On New Year’s Day, Major League Baseball launched its new cable network. Unlike the NFL Network, which has fought numerous battles with Comcast and Time Warner to try to get carriage, the MLB Network will debut in 50 million homes.
Gee, I wonder if it has anything to do with MLB giving Comcast, DIRECTV (now run by the guy who engineered this strategy, John Malone), and a bunch of other big cable boys an equity share?
Oh if only we had a federal law to prevent such extortionist use of market power, and a federal agency to enforce it! Oh wait, we do. Well why hasn’t the NFL filed a complaint? Oh wait, they did. Well then, why do Comcast, DIRECTV, and the rest of the cable cartel think they can get away with it? Oh right, because the FCC has done absolutely jack on this. Why? Because, as we all know, everything is perfectly wonderful and competitive in cable-land and trying to address the NFL’s complaint is just all part of Evil Kevin Martin’s wicked vendetta against this customer-oriented highly-competitive industry.
A bit more below . . . .
Perhaps I’m just a cynical cable hater for thinking that MLB did so well because it agreed to give an equity interest to the largest pay tv providers such as Comcast and DIRECTV. After all, Section 616 of the Communications Act (47 USC 536) makes it illegal for a “multichannel video programming distributor” (MVPD), as we in the FCC legal biz call subscriber TV services, to demand an equity stake as a condition of carriage, or to punish a network for refusing to hand over an equity stake. But while I may be a cynic, I’m hardly alone in drawing this conclusion.
Indeed, as this piece in Bloomberg’s shows, what remains of the independent programming industry and those who follow it have learned that making a voluntary “gift” of an equity interest can really grease your wheels, whereas declining to make such a voluntary show of respect has, shall we say, consequences. Or, as This article quotes MLB President Bob DuPuy, explaining the decision to make this “voluntary gift” of equity to the top MVPDs:
It would take an awfully long time to grow to the value that being in 50 million homes is immediately going to provide. It makes sense from an economic standpoint and plus these companies are partners that will help grow the game, and at the end of the day, that’s to everybody’s benefit as well.
Yes, the NFL wants to charge more for its programming. Something comparable with, say, ESPN or what it charges broadcasters. Not unreasonable given NFL’s ratings. And cable companies might legitimately balk at such a pricey demand — especially at a time when they get routinely pilloried for their regular rate increase (although these appear to have nothing to do with programming costs and everything to do with market power).
But that’s why we have a process for investigating these situations to determine whether what’s happening here is a standard competitive market dynamic or a cartel in action. Sure NFL is big, but anyone remember how Microsoft leveraged its market power over the desk top to bully giants like IBM and Intel? Congress passed Section 616 because even major networks like NBC — which had to make all kinds of adjustments to CNBC when it launched to reassure the cable cartel it would not compete with CNN — had to bend the knee and pay tribute to get access to cable subscribers.
Unfortunately, the FCC remains paralyzed on the question of reforming the carriage complaint rules. Meanwhile, resolution of the pending complaints by NFL Network and others has (and you will hopefully forgive the inevitable utterly lame sports puns here, but I’m told they are mandatory) have become the loose ball in a massive scrimmage between the Administrative Law Judge and the Media Bureau.
Small wonder that the MLB and any other independent programmers still out there would rather pony up to pay for play rather than rely on the FCC to enforce federal law explicitly designed to prevent this very thing from happening. Or, as analyst Craig Moffett, who recently touted cable to investors because cable is a natural monopoly, put it so eloquently in the Bloomberg article:
“A successful launch by MLB will bring unwanted scrutiny on the NFL Network’s cable strategy,” said Craig Moffett, a Sanford C. Bernstein & Co. analyst. “There’s plenty of unhappy viewers all over the country that don’t like the fact that they can’t see a Thursday night game.”
Yup, looking to the FCC to enforce federal law has proven a pretty boneheaded cable strategy after all. Much smarter to play nice with the natural monopoly, don’t try to get what you think your product is worth, and show respect by giving the big boys a taste of the action. MLB certainly learned from NFL’s “mistake” in trusting the FCC to give it the day in court promised by law, just like Hallmark did when they surrendered to Comcast after the FCC failed to pass a carraige complaint reform measure in 2007.
In a week, Kevin Martin will no longer chair the FCC — and cable will lose their “vendetta” argument that has so paralyzed the FCC on this issue. I can only hope that in the massive focus on the DTV transition and the usual chaos around even a well-run transition, the small matter of actually enforcing federal law and giving NFL — along with MASN and WealthTV — the protection the law entitles them to does not get overlooked. Whatever happens, we can expect the industry to keep watching and to continue to learn the lesson of the NFL. It falls to the FCC to decide whether the lesson they wish to teach is “rely on your rights and trust the law” or “get real and pay for play.”
Stay tuned . . . .