The Game to Show the Games

What can baseball do to save itself?

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That was Keith Olbermann’s intro to last night’s show, where he used the occasion of the 20-year anniversary of the 1994 baseball strike to opine on the existential threat facing baseball today – kids not getting interested in the sport and declining national TV ratings. To that I would add weak ratings, even considering the sport’s weak general ratings, among people slightly older than kids – the 18-49 demographics advertisers love. He attributes the decline of national TV ratings to the adoption of interleague play removing the novelty factor of being able to see teams you’d otherwise only be able to see if your team made the World Series, requiring baseball to find “a new reason” to watch nationally televised games even when your team isn’t playing in them, thus keeping up the value of the national TV contract and in turn keeping smaller market teams in business. What should that new reason be, and how can baseball create it?

I’m going to assume that the problem is not that baseball is an inherently boring sport, something people have been saying for decades, even though even baseball’s fans sometimes wax poetic about the sport being “passed down from father to son”, which is another way of saying the only reason anyone would be a baseball fan is because their parents brainwashed them to be. I’m going to assume the sport can be saved when a lot of damage to its currency among younger people has already been done, which also requires leaving aside factors like steroids that might have poisoned the sport for a generation, and rendered its records, once a massive part of the mythology of the sport, untrustworthy forever. Even then, baseball has signed its new TV contract and as such there are some things it can’t change, like having TBS come out of nowhere for the postseason, and it can’t inoculate itself against cord-cutting when it’s just agreed to cut its presence on broadcast TV to a few weeks in the middle of summer and September in favor of a network that might be one of the first to go if cord-cutting results in catastrophe for linear cable TV. I’m also going to leave aside things involving the game itself like speeding up the pace of play or getting rid of Joe Buck.

With that in mind, it’s worth noting that football and basketball have the equivalent of interleague play, and significantly stronger national TV ratings – in basketball’s case, in spite of the fact that it has games on every day on cable TV just as baseball does, even though that is often perceived as “oversaturating the product”. They do this because they are able to craft a national narrative larger than any individual team, one driven by stars that encourages people all over the country to pay attention. Everyone knows the Patriots are “Tom Brady’s team”, or the Broncos are “Peyton Manning’s team”, or the Saints are “Drew Brees’ team”, and they automatically know what it means when any two of those teams square off and are willing to tune in for same. Ditto for basketball where the Cavaliers are “LeBron James’ team”, the Lakers are “Kobe Bryant’s team”, or the Former Sonics are “Kevin Durant’s team”.

Baseball is a star-driven sport – certainly more so than hockey, where the stars are only on the ice one-fourth of the time and don’t really have any more impact on the outcome than the lesser lines – and should be able to take advantage of the same factors, crafting a national narrative out of its pennant races. But there also are a lot of things football and basketball has that it doesn’t:

  • Baseball has way more games in a regular season than football or basketball – nearly double the NBA’s number. Those games are divided up into series where two teams play each other day after day. When, say, the Clippers and Celtics face off, it’s an event among many similar events over the course of the season. When the Angels and Red Sox face off, they’ll face off once on MLB Network, then again on ESPN, then again on MLB Network – and if it’s on the weekend they’ll go MLB Network, then Fox or Fox Sports 1, and then ESPN. It sort of dilutes the knowledge that these two teams are facing off when you see them two to four straight days.
  • Baseball may be a star-driven sport, but not nearly to the extent of football or basketball where one good player can completely change the fortunes of a franchise. No position player has much more than a one-ninth impact on a team’s fortunes. In football and basketball, that makes it much easier for smaller markets to join the ranks of the marquee franchises. The Moneyball era has made things easier for small-market baseball teams, but the lack of a salary cap, coupled with the need to put together a complete team on a scale not necessary in football or basketball, makes it very difficult to keep the marquee teams from being a procession of the Yankees and Red Sox over and over.
  • In the case of pitchers, it’s too difficult to ensure that a pitcher is starting on the same day as one of your marquee national TV windows.
  • Football and basketball stars are usually pre-made in college. People don’t care as much about high school or college baseball, and even if a sensation does come along they generally have to toil away in the minor leagues for a while, which people care about even less unless they have a minor league team nearby or are really interested in how their major league team’s farm system is doing.

There certainly are some things baseball can do about some of these – a while back, Awful Announcing’s Steve Lepore pointed out that the seeming dichotomy between shoving the Yankees and Red Sox down people’s throats all the time, and trying to “spread around” the wealth to all 30 MLB teams, misses that what baseball fans really want is to be able to see the good teams, whether they’re the Mets and Yankees or Brewers and Royals, square off against one another on national television, and follow the pennant races that way, and to some degree MLB Network (but not ESPN, which keeps following the former approach, and Fox, which tried the latter approach this year) has done that. Many, however, are things MLB has little to no control over, and to the extent that it does it’s probably as unlikely to try them as to get rid of interleague play. Does baseball want to substantially shrink the regular season? Is it willing to take the plunge on a salary cap?

With that in mind, perhaps the best thing baseball can do to improve its long-term fortunes, specifically in small markets, is to find a way to get rid of the RSN loophole, which is a big reason so much of MLB’s revenue sharing does come from the national TV contract. What is the RSN loophole? Well, here are the ten most valuable franchises in the major leagues according to Forbes magazine:

  1. New York Yankees, $2.5 billion
  2. Los Angeles Dodgers, $2 billion
  3. Boston Red Sox, $1.5 billion
  4. Chicago Cubs, $1.2 billion
  5. San Francisco Giants, $1 billion
  6. Philadelphia Phillies, $975 million
  7. Texas Rangers, $825 million
  8. St. Louis Cardinals, $820 million
  9. New York Mets, $800 million
  10. Anaheim Angels, $775 million

What do these teams have in common? Nine out of ten of them own all or part of the regional sports network that airs their games. The tenth, the Cardinals, are valued at a third of the level of the top-ranked Yankees – mostly because their fanbase draws from such a wide area. Owning a stake in an RSN has become all the rage in recent years, because while the rights fees that teams get from their RSNs are subject to revenue sharing, the boost that a team gets from actually owning a piece of the RSN is not. That’s allowed the Yankees to remain on top of the baseball pyramid despite the revenue sharing schemes baseball has adopted in recent years, through their ownership of YES Network. It also allows teams to benefit with money not subject to revenue sharing when other teams set up shop on the same network. When the Nets do well, the Yankees do well. When the Bruins do well, the Red Sox do well. When the Bulls do well, the Cubs do well. When the Warriors do well, the Giants do well. When the Flyers or 76ers do well, the Phillies do well. When the Mavericks or Stars do well, the Rangers do well.

