End the Blackouts

Editor’s Note: This is the third in a 10-part series commemorating baseball’s new commissioner with advice for his tenure. To read more about this series, click here.

MLB television blackouts could, and should, be a thing of the past. (via Billy Bob Bain)

We live in the golden age of watching major league baseball. With either the MLB.tv Internet service or MLB Extra Innings pay-per-view television package, fans today can watch virtually every one of the 2,430 games played each season, all for the relatively low price of around $100-200 per year.

Unfortunately, like so many good things in life, this all-inclusive baseball access comes with a catch: “Blackout and other restrictions apply.” MLB’s television blackout policy currently runs more than 850 words. In a nutshell, the policy prevents subscribers of either the MLB.tv or MLB Extra Innings services from viewing, in real time, the ESPN Sunday Night Baseball game of the week, the subscriber’s regional Fox Saturday broadcast, or – most importantly – any game involving the subscriber’s designated “home” team. This latter restriction applies “regardless of whether or not a game is televised in a Club’s home television territory,” meaning that even if your designated home team’s game is not being televised locally, you still can’t watch it on either pay-per-view service.

As others have previously noted, this home territory restriction can, at times, lead to absurd outcomes, leaving some fans completely unable to watch their favorite team play. This is something that I would like to see changed in the Rob Manfred era.

To the uninitiated, this home territory blackout restriction may not seem like that big of a deal. Because almost all of a team’s games are usually broadcast in its home market on one station or another, one would logically assume that even if a game were blacked out on MLB Extra Innings or MLB.tv, local fans could still watch it via traditional cable television.

This is not always the case, however, as many fans routinely find themselves blacked out from watching games that are completely unavailable on their local cable system. In some cases, this may be due to a dispute between the club’s regional sports network and one of its town’s local cable providers (Houston and Los Angeles provide two recent examples).

In other cases, blackouts will affect fans living a great distance from a team’s home city. Because teams’ home television territories frequently extend hundreds of miles, they often reach areas where the local cable provider has never carried – and likely never will carry – the regional network broadcasting a particular team’s games. Nevertheless, fans in these regions are still subject to MLB’s blackout policy. For example, even though most local cable providers in Hawaii do not subscribe to the San Francisco Giants’ regional network, all Giants games are still blacked out in the state. Not only does this mean these fans can’t watch the Giants play on television, but under MLB’s blackout rules they are also unable to tune in on the Internet via MLB.tv.

Moreover, as the following map illustrates, because teams’ broadcast territories frequently overlap, some fans routinely find themselves blacked out from watching multiple major league games on any given night.

Take, for instance, anyone living in Iowa, where the entire state is considered the home broadcast territory of six teams: the Chicago Cubs, Chicago White Sox, Kansas City Royals, Milwaukee Brewers, Minnesota Twins and St. Louis Cardinals. This means Iowa fans may be unable to watch 40 percent of the 15 games played most days. Fans living in Las Vegas – the home territory of the Arizona Diamondbacks, Los Angeles Angels, Los Angeles Dodgers, Oakland A’s, San Diego Padres and San Francisco Giants – suffer a similar fate.

Even those fans who can watch their team play on a local sports network may still be affected by MLB’s blackout restrictions. For any number of reasons, a fan may prefer to watch a game over the Internet rather than on television. Under MLB’s current television policy, though, these fans are also blacked out from watching their home team play on-line (the sole exception being fans living in Canada, where the Toronto Blue Jays are the only MLB team to currently offer fans live, in-market streaming over the Internet).

To its credit, MLB has recognized that its blackout policy can impose hardship on some of its fans. Back in 2006, Commissioner Bud Selig – himself an occasional victim of MLB’s blackout rules – expressed frustration over the policy and vowed to fix it. This led to a push in 2007 to redefine each team’s broadcast territory, with MLB reportedly giving owners a year to work out any contractual issues that the change might raise under their broadcast agreements with the regional sports networks. Eight years later, however, MLB’s broadcast territories still haven’t been adjusted.

Instead, MLB appears to have resigned itself to adopting what are, at best, half-measures. This past August, Bob Bowman – president and CEO of MLB Advanced Media, the company that runs the MLB.tv service – told the Associated Press that he hoped the league’s blackout restrictions would be eased in 2015. In particular, Bowman described a new policy that would allow fans to view their home team’s games over the Internet via MLB.tv, but only if the fan also subscribed to whichever cable network is airing the game locally (similar to the model recently used for live streaming of the Olympics and soccer’s World Cup). So in other words, if you are a cable subscriber, you may soon have the choice of watching your local team play on either television or the Internet.

While this change would be a good start, it doesn’t go far enough. Although it is still unclear exactly how this latest proposal will be implemented, based on Bowman’s comments it appears that anyone who does not currently subscribe to a regional sports network would still be unable to watch the home team play via MLB Extra Innings or MLB.tv. Presumably, this would be true even if the network isn’t offered in your area, meaning that those unlucky fans living in Iowa or Las Vegas would still be unable to watch a number of games each day.

