Column: Why the Justice Department gets it wrong in lawsuit over Dodgers channel
Federal authorities have it wrong.
The Justice Department sued AT&T on Wednesday, arguing that the company’s DirecTV subsidiary masterminded a collusive arrangement among pay-TV companies to block expansion of the Dodgers channel.
The feds lay out evidence that pay-TV companies whispered among one another to give them leverage over the channel’s distributor, Time Warner Cable.
This created an impasse “that ultimately made consumers less likely to be able to watch their hometown team,” said Deputy Assistant Atty. Gen. Jonathan Sallet of the Justice Department’s antitrust division.
Collusion among market players is never something to take lightly. It almost always leads to consumers getting the short end of the stick.
“It’s a huge problem when a handful of giant cable and satellite companies collude to drive their own costs down while leaving viewers with limited options to get desirable content,” said Matt Wood, policy director for the advocacy group Free Press.
But the Justice Department’s case is predicated on the idea that consumers were harmed by DirecTV and other pay-TV providers standing up to Time Warner.
In this case, however, just the opposite was true — at least if you’re not a rabid Dodgers fan.
Time Warner Cable wanted about $5 a month per pay-TV subscriber for the Dodgers channel, a.k.a. SportsNet LA, and it wanted that five bucks levied whether or not a DirecTV, Dish Network, Charter Communications, Cox Communications or FiOS subscriber wanted the channel.
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. That’s rare and welcome behavior from an industry that all too often regards consumers as ATMs from which it can make frequent withdrawals.
“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 L.A. Dodgers baseball,” David McAtee, AT&T’s general counsel, said in a statement.
“We make our carriage decisions independently, legally and only after thorough negotiations with the content owner,” he said.
AT&T acquired DirecTV last year for about $49 billion. It’s now chasing after Time Warner — the entertainment behemoth, not the cable company — with a proposed $85-billion merger.
Of course, AT&T will need the blessing of the Justice Department to move forward with its Time Warner deal.
It seems fair to say other pay-TV companies took their Dodger-channel cues from DirecTV, the largest service provider in Southern California after Charter, which acquired Time Warner Cable in May for roughly $60 billion.
DirecTV adopted an unwavering stand throughout negotiations with Time Warner Cable. As a DirecTV spokesman told me in 2014, “The simplest solution is to enable only those who want to pay to see the remaining Dodgers games to do so at the price Time Warner Cable wants to set.”
In other words: Sure, we’ll carry the Dodgers channel for $5 a throw, but only subscribers who want it would have to pay.
DirecTV’s hard-line stance undoubtedly strengthened the backbone of competing pay-TV firms. In its lawsuit, the Justice Department says DirecTV “corrupted” negotiations with Time Warner Cable to the detriment of Southern California consumers yearning to watch their hometown team on TV.
“A significant number of Dodgers fans have had no opportunity in recent years to watch their team play on television because overlapping and competitive pay television providers did not telecast Dodgers games,” the suit says.
Specifically, it alleges that DirecTV exchanged information with Cox, Charter and AT&T about the Dodgers channel. Cox and Charter aren’t named as defendants in the suit.
Here’s the crux of the lawsuit: “The sharing of this competitively sensitive information among direct competitors made it less likely that any of these companies would reach a deal because they no longer had to fear that a decision to refrain from carriage would result in subscribers switching to a competitor that offered the channel.”
The thing is, Time Warner showed no inclination at any point to offer the Dodgers channel on an a la carte basis — that is, with an understanding that only those who wanted it would pay for it.
It indicated it would be open to letting an arbitrator decide a fair price for the channel. But everyone would still have to pay.
From Time Warner’s perspective, its $8.3-billion deal with the Dodgers to be the exclusive distributor of the channel doesn’t pencil out unless all pay-TV customers are forced to pony up about five bucks a month.
I know there are plenty of Dodgers fans who are miffed about this corporate head butting, especially in light of sportscaster Vin Scully’s sayonara season.
But I heard from lots of pay-TV customers who were adamant about not wanting their bill to go up by $60 a year for a channel devoted solely to Dodgers games.
As Mar Vista resident Steve Lawrence told me: “I don’t watch any of the Spanish channels. But I still have to pay for them. Why?”
Leading pay-TV providers lost about 665,000 subscribers in the second quarter as more consumers cut the cord, according to Leichtman Research Group. The firm MoffettNathanson places quarterly subscriber losses at 757,000.
The Dodgers channel was one ripoff too many, and pay-TV companies knew this.
Consumer protection? Yes, undeniably.
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