The next-most valuable teams that do not own a piece of an RSN are Atlanta ($730 million), which also draws from a huge fanbase built over the team’s years on WTBS; #15 Detroit ($680 million), the most popular team on a per-capita basis in baseball, and both of those two teams are from two of baseball’s larger markets; #18 Toronto ($618 million), which draws from all of Canada; and finally, #19 Minnesota ($605 million) and #20 Cincinnati ($600 million), two teams in the bottom half of all major league teams with four teams valued at double their value, and that don’t even double up the poorest team in baseball, the $485 million Tampa Bay Rays. The NBA and NHL don’t have this problem, either because they try harder to reach for the RSN dollar or the existence of the salary cap reduces the incentive to own a stake. Here is the complete list of NBA and NHL teams to own a stake of their RSN: Bulls, Blackhawks, Rockets, Bruins, Celtics, Maple Leafs. The seven richest baseball teams all own stakes of RSNs, and the number of teams in other sports that own pieces of RSNs are six total.

What can baseball do about this? They could try and find a way to go after revenue obtained from owning RSN stakes and draw it into the revenue-sharing fold. They could institute a salary cap and blunt the incentive to cheat the revenue-sharing system. Or they could look at the ongoing carriage disputes plaguing CSN Houston and Sportsnet LA – not to mention how ugly the dispute between the Orioles and Nationals over MASN has gotten – and wonder if the lucrative RSN market is built on a house of cards, the scam that is the cable subscription fee model, that is starting to come tumbling down, and find a way to pre-empt them all and save even the richest MLB teams from themselves, while also putting themselves in better position than their competitors for the future of video content. Again, baseball has already signed its national TV contract and is stuck with its cable-heavy nature for the foreseeable future, and the NBA may yet go the other way, but there might still be quite a bit baseball could do on the local front.

The potential of the American Sports Network

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The Sinclair Broadcast Group is representative of everything wrong with broadcasting in the new millennium. During the 00’s they became notorious for repeatedly airing “documentaries” on their stations that were hit pieces on Democratic figures and causes, most notoriously one on the Swift Boat accusations against John Kerry in 2004. Even before that they were a dirty word in media consolidation circles for their use of shell companies to circumvent FCC rules prohibiting owning more than one station in a market (and later, owning more than two in a large market). Recently, they’ve gone on an acquisition binge, including DC-based Allbritton and Seattle-based Fisher, that has them bumping up against another FCC limit: if the FCC goes forward with eliminating the “UHF discount” (counting UHF stations as only half their market value against the national cap) Sinclair will be bumping up against the limit in a way that the companies owning the stations in the largest markets – and who also own the very networks Sinclair is affiliated with – will not be.

But Sinclair’s market power also gives it considerable influence over the future direction of the broadcast industry. And in that light, today’s announcement of the American Sports Network, or ASN, fits so perfectly into the framework I laid out a year ago that I can’t help but wonder whether someone at Sinclair read the version of that post I put on RabbitEars.info. Assuming it’s not so dependent on retransmission consent revenue that it results in Sinclair undermining their own nominal means of distribution, it could well be the key to the broadcast industry’s turning around its fortunes. And though it launches with only five mid-to-low-tier college conferences on board (only one of which plays FBS football), it could well prove to have a better shot at running down ESPN than any other player that has come along so far.

ASN will initially be distributed primarily across Sinclair’s CW and MyNetworkTV affiliates, and on digital subchannels on Sinclair’s other stations. The press release also mentions that “other broadcasters” are interested in airing ASN content as well. This makes me wonder whether Sinclair’s long-term plan is to turn ASN into a potential replacement for the CW and/or MyNet, especially in light of yesterday’s news of Fox’s attempt to buy Time Warner, which would have given them half-control of the CW and likely resulted in either the CW turning into CBS’ version of MyNet or the closing of MyNet entirely (and especially if they throw in Ring of Honor wrestling). The press release also mentions the potential launch of “new cable networks and digital platforms” surrounding ASN content, pending securing agreements with cable providers – which could refer to an aspect of what I had in mind last year I didn’t dare mention or even hint at, which would allow ASN, were they to set their sights much, much higher than the likes of Conference USA, to avoid the pitfalls that were the downfall of Fox Sports Net.

Throughout the 90s, many people felt that the collection of regional sports networks across the country, including the majority of them operating under the SportsChannel and Prime names, were they to join together as a single force, could put together a sports empire rivaling ESPN, given their distribution advantages and the attractive programming from local teams they could offer. But when Rupert Murdoch bought the SportsChannel and Prime networks with an eye to doing just that, the very thing that looked like so much of an asset proved to be FSN’s undoing. Any national programming FSN had was prone to being pre-empted for local teams’ games, which meant any entity with a national programming arrangement with FSN automatically had a worse deal than if they were with anyone else (something then-Pac-10 fans especially chafed at in the early-to-mid-00’s), and any national studio shows couldn’t count on a consistent time slot or even consistently airing at all. (I remember how upset I was when the Mariners played an East Coast game that pre-empted “I, Max”, the show Max Kellerman got from FSN upon leaving ESPN, entirely.) Now the rise of the RSN owned by the team playing on it, coupled with the rise of Comcast as an RSN player and aided by Fox’s own actions, has taken Fox’s once-complete hegemony over the RSN marketplace and greatly dismantled it.