So what should be done? Some economists have suggested that MLB should simply eliminate its broadcast territory restrictions entirely. As the argument goes, by dispensing with broadcast territories, competition would be introduced into the local broadcast marketplace, forcing regional sports networks to compete with services like MLB.tv. This competition, in turn, would give consumers more choice and lower prices for their televised baseball.

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While this scenario sounds attractive in theory, MLB would argue that it is unworkable in practice. Indeed, the reason that teams were originally assigned exclusive local broadcast territories was not to avoid competition with pay-per-view television or Internet services, but to prevent teams from beaming their games into each others’ television markets. Without exclusive broadcast territories, for example, nothing would stop the New York Yankees from signing local television agreements with stations in Cincinnati, Kansas City or Milwaukee.

The fear, then, is that without broadcast territories, the most popular large market teams would directly compete with smaller market teams in their own territories. This would increase the large market teams’ local television revenue while  decreasing the TV revenue of the smaller market teams, further exacerbating competitive balance concerns. While an economist might argue that these concerns could largely be alleviated through enhanced revenue sharing among major league  teams – with all teams agreeing to share their local television revenues equally – the odds are nonexistent that the Yankees or Dodgers would ever agree to split their local TV money evenly with the Royals or Brewers. So a complete elimination of MLB’s exclusive broadcast territories appears unrealistic.

Alternatively, one might propose that MLB continue to assign its teams an exclusive broadcast territory, but simply lift the restrictions preventing fans from viewing in-market games over the Internet. This solution would also introduce some element of competition into the broadcast marketplace, allowing fans to forgo subscribing to cable entirely and instead watch their local team play exclusively on MLB.tv (cable cutters rejoice).

While this would be a major step forward, it is also something that MLB is unlikely to agree to voluntarily. Teams currently earn tens to hundreds of millions of dollars per year from their local television contracts with the regional networks. Those networks, in turn, are willing to pay these sums in exchange for exclusivity. By ensuring that they remain the only outlet for local fans to watch their favorite team play, the networks are able to charge cable providers significant fees for the right to carry their station. They, therefore, would strongly oppose any plan to allow fans to freely access in-market games via MLB Extra Innings or MLB.tv because then there would be little reason for cable providers to pay to carry their networks. And MLB teams are unlikely to do anything that could threaten the substantial revenues they receive from the regional networks.

As a result, the most practical solution for the time being would appear to be paring back each team’s assigned territory to a more reasonable radius. As a starting point, MLB could prevent teams from claiming any territory where their games have not been broadcast on a consistent basis in, say, the last five years. Such a solution would still provide the regional networks with the bulk of the exclusivity they want, while allowing fans who are currently unable to watch a game on television to tune in via Extra Innings or MLB.tv.

Sadly, though, even this proposal is unlikely to be adopted anytime soon. As noted above, MLB explored the possibility of redefining its teams’ broadcast territories back in 2007, only to determine that there were too many contractual issues to overcome. As Bob Bowman told the Associated Press in August, “If [the blackout issues] were easy to resolve, then somebody would have done it.”

Without being privy to the behind-the-scenes maneuvering, it is difficult to know just how seriously MLB worked to resolve these issues. Nevertheless, one has to believe that if baseball was truly committed to redefining the broadcast territories, it would have figured out a way to do so by now.

Rob Manfred should make resolving this issue one of his top priorities as commissioner. While reconfiguring the league’s blackout map will undoubtedly require some teams to renegotiate their regional network contracts, given the value of live sports programming today the time is ripe for MLB to resolve these issues once and for all. And to the extent the process imposes any real financial hardship on a franchise, MLB can use its central league coffers to compensate the team for its trouble.

Alternatively, at a minimum, MLB should prevent teams from entering new contracts with regional sports networks promising exclusivity based on the existing blackout map. This would enable MLB to slowly implement a more rational set of exclusive broadcast territories, without disrupting any of its teams’ existing contracts. To be sure, this would require teams to voluntarily agree to reduce their broadcast territories, perhaps a wildly overoptimistic expectation on my part. And even then, this process would take quite some time to rationalize MLB’s blackout restrictions, since some teams’ current local television contracts run into the 2030s. But at least things would be starting to move in the right direction.

Ultimately, should MLB refuse to act voluntarily, the time may come when its hand is forced. A lawsuit – Garber v. Office of the Commissioner of Baseball – is currently working its way through the courts challenging, in part, MLB’s television blackout policies under federal antitrust law. While the suit’s odds of success are uncertain, MLB would be wise to fix its blackout restrictions now, on its own terms, rather than risk having a judge or jury impose even more radical changes in the future.

The time has come, then, for MLB to fix its antiquated television blackout system. It has fans who are willing to pay good money to watch its product, but are unable to do so. MLB should let them have their baseball.