c.king via Flickr CC BY 2.0

The U.S. Soccer position in the litigation to me demonstrates furthermore a fundamental misunderstanding of what it will take to make football successful in America. American soccer advocates often wonder aloud why the sport seems to stall again and again, even after the men's World Cup in the United States in 1994 and the astonishing run of the U.S. Women's team in an unprecedented four World Cup titles.

To be sure, there are many, many reasons for the frustrating cycle of revving and stalling. But equally surely, one of those many reasons is the short-term greed of commercial actors that works a detriment to long-term development. 

I've written previously about this problem in the context of media rights. When NBC acquired the rights to English Premier League football, the broadcaster divvied up matches among its many media properties based on the popular appeal of each. NBC's strategy was to leverage interest in the league to sell separate subscriptions to multiple services: NBC, NBC Sports, (at one time, "NBC Gold,") Peacock, USA, Telemundo, Universo.

The network either didn't consider or doesn't care what that model looks like from the customer's perspective. Football in a place such as its home U.K. (at least before U.K. media companies such as Sky started merging with U.S. media giants and took sport away from the publicly minded BBC; that's another story) maintains a multi-generational foothold because supporters follow their teams.  

Divvying up the matches makes it impossible in the United States for a viewer to follow a team. Each week, one gets whatever match a selected service happens to carry, based on its level of market appeal.  If you subscribe to a middle-tier service and your team starts to lose, you might get more matches. If your team starts winning, and you start becoming more engaged, you find yourself suddenly deprived of matches.

That market behavior doesn't build a fan base. For American football or basketball, maybe there are enough viewers who will watch any game because they love the sport. But Americans don't yet love soccer that much. Sport-market development requires fostering two interrelated conditions at the same time: public enthusiasm for the sport, and public enthusiasm for a team. Neither can thrive without the other.

U.S. Soccer's refusal to permit La Liga to play a match on U.S. soil also is self-defeating, if for the converse strategic blindness. Both media rights usurpers and U.S. Soccer, focused on short-term profits, are dampening American enthusiasm by impeding U.S. viewers' access to the highest level of play in the world, in the Premier League and La Liga. While NBC's strategy deprives Americans of the opportunity to root for a team, the U.S. Soccer strategy deprives Americans of the opportunity to root for the sport.

Again, neither can thrive without the other.  U.S. Soccer is trying to protect Major League Soccer and the federation's underage and lower divisions. The federation reasons coldly that someone who buys a $500 La Liga ticket will skip five or ten $48 Tampa Bay Mutiny matches.

They're wrong. One of my U.S.-based family is a card-carrying member of the Toon Army, a dedicated supporter of Newcastle (U.K.) United FC. He traveled domestically to see Newcastle play an exhibition match in the United States this summer. Being a Newcastle supporter has made him a more, not less, enthusiastic supporter of his nearby D.C. United and the U.S. men's and women's national teams. With access to the matches of each, live and on TV, he's more likely to spend money on all of them.

Antitrust law is not a device to make commercial actors prioritize long-term interests over short. To the contrary, if NBC and U.S. Soccer put themselves out of business, that's a healthy outcome for the free market. But if antitrust inadvertently compels U.S. Soccer to up its game and compete for eyeballs by actually developing the sport, rather than constraining consumer choice, then that's an outcome I can get behind.

The case is Relevant Sports, LLC v. U.S. Soccer Federation, Inc. (2d Cir. Mar. 7, 2023). U.S. Circuit Judge Raymond J. Lohier, Jr.., wrote the opinion of the unanimous panel that also comprised Chief Judge Livingston and Judge Lynch. In 2017's "El Clásico Miami," Barcelona bettered Real Madrid 3-2.

Can Arsenal supporter be impartial in football inquiry?

A curious story of lawyering ethics and football allegiance broke in mid-May, just after I went off contract with UMass Law and left the States for a chunk of the summer.

Manchester City Football Club (City, or MCFC), my team, won a historic "treble" over the summer, topping the Premier League, FA Cup, and UEFA Champions League.

Thomas Jefferson, me, and a City kit
at Hofstra University, 2016
Morgan Steele CC BY-NC-SA 4.0

While City was on its spring tear, a modest shadow was cast by allegations of violations of "fair play" financial regulations in the Premier League for transactions dating to 2009 to 2018. From as much as is publicly known, the allegations focus on financial transparency requirements. Any ultimate finding of violation can have consequences going forward, ranging from fines to relegation from top-tier play.

City denies any misfeasance. In 2020, the Court of Arbitration for Sport (CAS) reversed a UEFA suspension of City for alleged violation of the financial regulations related to transactions from 2012 to 2016. The CAS decision was based principally on the exclusion of dated evidence, so the matter was not resolved on the merits. City then also denied any wrongdoing.

The present allegations, which themselves are reported to arise from a four-year investigation, have been referred to an independent commission. Its behind-closed-doors work will take a while. And City can be expected to litigate any adverse result.