Suppose Sinclair were to sign up a much bigger array of content for ASN – major professional sports and major college conferences, maybe some top mid-majors as well – and signed up affiliates from all over the country. And suppose they then launched a cable channel that amounted to an ASN national feed, taking content from their various rights deals and distributing them to a national audience. Sinclair could offer certain ASN programming “nationally” to various ASN stations, but even if that programming were to be rejected or pre-empted for something of local import, Sinclair could simply stick it on the ASN national feed, ensuring truly national distribution for the biggest content Sinclair has. Sinclair could then have an alternate feed to stick on other programming in markets where the main ASN game is airing on the local ASN station. In effect, rather than being inferior to any cable network with decent national distribution, being on the ASN national feed would be a sort of hybrid between being on a national broadcast network and being on an ESPN knockoff.

For ASN to really reach its potential, the FCC (and Congress) would need to fix the broken economics of the broadcast business, where broadcast stations and networks must either embrace the retransmission consent regime and thus see themselves as cable networks first and foremost, or inexorably lose programming to actual cable networks with their decided monetary advantages. Depending on how it’s done, and how the Internet shakes up the live video marketplace, it could completely upend the competitive landscape and destroy the potential of most of the ideas (not to mention the metaphors) in the previous paragraph. But if it happens, here’s the blueprint I would have for ASN to succeed where FSN failed and for the broadcast industry in general to bounce back from the point where its own nominal guardians have turned against it:

  • Convince teams, leagues, and conferences that between the FCC’s reforms and the impact of the Internet, the cable network market is badly oversaturated, and given the superiority of the technology of broadcasting (leaving aside the economics and regulatory landscape surrounding it), the regional sports network and league- and conference-owned network, though in better shape than most cable networks, is a bad way to go, especially considering the bitter carriage disputes surrounding them. Convince stations around the country of the same thing and that whatever obstacles they may face in the short term will be outweighed in the long term by eliminating one of the biggest barriers left to widespread cord-cutting.
  • Offer to negotiate on behalf of every English-language general-entertainment station not associated with one of the major networks (or a network seriously trying to be one of the major networks), not just ASN stations. Then make a deal with the leagues: so long as there are stations available, every game of a team that claims a given market will be televised, but any game there’s not enough stations for cannot be blacked out on the out-of-market package. This may take the form of an NFL-esque deal where ASN handles the distribution of every team’s game not on a non-ASN national platform. This is especially important for baseball, but allowing the ASN national feed to take content from any station allows the national feed to take content from any team or conference it wants without tipping the scale in negotiations towards ASN stations. (Some side notes: first, “digital subchannels” are a failure and I don’t see them surviving the upcoming FCC-mandated auction and repack; otherwise the ASN national feed might be one. Second, this would be largely dependent on CBS and Fox being open to aiding something that might take a bite out of their main networks in order to maximize the number of stations available in the largest markets; if they aren’t, the FCC might have to repeal or severely tighten the duopoly rules, which could leave Sinclair unable to run ASN. Third, the borders between conferences are blurry enough now that many areas may be within the sphere of influence of multiple conferences, so it may not be possible for ASN to handle them all alone; fortunately, more markets than you think have at least two stations of the type I discuss here even with a fifth network, especially if you count the enigmatic Ion network. And fourth, every game is more than any station has ever showed in a non-NFL professional sport, but in retrospect that practice merely opened the door for the RSN to walk in and undermine independent broadcasters, at least sooner than it could have.)
  • The existence of the ASN national feed and rise of the Internet may obviate the need for league-owned networks. Some college conferences (namely the SEC and Big Ten) may be confident of their ability to keep their conference networks going even under the new economics, given the passion of their fanbases. To counter this, export the conferences you do have to the entire country. You don’t have to give national distribution to every single conference, but if most of SEC and Big Ten territory can get ACC or Big 12 games for free (and hopefully, without needing a kludge to get them on a mobile device), and can’t do the same with the SEC and Big Ten, it could put a big scare into the both of them.
  • Don’t get involved with the NFL unless it falls in your lap, then snap it up in a heartbeat. Some of your stations are probably going to show NFL preseason games and cable-game simulcasts without your help.

The end result could be a landscape where only two cable sports networks are left: ESPN and the ASN national feed (assuming cable networks themselves still exist as we know them once the Internet is done with them). Things that don’t fit the local team-sports framework like NASCAR and golf would probably go to ESPN, and ESPN would probably still have important maj0r-league pro sports games, but events like the college football national championship game would abandon ship and return to major broadcast networks where they belong, and ASN’s combination of national distribution and local broadcast stations could give it a significant advantage in any negotiations, and they could find themselves in possession of important MLB, NBA, and – perhaps especially – NHL playoff games.

Is this a bit of a utopian pipe dream? Sure – this is the sort of idle imagining I spend way too much of my free time on and then am hesitant to put on the blog because it has so little relation to reality. This one, though, has just enough relation to reality to be an enticing vision for those that believe in broadcast television – and sometimes, a concrete yet distant vision is just what’s needed to be the impetus for change. If the future of broadcast television lies in live sports, this may be the first, halting acknowledgement of that fact – and the start of broadcast television’s comeback. The only problem is, is it too late?

Does Sports Explain Why Fox Wanted to Buy Time Warner?

