The U.S. Department of Justice yesterday sued AT&T over DirecTV’s refusal to carry the Dodgers’ RSN. The DOJ suit alleges that DirecTV colluded with cable companies Cox, Charter and AT&T to deny carriage to what is now called Spectrum SportsNet LA. Essentially, the 57-page complaint accuses DirecTV Chief Content Officer Dan York of making sure that Cox, Charter and AT&T held firm in not carrying the RSN, which was being sold by Time Warner Cable. According to the complaint: “These unlawful exchanges were intended to reduce each rival’s fear that competitors would carry the Dodgers Channel, thereby providing DirecTV and its competitors artificially enhanced bargaining leverage to force TWC to accept their terms.” AT&T in a statement said that it was prepared to argue its case in court. “We respect the DOJ’s important role in protecting consumers, but in this case, which occurred before AT&T’s acquisition of DirecTV, we see the facts differently. The reason why no other major TV provider chose to carry this content was that no one wanted to force all of their customers to pay the inflated prices that Time Warner Cable was demanding for a channel devoted solely to LA Dodgers baseball. We make our carriage decisions independently, legally and only after thorough negotiations with the content owner.”
PRECEDENT HAD BEEN SET: The complaint contains interesting information on a previous carriage deal DirecTV signed for the Lakers’ RSN, now called Spectrum SportsNet. DirecTV waited until a week into the '12-13 NBA season to sign a deal. The complaint: “Most of (DirecTV’s) competing video distributors in the L.A. area had launched the Lakers Channel, and it was losing hundreds of customers per week to them. Consequently, on Nov. 14, 2012, ten days after Cox agreed to carry the Lakers Channel, DirecTV agreed to pay TWC’s initial asking price, even though DirecTV’s internal analyses estimated that carriage of the Lakers Channel was worth significantly less. DirecTV agreed to pay almost 50% more than its internal financial analysis suggested” (John Ourand, Staff Writer).
LONG TIME COMING: In L.A., James Rufus Koren writes prosecutors would not "disclose what sparked their investigation, but the lawsuit notes that there were multiple internal ethics complaints about York’s communications with other pay-TV providers." DOJ officials said that the inquiry "started more than a year ago" (L.A. TIMES, 11/3). Also in L.A., Meg James in a front-page piece writes although the DOJ "stopped short of requiring that AT&T/DirecTV begin carrying" SportsNet LA, the lawsuit could "pave the way for a settlement that could bring the Dodgers into an additional 1 million DirecTV households in Southern California." The Dodgers called the allegations “shocking but not surprising.” Fans "welcomed the move, which they hope will prompt more pay-TV companies to pick up the channel by next spring" (L.A. TIMES, 11/3).
UNCHARTED TERRITORY: The WALL STREET JOURNAL's Kendall & Flint note the lawsuit "inserts antitrust enforcers into a heated debate about the costs of sports television." The lawsuit also could "cast a shadow" over AT&T's proposed $85.4B deal to acquire Time Warner. Some critics of the deal said that "further media consolidation could increase the likelihood of the kind of collusive behavior alleged" in the lawsuit (WALL STREET JOURNAL, 11/3). Longtime media consultant Ed Desser called the lawsuit “pretty extraordinary" and "just stunning." Desser: "I can’t think of a situation like this in the 35 years that regional sports networks have been around" (L.A. DAILY NEWS, 11/3). CABLEFAX DAILY notes Cox and Charter "aren’t named as defendants," likely because the DOJ "went with where it thought it could make the strongest case." However, that "doesn't mean other MVPDs couldn’t be named as defendants at some point -- there are references of several conversations between York and other MVPD execs," including top programmers from Cox and Charter (CABLEFAX DAILY, 11/3).
HOPE FOR FANS: In L.A., Bill Plaschke writes under the header, "Federal Lawsuit May Finally Bring Some Justice To Dodgers' Botched Television Situation." After enduring three years of "suffering at the hands of battling billionaires, Dodgers fans might have found someone even more powerful to finally put their favorite baseball team back on their television sets." This "doesn’t mean the Dodgers ... were not at fault for foolishly setting a high price that the market would not bear," but they "may not be the only villains here." While the companies fought, fans "suffered, and nobody cared." Plaschke: "There is real hope here. But believe it only when you can turn on your television and see it" (L.A. TIMES, 11/3). In N.Y., Richard Sandomir notes most of the L.A. market has been "unable to watch Dodgers games" on the local RSN since '14, an "impasse that this season deprived many fans of the farewell tour of broadcaster Vin Scully this past season (N.Y. TIMES, 11/3).
POINT/COUNTERPOINT: In L.A., Michael Hiltzik writes under the header, "Why The Justice Department Gets It Right In Lawsuit Over Dodgers Channel." The DOJ has now "pulled back the curtain on this scam." Collusion is how companies "transform what appears to be a competitive market into a hydra-headed monopoly" (L.A. TIMES, 11/3). However, also in L.A., David Lazarus writes federal authorities "have it wrong" with this lawsuit. The DOJ's case is "predicated on the idea that consumers were harmed" by DirecTV and other pay-TV providers standing up to TWC. But in this case, "just the opposite was true -- at least if you’re not a rabid Dodgers fan." TWC "wanted about $5 a month per pay-TV subscriber" for the Dodgers' RSN. At a time when "there’s open rebellion against soaring pay-TV prices, these companies were clearly acting out of self-interest." The "last thing they wanted was to give people another reason to cut the cord." Whatever their "primary motive, though, they also were defending their customers’ interests." Lazarus: "That’s rare and welcome behavior from an industry that all too often regards consumers as ATMs from which it can make frequent withdrawals" (L.A. TIMES, 11/3).