The piece of the story that caused me to scratch my chin in May was the report that City had filed objection to the appointment of an Arsenal FC supporter, Murray Rosen KC, as chair of the independent commission.

Under rules of professional conduct in American law practice, being a fan of a sport team would not preclude a lawyer from representing a competitor. American Bar Association (ABA) Model Rule 1.7 focuses on conflicts in legal representation, not matters of social affiliation. Of course, the question comes down to the lawyer's ability to do the job "competent[ly]" and "diligent[ly]," so it's always possible for a lawyer to be compromised by sporting fervor. The best course is disclosure and client consent.

For a judge, ABA Model Code of Judicial Conduct Rule 2.11 similarly, probably, would not demand a sport-fan judge's recusal from a matter involving a competitor. The requisite "personal bias or prejudice" is usually indicated by concrete evidence such as financial interest, familial affiliation, or former representation, not social preference.

More than lawyer ethics, the judicial canons give weight to public perception, testing expressly for objective perception of impartiality. But being a sport fan, absent economic investment, doesn't move that needle.

For example, in a fraud lawsuit settled confidentially five years ago, plaintiffs accused the New York Giants and players, including quarterback Eli Manning, of American football, of passing off memorabilia falsely as game worn. The plaintiffs asked New Jersey Superior Court Judge James J. DeLuca to recuse, because he was a Giants fan and, with his son, owned professional seat licenses—that's something, economically—to attend Giants games. DeLuca declined to recuse and pledged on the record his ability to remain impartial. All good, legal commentators opined. (E.g., NJ.com.)

JAMS guidelines for arbitrators are at least as permissive. Like the judicial canons, the guidelines look to both actual conflict and objective appearance of conflict. JAMS guidelines expressly condone "social or professional relationships with lawyers and members of other professions" as long as they do not "impair impartiality."

I don't know what ethics constraints pertain to Rosen, but I'm doubtful they are any more demanding. I also don't know, though, how deeply Rosen bleeds Arsenal red and white. City's filing is secret, so it's possible there's evidence of conflict that the public can't see.

Nothing in Rosen's public record raises a red flag. Based in London, he's a CAS-certified arbitrator and mediator. Any European professional, especially a Brit, and especially someone working in sport law, can be expected to favor a club or two in association football. Rosen was called to the bar in 1976. He's practiced media, sport, and art law and has served in a wide range of offices, even once chairman of the board of appeal of English Table Tennis.

A biography of Rosen at 4 Square Chambers, pre-dating the City matter, reported:

He is a strong believer in fairness and in the power and benefits of sport and has a keen appreciation of its social, political and financial aspects. He has participated in sport all his life, is a member of the MCC [I presume, Marylebone Cricket Club] and Arsenal FC, and still regularly plays real tennis and ping pong.

A 2019 biography at Herbert Smith Freehills mentioned in parentheses that Rosen "is an Arsenal season ticket holder." Arsenal of course was a contender for trophies City won in the end in its treble. But, at least upon what is publicly known, Arsenal has no direct interest in the financial regulatory matters, any more than another competing club.

The objection to Rosen might be part of a kitchen-sink litigation strategy, or, more likely, a public relations strategy. It's frustrating not being able to know the substance of the objection (or nearly anything about sport governance matters that wind up before CAS). On the public record, at least, the objection on ethics grounds doesn't seem to hold water.

In any event, the allegations against City do nothing to dampen my celebration of the treble! I wore my Erling Haaland kit to law school orientation just last week.

NBC resists TV free market, overcharges U.S. viewers: PL football costs $20 in Canada, $70 in United States

Each year, I become freshly enraged at the cost of seeing Premier League football in the United States, a ready example of antitrust non-enforcement in the communication sector.

The Sporting News had the audacity, or stupidity?, to describe NBC carriage of PL matches in the United States as a "luxury." I guess it is, a luxury only the rich can afford. To follow one's team, one must, at minimum, subscribe to NBC partner FuboTV for $70 per month. Access via FuboTV costs just US$20 per month in Canada.

The tangled cross-ownerships of what used to be broadcast TV are indicative of the dearth of consumer protection in the area. NBC "competitor" CBS (Viacom) owns a stake in FuboTV. The legacy broadcasters are using their weight in contracting power to lock down content in channel consolidators that emulate the old cable TV business model, by which consumers were compelled to overpay for a sliver of content in a library they didn't want. Hardly the free market promise of streaming.

But the FCC long ago left the helm unmanned on consumer protection when broadcasting gave way to cable. And the FTC and DOJ have had little interest in expanding their purview in times of corporate-captured governance. As usual, the United States purports to model free market capitalism in an oligopolized market that is anything but.

FuboTV in Canada at left, United States at right.
The package in Canada has fewer channels,
but if PL is all you want, that's not an option.