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We’re coming up on the one-year anniversary of the launch of Fox Sports 1, and despite what the people in charge have said publicly, it has to be considered a big disappointment. The most-watched programming on the channel tends to be NASCAR-related… most of which the channel already had when it was Speed, and even if it doesn’t tends to appeal mostly to people who already knew where Speed was. Except for NASCAR programming, the gap between Fox Sports 1 and ESPN has been cavernous, with FS1 even unable to catch ESPN2 and struggling to pull away from NBCSN, and despite public appeals for patience the fact that FS1 has cancelled most of its launch lineup suggests the internal attitude is something else (especially with Fox offering make-goods to FS1 advertisers on the World Series). Other than NASCAR, the channel’s brightest spots so far are probably UFC and college football, and a) UFC programming has tanked relative to the same shows on FX and ratings for college football and basketball games are generally way behind games with similar appeal on ESPN or ESPN2 and b) they haven’t had very good retention for Fox Sports Live (something NASCAR has oddly been better at). Fox’s hopes are now pinned on the baseball playoffs to further bump up FS1 ratings, and after that Fox will be hoping the World Cup and US Open golf help FS1 more than FS1 hurts them (and the World Cup is the sort of short-run event programming that is likely to bump it up in the short term but have little long-term effect, as the Olympics has for NBCSN). If Fox were to pick up Big Ten rights it would be a big help, but they’re also making a long-shot run at NBA rights – possibly in addition to ESPN and Turner rather than replacing one of them. Fox’s biggest short-term sustainable boost they have to look forward to is probably NASCAR rights – which, besides attracting an audience already familiar with the channel when it was Speed, are uniquely unlikely to check out and are sometimes openly hostile to the rest of FS1’s “stick-and-ball” lineup.

Could this help explain why Rupert Murdoch made a run at buying Time Warner in June?

Let me be upfront that I personally would dread a merger of Fox and Time Warner that would create an absolute behemoth, place CNN under the Fox umbrella, and further degrade broadcast television by removing quite possibly the only company with the means and motivation to launch a true fifth network (but that’s another story) and, by inheriting Time Warner’s partnership in the CW, leave Fox with little motivation to keep running MyNetworkTV. (Though if that leaves Tribune to go without the CW, it might actually turn out to be the best possible outcome.) But strictly from a sports perspective, even though some people have naively wondered whether CBS and Time Warner would merge based on their partnerships on March Madness and the CW and their complementary sports assets and lack of direct competition outside premium cable channels, a Fox-Time Warner merger makes a lot more sense.

From the dawn of cable television, Turner has been a leader in sports programming, not being passed by ESPN until the 90s, and for all the talk of efforts by Fox, NBC, and others to make a run at ESPN, Turner has remained the company with the strongest assets to challenge ESPN of anyone, and TBS and TNT have remained the biggest non-ESPN sports destinations on cable, even with the impending loss of NASCAR programming and cutting back on MLB. Suppose Fox were to acquire Time Warner and move all the sports programming currently on TBS and TNT to FS1. Suddenly FS1 would have:

  • Turner’s high-profile critically-acclaimed NBA coverage, including Marv Albert and Charles Barkley, with games running all the way to the conference finals plus the NBA All-Star Game, control of NBATV as well, and a pretty good case to steal the broadcast component of the package away from ABC during the next negotiations (a potential nightmare scenario for the NHL)
  • Control over the ENTIRE MLB postseason aside from one measly wild-card game on ESPN
  • Control of much of March Madness and possibly the ability to muscle CBS out of the Tournament, keeping March Madness to itself on Fox, FS1, and some other channels (FX and/or Fox News or CNN could replace TBS or TNT; if the NCAA wasn’t willing to accept CBS Sports Network they’re unlikely to accept FS2 as is) and maybe bringing Gus Johnson back to the event that made him famous
  • The first two rounds of the PGA Championship and some auxillary coverage of the later two rounds, adding some meat to Fox’s golf-coverage bones
  • Fox would also take over HBO and its sports coverage, possibly meaning higher-profile boxing cards on FS1 and/or UFC cards on HBO

Again, I would hope this merger doesn’t happen – the general consensus is that just because Murdoch was told “no” now doesn’t mean he’s going to take that for an answer – but it wouldn’t be the first time sports was a big impetus for a larger media deal (see Comcast’s hostile takeover attempt of Disney and later actual acquisition of NBC) and would give ESPN some legitimate reason to worry about a potential challenger to their throne, something FS1 has largely failed at so far.

(The potential irony? If all proposed media deals go through, Time Warner’s former cable division could end up owned by a direct competitor.)

Is There a Place for Common Sense in Supreme Court Decisions?

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The Supreme Court Wednesday ruled 6-3 against Aereo, declaring the start-up’s array of miniature antennas available for rent to consumers in violation of copyright law. Astoundingly, the three dissenters were Justices Scalia, Thomas, and Alito, three of the court’s more conservative members. If you had to pick one person to symbolize the modern Supreme Court’s tendency to favor moneyed interests over ordinary Americans, the law, intent of the Constitution, and precedent be damned, it would probably be Scalia, followed by Thomas, then Alito and Chief Justice Roberts neck-in-neck. I would never have expected the conservatives to actually believe what they say they do enough to stand with the consumer and the scrappy, innovative start-up at the expense of the big, multi-national conglomerates, and as much as Democratic politicians may be in bed with Hollywood, I never would have expected every last one of the liberal justices to stand with the big corporations against the ordinary American. I know President Obama’s Justice Department filed a brief supporting broadcasters, but that was widely seen as disappointing, not sadly expected; I suspect this is an issue on which the Democratic decision-makers are well out of step with their rank and file. Maybe I’m just naïve (support in Congress and opposition among the public to SOPA was, after all, largely bipartisan), but it would be hard for me to deal with it if this turned out to be an issue on which I stand with conservatives and against Democrats.

