The plaintiffs and Major League Baseball yesterday exchanged briefs in anticipation of a January 18 trial before Judge Scheindlin in a case alleging it is anticompetitive for Major League Baseball to divide the market for broadcasting games into various territories exclusive to the local teams, while allowing the broadcast of out-of-market games only as part of a allegedly overpriced all-or-nothing packages.  (A companion case relating to National Hockey League games was recently settled.)

The plaintiffs’ brief argues that the structure is inherently anticompetitive:

The territorial scheme here . . . is of a type that has long been understood to have no redeeming effects and therefore ordinarily warrants per se condemnation. Sports leagues are granted an exception to the per se rule not because they are immune from the basic principles of economics, or because there is some special need to establish market definition and market power. Rather, sports leagues are not typically subject to per se rules because a certain amount of joint activity, such as agreeing on the rules of the game, is required for the underlying products—the games themselves—to exist.  . . . .

There is no dispute that the purpose of the [territorial broadcast system at issue] is to increase prices by preventing competitors from competing with each other. Nor is there any dispute that the restraints have been effective. Teams have been prevented from distributing games wherever they would like, which has increased prices and limited choice. Or, in Defendants’ words, the teams and their broadcast partners have been protected from “invasion” by others in order to increase the “value” of broadcasting in those territories, protecting would-be competitors from the “harm” resulting from increased consumer choice.

The defendants counter that their licensing regime is procompetitive because it promotes baseball in a particurly challenging market where “in recent years, programming as diverse as Dancing with the Stars, NCIS, 60 Minutes, and Two and a Half Men have beaten the World Series for television viewers.”  Specifically, the exclusive territory structure gives local broadcasts incentives to make the best product (since they are not competing with other broadcasters for the same games), and centralizes baseball’s resources for developing, marketing and distributing the broader league-wide packages:

Far from a conspiratorial device, these territorial rules were adopted to allow, and encourage, clubs to promote baseball in their local markets, where cultivating avid and committed fan interest is critical to their success, and that of the League. And these rules have worked. The last two decades have seen a dramatic increase in the quantity and quality of local telecasts, which in turn have fostered greater fan loyalty, boosted stadium attendance, and promoted greater club financial stability and competitive balance.

The allocation of national broadcasting rights to the League, which dates to the 1970s, reinforces these procompetitive benefits. Acting on behalf of all clubs, the League has negotiated broadcasting agreements that further expand the output and options available to consumers, while promoting the game in general. This allocation allows the League to promote all of the clubs and to develop a national brand, rather than entrench the popularity of a few select clubs. It has also permitted the League to innovate new products, including MLB Extra Innings and MLB.TV, which provide more baseball to more fans through more devices and options . . . .  Individual clubs never could have achieved the same levels of innovation, quality, and efficiency on their own. . . .

Together, these offerings allow fans across the country to watch virtually all of MLB’s 2,430 regular season games on television through regional and national networks, and a huge portion of the games on their desktops, tablets, and phones . . . Notwithstanding the availability of all of this baseball, Plaintiffs insist that the League’s licensing system should be dismantled because it purportedly reduces consumer choice . . . . [T]he evidence will show that dismantling the licensing system currently in place would eliminate many of the viewing options and procompetitive benefits that fans now enjoy.