Ted Lasso heads to UK, will coach AFC Richmond

From The Daily Show with Trevor Noah (Oct. 6, 2020)

A new Apple TV+ show has Saturday Night Live alum Jason Sudekis playing southern-drawl-wielding American football coach "Ted Lasso," as he is recruited to coach an English Premier League (PL) soccer squad.

Lasso's fictitious team in the Ted Lasso comedy series is "AFC Richmond," but Sudekis wore an authentic Manchester City FC (my team) hoodie for his interview with Trevor Noah on last night's Daily Show.

Financially regrettably, this show compels my wife and me to re-subscribe to Apple TV+.  We shelved the channel, pending new content, after we finished the highly gratifying For All Mankind (blog), and after I finished the sufficiently compelling if after all tritely pedantic Morning Show (both shows 2019, second seasons forthcoming).

Ted Lasso is a co-creation of Scrubs (2001-2010) creator Bill Lawrence, which scores dispositively in my playbook, though I don't think Lawrence has since re-created that Scrubs magic.  Ted Lasso is a spin-off, or spin-up, of NBC Sports promotional shorts imagining Lasso's appointment as head coach of Tottenhan Hotspur.

 

Incidentally, I'm a consistent critic of NBC's intellectual-property monopoly over PL broadcast rights in the United States.  NBC carves up the PL season so that one would have to subscribe to an impossible, and impossibly expensive, range of commonly owned services to follow a favorite team.  Americans would never tolerate such exploitation of American football broadcast rights.  NBC and the PL are greedily short-sighted, because inculcating loyalty to a single side is essential to sell British soccer to the American viewer in the long term.  It remains to be seen how UK regulators would react were NBC, since merging with Sky, to dare to try such such shenanigans there, where team loyalty is a multi-generational sacrament.  Other sports-loving countries won't have it.

Sports comedy is supremely watchable when it's well executed.  I thoroughly enjoyed Hank Azaria's Brockmire (2017-2020), though I have not watched baseball in many years.  And who can forget comedy-drama Sports Night (1998-2000)?  The West Wing (1999-2006) is too often credited for Aaron Sorkin's introduction of fast cuts and fast-paced dialog into small-screen canon, but it was on Sports Night that he pioneered the art.

The Sudekis interview appeared on The Daily Show just a day after Trevor Noah opened with some Premier League humor (cue to 1:13), noting Aston Villa's defeat of both Manchester United and Liverpool, the latter 7-2.  Noah is a Liverpool supporter.

Here is the trailer for Ted Lasso.

UK football letter roils world sport, and real world, too

Letter posted on Twitter by the AP's Rob Harris

The English Premier League football (soccer) organization wrote to the U.S. Trade Representative in February urging that the United States put the Kingdom of Saudi Arabia on the "Priority Watch List" of countries that fail to protect intellectual property (IP) rights.

The letter has been widely reported beyond the football world for its potential implications in foreign affairs.  Where the United States is concerned, IP piracy is regarded as a critical contemporary problem, on par with national security.  Much of that regard is warranted, as countries such as China, at least historically, have been linked to IP theft as a means to unfair economic advantage, to the detriment of American enterprise.  Some of the sentiment derives from the capture of Washington by IP-wealthy corporations, to the detriment of intellectual freedom.  Regardless, the gross result has been a paper war with nations that countenance IP piracy.  To put Saudi Arabia in those U.S. crosshairs adds a layer of complexity to our already impossibly complicated love-hate relationship with the KSA—read more from James Dorsey just last week—with ramifications from Yemen to Israel.

The letter has potential ramifications within the Middle East, too.  The Premier League's indictment calls out specifically a Saudi-based pirate football broadcaster that calls itself "beout Q" and seems to operate in a blind spot of Saudi criminal justice, even distributing set-top boxes and selling subscriptions in Saudi retail outlets.  The name seems to be a thumb in the nose of beIN Sports, a Doha-based, Qatari-owned media outlet with lawful licensing rights to many Premier League and other international sporting matches.  Saudi Arabia has led the blockade of Qatar since the 2017 Middle East diplomatic crisis, a high note of previously existing and still enduring tensions between the premier political, economic, and cultural rivals in the region.

A 2016 Amnesty International report
was not flattering to Qatar or FIFA.

Football and international sport are weapons in this rivalry.  Qatar has long capitalized on sport as a means to the end of soft international power, winning the big prize of the men's football World Cup in 2022, if by hook or by crook.  Saudi Arabia has more lately taken to the idea of "sportwashing" its image, especially since the Jamal Khashoggi assassination and amid the ceaseless civil war in Yemen.

The letter roiled the world of football no less, as Saudi Arabia has been in negotiation to acquire the Newcastle United Football Club.  That purchase requires Premier League approval.  So everyone and her hooligan brother has an opinion about what it means that the league is so worked up about Saudi IP piracy as to write to the United States for help.

This unusual little letter is a reminder of a theme, known to social science and as old as the Ancient Olympics, that, more than mere diversion, sport is a reflection of our world.