But that’s not what I want to talk about. Rather, I want to talk about the tendency for pro-Aereo corners of the blogosphere (as well as Aereo itself) to decry the decision as being obviously wrong, to gloss over the sketchier elements of what Aereo was trying to do, take its own description of it at face value, and dismiss the majority’s reasoning as the “looks-like-a-duck test“, to speak of Aereo’s setup being designed to follow the law as opposed to “going around” it as though that were more than a semantic distinction. One of the things Americans don’t like about the legal system is the tendency to create overly complicated documents written in horrendously obtuse language with no resemblance to anything ordinary Americans could recognize so that people can get off on obscure technicalities. But when the Supreme Court finally looks past the technicalities and boils things down to what they actually are, but we happen to be on the side that wanted to take advantage of those technicalities, suddenly we want the court to follow the obtuse legal language, ignore what we’re actually trying to do, and let us skirt through the loophole?

I personally felt that, while Aereo was clearly trying to take advantage of a loophole in the law, it was the place of Congress, not the Supreme Court, to close it, and it sounds like the commenters on (the very liberal) Daily Kos agree with me. But I don’t think we’re giving the position the majority accepted enough credit. Leaving aside the technicalities of how it all works, what Aereo was selling was the ability to watch broadcast television stations, regardless of whether you had the ability to view them at your current location if you had an antenna, indeed without you needing to worry about having an antenna or where it was located. You, the viewer, don’t see where Aereo’s antenna is and don’t even necessarily know anything about where Aereo is getting the signals from. All you know is that you are giving Aereo money and they are supplying you with a bunch of television channels you may or may not be able to receive otherwise. Boiled down to those facts, there really is very little difference between Aereo and basic cable service (and some of the things Aereo had said about potentially carrying cable channels didn’t really help their case).

What this shows is that our communications and copyright laws are woefully outdated and rooted in assumptions that don’t hold water, that failed to anticipate technological developments that rendered the technological distinctions encoded in the law obsolete. The entire Aereo affair had a company resorting to technological contortions to provide a fairly basic service there was a clear demand for and broadcasters being undermined by the very nature of, and wanting to be rid of, their own nominal method of delivery, their own neglect of which helped create the demand for Aereo in the first place (and while they’ve won this battle, they may ultimately lose the war). The court said that if Aereo wanted relief they should go to Congress when they should have said that to the broadcasters, not only because that would have been the right approach but because the broadcasters would likely have been more able to get that relief. But putting the onus on Aereo does give Congress incentive to clear up a regulatory framework that assumes the primacy of the obsolete technology of cable television and undermines the potential of broadcasting, while creating perverse and unintentional disincentives for maximizing the distribution of content.

Report: WGN America to Drop Chicago Sports

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For at least two decades now, and certainly for the past decade-plus, Tribune Broadcasting has been an anachronism: the last relic of an age of truly local, independent broadcasters, from a time when broadcasting was so dominant that broadcast stations’ fear of cable had to do with the prospect of importing other stations from outlying markets, a time when independent broadcasting was so strong that Tribune, the owner of the dominant independent stations in its markets, didn’t affiliate them with the fledgling Fox network, leaving Fox to leave Tribune’s VHF stations behind in favor of UHF stations in markets like Chicago and Denver in a time when that still mattered. Even as its stations have affiliated with the WB and later the CW, Tribune has steadfastly avoided being identified with those networks and, especially with the CW (which, unlike the WB, it doesn’t hold an ownership stake in), has downplayed its affiliation as much as possible. In the very biggest markets, the biggest general-entertainment stations outside the Big Four networks tend to be owned by CBS, Fox… or Tribune, the one company of the group not to be a massive conglomerate, even as it has increasingly become a more standard owner of affiliates of the Big Four networks in smaller markets, especially ABC and Fox.

A big reason Tribune has managed to maintain this strange, hybrid status has been its flagship station in Chicago, WGN, and its own status as the last relic of the early days of cable, when imported “superstations” were the main distinguishing feature from standard broadcast. While Ted Turner was exporting WTBS throughout the South, Tribune was doing the same with WGN throughout the Midwest, showcasing Cubs games in much the same way TBS did Braves games. Broadcast stations were able to get “syndication exclusivity” rules passed that required any syndicated programming on imported broadcast stations that also aired on a local station to be wiped from the feed, requiring the likes of TBS and WGN to set up separate feeds to export to outlying markets, but because such rules didn’t apply to cable networks that didn’t originate as local stations it left the superstations at a substantial competitive disadvantage and helped hasten their demise.

In the case of WGN, the advent of the WB further sealed its fate; WGN was able to carry the WB on its national feed in its early years, helping that network gain traction throughout the country in areas that didn’t have a WB affiliate, but as that problem slowly waned WGN eventually dropped the WB from its national feed, meaning the national feed increasingly became very different from the local Chicago one – which ironically may have helped it keep going longer. Tribune’s relatively smaller status also may have helped; TBS divorced its national feed from its local Atlanta station once and for all once it won a national baseball contract. Eventually, the WGN national feed was renamed “WGN America” with a different logo, and the only things it had in common with the Chicago feed were the 9 PM CT news and local Chicago sports.

Now, however, Tribune has signaled its intention to turn WGN America into a more traditional cable network and is wiping the last vestiges of WGN America’s superstation status from its lineup. WGN America dropped local Chicago news earlier this year, and now Tribune CEO Peter Ligouri has told Crain’s Chicago Business that WGN America intends to drop Cubs games and other Chicago sports at the end of 2014. (The article is behind a paywall, but if you want to read a possibly-illegally-copy-pasted version that reads like it was sent through a machine translator and back again, click here.)

The continued presence of Cubs games on WGN America was yet another vestige of a bygone age. In the early days of cable, there was no MLB Extra Innings, no more than one game a week on TV nationally, and MLB had a lot fewer teams than it does now. The Braves and Cubs were able to build large regional fanbases through the exporting of WTBS and WGN. With games with national interest on TV every day of the week on ESPN, FS1, and MLB Network, Cubs games on WGN America are less special, and the continued presence on broadcast those games require means missing out on the dual revenue stream from a regional sports network.

