NFL Loses Big In Anti-Trust Lawsuit Involving Sunday Ticket
A California jury found that the NFL colluded with its 32 teams to increase the cost of the Sunday Ticket between 2011 and February of 2023. Direct TV (owned by AT&T) owned the rights during that time frame. Youtube TV (owned by Google which is owned by Alphabet) bought the rights for Sunday Ticket in 2023 and retains the rights through 2028. However, neither AT&T nor Google were named in the suit. As far as I can tell from reports, no other defendants were named in the lawsuit who might have to share the burden of paying the damages.
Briefly, it was alleged that: 1) the NFL colluded to CBS and Fox to limit the number of games available for free over the air on Sundays; 2) drove up the price of the Sunday Ticket to force fans to buy all-or-nothing packages for out-of-market games; 3) refused to allow teams to sell their out-of-market games individually; and 4) alleged that allowing teams to sell all of the their out-of-market games is good for competition in the marketplace.
The jury awarded almost $4.8 Billion in damages in the class action lawsuit to commercial and residential purchasers. I may be cynical, but do not get too excited if you purchased Sunday Ticket. You might get some money back down the road after the attorneys and court fees get paid, assuming the verdict withstands after trial motions and appeals. The NFL has already asked the presiding judge to set aside the verdict and has indicated that it will appeal. The presiding judge dismissed this case in 2017 but the 9th Circuit Court of Appeals reinstated the case in 2019. Yes, this case has been winding its way through the legal system for ten years, and seems destined to remain there for the next few years.
Anti-trust damages get tripled, so the amount the NFL might be liable for is $14.4 billion. That is $450 million per team, unless reduced by the presiding judge through a motion for remittitur (a claim the jury awarded excessive damages) or other legal maneuver. While the Packers' profit per year varies, sometimes greatly, I seem to remember profits of $35M and $68M in two recent years). It is fair to say that those damages would wipe out profits for quite a few years.
The impact would not be that extreme. If the league loses some time in the future and has to pay, the payout likely would be paid over multiple years and it would be divided up between the 32 teams. The salary cap would not be affected because it is calculated by revenue, not expenses or net profit.
So, could the salary cap be affected? Well, for Sunday Ticket Youtube is paying the NFL an average of $2 billion per year, which can increase to $2.5B if certain performance marks are achieved. The contract is for 7 years. I see no reason why the NFL's deal with Youtube might not run afoul of the same anti-trust issues. That puts $2B per year in at least some jeopardy. As for the salary cap, $2B times 48% is $960M, which would count towards calculating the salary cap limit. $960M divided by 32 teams means this revenue theoretically accounts for $30M of the cap each year, at least on paper.
It actuality, the effect probably will be far less than $30M per year, if it affects the cap at all, and even then it likely won't be for several more years. The judge might throw out the award or the NFL might win an appeal of an adverse decision at the Court of Appeals level and/or in the Supreme Court, making a new lawsuit about the current Sunday Ticket less likely due to precedent. The appeals alone probably kick this issue years down the road. Even if the NFL loses the deal with Youtube, it can still sell the Sunday Ticket rights to an over-the-air broadcaster under the antitrust exemption passed in 1961. The NFL might not get $2B for Sunday Night games since they would be televised to everyone for free, but those games tend to be marque match-ups, so they should sell for something substantial.
This should have no effect on the cap for several years, if ever. That said, quite a few of the estimated contract structures for Jordan Love's new contract have a $70M cap number in 2028 or 2029. Many expect the cap to increase by $25M or more for the next several seasons. A $25M per year increase would be a $355M salary cap in 2028. $70M would be 19% of the cap for Love. If the NFL get $1B per year from some other entity instead of the $2B it is getting currently from Youtube, that equates to perhaps $10M to 15M per year less in cap increases, meaning the Cap might be $305M. A 70M cap number would be 23% of the 2028 salary cap. That something to think about while they hammer out what probably will be a five or six year deal with Love. Of course, the NFL might add an 18th game or find other ways to generate revenue: it is pretty good at that.
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Comments (12)
Thegreatreynoldo
June 28, 2024 at 07:54 pm
First, let me note that I graduated from Law School 39 years ago. I don't remember ever taking a course on antitrust and I certainly haven't given it a thought since then. You folks know about as much as I do about the law, and some readers probably know this area of the law pretty well or may have followed the case. Feel free to correct to add to this. Moreover, I didn't read the opinion itself, though I read several articles on it, including one by Andrew Brandt.