Despite all that, this is a bit of a head-scratcher to me. Tribune seems to be trying to catch the general cable network market on a downswing, right as it reaches a tipping point and starts to decline as online services like Netflix step on its turf. The value of linear television going forward is sports, so WGN America seems to be going in the exact wrong direction; I’d be very surprised if Cubs games, even with the team sucking in recent years, would be less popular than whatever original programming WGN America tried to put on its air (how much money it makes for WGN given production costs is another matter). This is especially the case since, owing to the SyndEx rules, WGNA has rather limited distribution compared to other networks of similar vintage, and may have to renegotiate its contracts from scratch if it divorces itself from WGN in Chicago completely. I would mention that the national carriage WGNA gives the Cubs is the one big value WGN would bring to an impending renegotiation of its contract, except that this move may itself be an admission that WGN is likely to lose the contract.

Tribune is in the process of spinning off its newspapers into a separate company, leaving its broadcast stations and WGN America as the heart of the company, along with digital investments. But those stations are themselves prone to potentially suffer the same fate the newspaper industry did as the Internet stepped onto its turf, and without affiliation with a Big Four network or (with the only exceptions being WGN and WPIX in New York) a sports presence, Tribune’s legacy stations seem particularly exposed. Tribune has been run by private equity firms since its emergence from bankruptcy in 2012, and besides turning WGN America into a conventional cable network, those firms have shown every sign of running Tribune as a traditional owner of broadcast affiliates (purchasing the Local TV group, another group of stations run by private equity firms, last year), yet no company is in better position to affect the future course of the broadcast industry. I hope the people in charge of Tribune have, or at least can acquire, a mindset of the television industry of the future, not the past.

Is Aereo Legal? Should It Be?

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(Disclaimer: I am not a lawyer, and I could very easily be talking out of my ass here. Take everything you read here with a grain of salt.)

The Supreme Court is set to decide, at least in part, the fate of Aereo; plaintiffs’ amicus briefs were due Monday, Aereo will present its opening argument by March 26 with amicus briefs in their favor due by April 2, and oral arguments will begin on my birthday, April 22. For those not familiar with it, Aereo is the service that has set up tons of tiny antennas and rents each one out to each of its customers. Customers can view free, over-the-air TV from their personal antenna over the Internet on whatever Internet-connected device they wish, and record said over-the-air TV on Aereo’s cloud DVR. Aereo claims that it is merely helping people access the free, over-the-air TV they’re entitled to, but if you think the foregoing description sounds like an unnecessary technological kludge, you’d be right. Broadcasters have been suing Aereo in any court they can, convinced that Aereo is getting away with not having to pay retransmission-consent fees cable operators are subject to, and fearful that cable operators might decide to do the same thing to get away from retransmission consent fees themselves.

That this is the issue is important, because the issue being presented to the Supreme Court is the notion that Aereo is engaging in a “public performance” in violation of copyright law. And as kludgey as the foregoing description is, it would be ridiculous to argue that it is based on it; Aereo isn’t engaging in any sort of “public performance” beyond what broadcasters are already doing with their free over-the-air signals, and any notion that what people do with their personal DVR service constitutes any sort of “public performance” is ludicrous, not to mention contradictory to past court decisions. In fact, it’s been argued that a decision against Aereo on this count could set a dangerous precedent that could preclude other technologies such as Slingbox.

Let’s be clear here. Aereo is clearly trying to take advantage of a loophole in the retransmission consent (not copyright) rules, and if it keeps winning in the courts Congress is going to have to step in, if only because it could render the retransmission consent regime unenforceable. Given that Congress is likely to close the loophole on which Aereo rests anyway, the Supreme Court doesn’t need to step in in order to kill Aereo. As such, it should avoid a decision that results in any sort of unintended consequences just to kill Aereo. The Supreme Court could rule on whether or not the loophole Aereo claims to have found exists, but it’s not its place to legislate it out of existence.

Broadcasters have argued that an earlier court decision in favor of Cablevision’s cloud DVR service doesn’t apply here, because Cablevision paid for the copyrighted content. But what about someone with an over-the-air antenna hooked up to a Slingbox? What has that person done to “pay for the copyrighted content”? Nothing, at least not to the broadcasters. Yet it’s obvious that such a situation is fully legal and within the intent of the law: Congress has mandated that television signals broadcast over-the-air be available free for anyone with an antenna to pick up, and the Betamax decision established the legality of recording content for personal use.

To close the loophole on which Aereo rests, Congress would need to figure out what differentiates the above situation from what Aereo is doing. One way it could do so is by noting that Aereo is charging for access to free over-the-air TV. In other words, Aereo is making money off of broadcasters’ free over-the-air signals, and so is bound to kick some money back to them. If Aereo were really interested in just helping people access the free over-the-air TV they’re entitled to from their own personal antenna, they wouldn’t be charging rent for access to that antenna (which implies that Aereo, not the consumer, actually “owns” that antenna). But that has nothing to do with copyright, and if that’s not what retransmission-consent law says already, that’s not the place for the Supreme Court (or any court) to decide that it does.

What does the Comcast-Time Warner Cable merger mean for you?

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It certainly doesn’t sound good when the two largest cable operators, substantially bigger than any of their non-satellite rivals (a year ago TWC had 12.2 million subscribers; even counting telco companies Verizon had only 4.7 million), announce they’re going to merge. As part of the deal, Comcast announced it would sell off systems representing 3 million subscribers to other parties, getting to 30 million and under a former 30% cap that had been thrown out by the courts. Were it not for that, the combined Comcast-Time Warner monolith would have had control over fully a third of the market, over seven times that of the next largest cable company, and nearly as big as DirecTV and Dish Network combined. But what would that actually mean?

Cable operators are natural monopolies; with the exception of a few “overbuilders” (none of which have more than a million subscribers), in most places you only have the choice of one cable operator if you don’t want to get a dish or Verizon or AT&T aren’t available. There’s basically nowhere where Comcast and Time Warner Cable were in direct competition with one another. The fear of a Comcast-TWC merger, it seems, is that such a behemoth could basically set up shop wherever it wanted and keep other cable operators from growing, but even then it’s hard to see how realistic that is. (Or maybe that Comcast could afford to rest on its laurels in terms of service, making it even more Comcrap.) Comcast’s purchase of NBCUniversal had the potential to be far more detrimental to the consumer in this light.

The image that comes to mind when it comes to horizontal integration on this scale is the former AT&T telephone monopoly, but even that was not broken up so much because of its overall reach but because of its vertical integration with AT&T’s business selling telephones and using its control of the phone network to undercut rival phone sellers. Perhaps the analogous fear is that Comcast will use its broad reach to show preferential treatment to NBCUniversal networks, crippling rival programmers by denying them access to 30% of the country or subjecting them to onerous conditions to get there, but it’s not clear that’s actually possible, certainly not as cable providers increasingly become Internet providers first and foremost – especially given the conditions Comcast agreed to as part of the NBCU deal, including abiding by net neutrality even after the courts threw the FCC rules out last month. If anything a larger Comcast (which, if it continues negotiating for Bright House Networks as TWC had, will be negotiating on behalf of 32 million subscribers) might actually lead to positive outcomes for consumers in the long term, standing up to increasing rights fees asked for by other programmers, especially ESPN – though of course Comcast’s own stake in content production might still give them an edge that results in worse outcomes for rival content providers and consumers. (Time will tell if the new Comcast’s approach to sports networks will be more like that of Comcast – which has largely avoided rocking the boat with anyone en route to a portfolio it proclaims as “your home for the most live sports”, legal wrangling with Tennis Channel excepted – or Time Warner Cable, with its high-profile showdowns with the likes of NFL Network, MSG, Viacom, and broadcast networks like CBS and Fox.)

Of course, where those fears might be well founded is in how much leeway Comcast has had even under net neutrality rules, including engaging in its own carriage disputes with bandwidth providers, throttling traffic on video sites, and imposing broadband data caps. A monolithic Comcast/TWC union could still conceivably, without restrictions imposed by Congress or the FCC or agreed to voluntarily by Comcast, create winners and losers in the Internet marketplace, to the point of being able to throttle cord-cutting for a substantial number of Americans. That underscores the importance of allowing as much video as possible to be transmitted over the air where it can lie outside of Comcast’s reach.

Making sense of the Thursday Night Football deal

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After over two years of speculation, the NFL has finally sold half of its Thursday Night Football slate… in a way no one could have anticipated.

As the NFL started ramping up the bidding process for the new package over the past month, some of the details that started coming out were head-scratching. The NFL expressed its preference to put the games on broadcast, not cable, which eventually grew to the point of basically insisting on it. The NFL also expressed its desire to simulcast the games on NFL Network.

Neither of these made any sense to me. The whole point of selling the games, I would have thought, was to get networks like NBCSN or FS1 to pony up the subscriber-fee-backed dough to take on programming that could boost those subscriber fees to the moon, to say nothing of ESPN protecting its own turf or Turner propping up TruTV or giving a boost to TNT. Broadcast networks have started catching up to cable with their retransmission consent fees, but the possibility of cord-cutting, or technologies like Aereo, could always be lurking in the background, and their owners continue to put their emphasis on cable wherever possible; the first twelve years of the college football playoff, after all, will still be on ESPN. Certainly the big four broadcast networks would fall over themselves to get the package, though it’s still the bank of crappy games NFLN has had for the past two seasons, but they wouldn’t pay nearly as much as cable networks would. And what did the NFL expect to gain by simulcasting games on NFL Network? Did they really think Time Warner Cable and Cablevision were so stupid they would treat NFLN as though it still had a full-season schedule despite the fact they could get 6-8 of its games anyway on a broadcast network? The NFL seemed to want it both ways.

I wonder if the key to the NFL’s thinking was the fact that this was a one-year deal (although the eventual deal also contains an option for a second year). I wonder if the NFL was floating a trial balloon to see how much money the Thursday package was worth, while also seeing what the reaction of cable companies might be to NFLN losing a bunch of games without actually having NFLN suffer too much – perhaps not wanting to lose people used to turning on NFLN on Thursday nights. The NFL might also want to see how much of TNF’s ratings, which are substantially behind those of the NFL’s other packages, are because of NFLN’s limited distribution or the crappy bank of games, while trying to build an audience for the games on the broadest distribution platform available and get more people used to watching the NFL on Thursday night. Perhaps they floated out feelers to Comcast, Fox, Turner, and ESPN and didn’t like the potential bids they got, so they decided on a different approach that could boost the value of the package and help them determine what balance of rights fees to boosting NFLN to strike. Depending on what the ratings are on CBS and NFL Network for each half of the package, as well as what the reaction of cable companies will be, the NFL may decide to sign a longer-term deal with a cable network, or keep more games on NFL Network again, or something else entirely.

But I can’t help but wonder if this marks a turning point in the bigger picture. The last few years have seen more and more events move from broadcast to cable and the accompanying explosion of the sports TV wars. Now the kingpin of American sports has seemingly moved in the opposite direction, and put a package on broadcast that might otherwise have seemed destined for cable. It may be a small step, but I hold out hope that when we look back, it marks the point the tide started to turn in broadcast’s favor – though the NBA could end up having a bigger impact on that later this year.

(I am surprised at CBS’ win, not because of their strong Thursday primetime lineup, but because of the same reason I didn’t see FS1 winning the package: it was just too awkward for CBS to take on a conference-agnostic package alongside having all the non-primetime AFC games. I thought NBC was the favorite, more because of synergy with their Kickoff and Thanksgiving night games than because of their weak Thursday primetime lineup, with ABC being second favorite by default.)

An Open Letter to FCC Chairman Tom Wheeler

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To: Federal Communications Commission Chair Tom Wheeler
CC: Other FCC commissioners, the United States Senate Commerce Subcommittee on Communications, Technology, and the Internet, the House Energy Subcommittee on Communications and Technology (and any other interested members of the House of Representatives), the National Association of Broadcasters, and all concerned citizens reading on MorganWick.com

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The Problem With Internet Companies Getting Major Sports Rights

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I have a much longer series of posts planned on the broader issues surrounding the current era of sports on television, but I wanted to make this particular point because I think it’s particularly important.

The NFL is reportedly still considering an expansion and splitting of its Thursday night package to sell to another partner, and is reportedly interested in potentially selling games to a tech company like Google or Netflix. This comes as the NBA, still in the process of negotiating its next TV package, has been speculated to potentially also sell games to a tech company. And that comes amidst years of speculation that tech companies like Google, Apple, Microsoft, Facebook, or Netflix, could be the best candidates to challenge ESPN and completely upend the sports TV wars.

But I’m still unconvinced that Internet companies are really the threat they’re made out to be. In my opinion, the speculation surrounding them is mostly superficial and based on only a few factors, without seriously considering the circumstances and what their entry into the market would actually mean, and I don’t believe they’re a realistic candidate to score sports rights, or that if they are that it would turn out to be a good idea, or that if it does that they would really be as revolutionary as they’re cracked up to be.

For one thing, I’m having a hard time seeing exactly how tech companies would distribute games and make money off them. I can’t imagine Google would simply slap games on YouTube, as that would mean they would need to collect money through advertising alone, when the great advantage of sports networks like ESPN is their dual revenue stream of advertising and subscriber fees. That means tech companies would need to restrict access to the games in some way, and most of the options don’t sound very promising. Would Apple restrict games to users of iOS devices and Apple TV, or Google restrict them to users of Android devices and Google TV? That seems like it would have the potential for disaster as people would be shut out for choosing the wrong product, especially if we’re talking about being the equivalent of a national television partner as opposed to getting a piece of the out-of-market package. A company like Netflix could distribute games to its subscribers, but that would be the equivalent of a premium channel at best. The best-case scenario probably involves Facebook or Google effectively blackmailing people into signing up for their services in order to view the games, but even then I’m not seeing how that would help them raise enough money to be competitive with sports networks.

And none of these approaches would avoid the other issues, certainly not the issue of being a middleman. The nature of TV is such that sports benefit from distributing their games through middlemen, which is why none of the sports leagues that own their own networks have abandoned their relationships with other partners; from its humble beginnings as the Outdoor Life Network, the entity now known as the NBC Sports Network has acquired more and more properties to obtain more distribution than any sport-specific network other than Golf Channel and, until this past August, Speed – and those two had a multiple-year head start on gaining distribution before the full effect of the sports TV wars set in. In theory at least, fans of any of its properties can drop in on coverage of any other property, thus broadening the exposure to that property. But the open nature of the Internet already provides exposure to anyone who wants to drop in, so I’m not sure what sports leagues would gain from selling games to Google when they could cut out the middleman and distribute games themselves. In this sense, Major League Baseball has already entered this territory; its MLB.tv service regularly offers one game for free each day to non-customers.

But none of that begins to approach the most fundamental issue, the basic distinction between the Internet and television, which I laid out before: the Internet is good at distributing many programs to a few people, but television is good at distributing a few programs to many people. The Internet effectively consists of one “channel” for each of its customers, meaning you have a channel that you can program yourself, allowing you to watch whatever you want whenever you want. But if many people want to watch the same thing all at once, i.e., some sort of live event (i.e., a live sporting event), they all have to watch it on their own individual “channels” – the server has to serve the event to each individual computer that asks for it. We saw the result with the massive issues NBC had with streaming of events at the London 2012 Olympics, and those didn’t reach more than a million or so people at a time. Things haven’t improved that much since then:

Perhaps the issues surrounding large-scale Internet streaming can be fixed with bigger pipes and more investment in servers and the like, but this structural issue will remain: why distribute the same event many times to each individual customer if you could find a way to distribute the event once and allow anyone, at least with the proper credentials, to hop on the stream with no additional strain on your end? On this front, it’s instructive to see how the mobile world, which (at least at the moment) already lives in the world where all television is over the Internet, is dealing with this issue, and it’s clear that they at least recognize it: AT&T has begun work on a network that will precisely allow them to push video out to many different devices at once. One thing strikes me about this project: it is a completely separate service that requires use of completely separate spectrum from AT&T’s normal 3G/4G network (indeed, spectrum that had most recently been used for a similar service). In other words, once you begin broadcasting the same signal for any device to hop on to, it is no longer the Internet, at least not as we know it. In this particular case, it becomes something fundamentally not that different from over-the-air broadcast television – indeed the spectrum in question may well have once been TV spectrum.

Once the distinction between and relative strengths of TV and the Internet are recognized, it’s clear that at least on a large scale, showing a single live event for everyone to view at once is something the Internet simply is not suited for. The great advantages of the Internet for viewing video are the ability to view it anywhere you want and to watch whatever you want whenever you want, but only the former applies to live events like sports, and even that goes away if the technology is developed to deliver content to many devices at once. Broadcast television is already halfway there, but is currently only reaching mobile devices through optional kludges attached to the existing broadcast standard, rather than having one standard suited to reaching all devices whether stationary or on the go. If the television industry recognizes its place in a future where Internet distribution of video reaches maturity – a place where its purpose becomes refocused specifically on the broadcasting of live events – adopts a standard that maximizes its investment in its existing infrastructure and reorganizes its business accordingly, it can survive and effectively compete in that future for years to come, even if that future is substantially different from what exists now.