As to whether this lawsuit if ultimately successful can provide a precedent for a lawsuit regarding the Youtube is hard to say. I don't know if there is evidence that the NFL colluded with over the air broadcasters or got YouTube TV to increase its rates (did they even increase them at all), or whether not allowing teams to sell the rights to their own out of market games violates the antitrust exemption. Certainly, a lot of people who live outside of Wisconsin would buy a package of every Packers games rather than having to buy Sunday Ticket just to see a couple of Packers games along with a bunch of other games they might have no interest in, since the price would be presumably less. As for the notion that it would be good for marketplace competition to make the NFL allow teams to individually market their own games, that sounds like nonsense to me. Well, unless the marketplace is not the league parity but competition between broadcasters and media in general.
Brandt suggests that the Cowboys and Packers (to my mind, at least while the Packers have a good team but maybe even they are bad) would earn far more money than say the Panthers or Jacksonville, for example.
As a note, per Ken Ingalls, the NFL has changed the rules to allow teams to designate two players as eligible to return from IR at or just prior to cutdowns. That means the teams won't have allow those players to make the team while cutting/subjecting to waivers a player or two who they would like to keep for the season. I suppose if a team has three players or more on IR that they want to keep for the season, one of them would have to make the team. So, I guess a little less to write about come cutdowns.
Grandfathered
June 28, 2024 at 09:46 pm
Thanks for the info; I was following the case a little, but it was agreed by all that, as they say in the legal world, this case has legs. It won't be final for a long time.
Leatherhead
June 29, 2024 at 07:29 am
This is why you should never trust The Man, man.
Since'61
June 29, 2024 at 07:58 am
TGR as always an informative and helpful article on a complicated topic. Good job! Thanks, Since '61
Ferrari-Driver
June 29, 2024 at 09:14 am
TGR,
Engineers and lawyers mix about as well as oil and water. It seems we always have them in our hair regarding projects and they are tough negotiators on the golf course. I play with one who is a hacker, but by the time he finishes the handicap arrangements, I have a good day when I can break even.
Nevertheless, I love your contributions to this Packers website and feel you do more than a yoman's job, but I'll keep my eye peeled for you on the golf courses. You don't live in California, do you?
HarryHodag
June 29, 2024 at 09:49 am
This is what happens when you have limited checks and balances in a system. Who pays? The consumer, of course.
PhantomII
June 29, 2024 at 05:23 pm
We're gonna pay 2x Harry. The second time will be the NFL Billionaires shrinking the salary cap to cover their 20 year fiasco to pay it back and lessen the teams competitiveness by losing more players more often.
Qoojo
June 29, 2024 at 11:05 am
#1 - NFL has been doing this so long and I had become so accustomed to it. So much so that i never gave it a second thought. Remember the 70s/80s/90s? when 4 games were aired on Sunday, then that all changed as the NFL started getting more money once Fox outbid for the rights to NFC. It's been escalating since.
#2 - I didn't realize there was anything but the complete package.
#3 - no idea teams could sell out of market games.
Also, I think the NFL is still a non-profit organization.
zerotolerance
June 29, 2024 at 12:46 pm
The greed is astounding.
Leatherhead
June 29, 2024 at 01:04 pm
"""""This is why you should never trust The Man, man.""""
jont
June 30, 2024 at 09:23 am
Quiet time of the NFL year so I'll waste a few kilobytes.
It was alleged that:
1) the NFL colluded with CBS and Fox to limit the number of games available for free over the air on Sundays;
> Or the NFL offered only some of its product offering to these two customers in order to have some products to offer to other customers (such as Youtube).
2) drove up the price of the Sunday Ticket to force fans to buy all-or-nothing packages for out-of-market games;
> "Drove up"? "Forced to buy"? Undoubtedly this is the desire of every seller, but no one holds a gun to my head and makes me buy this. The seller offers the product-- buy it or not is on our side. In the regulated US market very few sellers are required by law to sell to you in particular or to any group. Costco is a members only business, but their pharmacy is by law open to everyone, for example. Otherwise "we reserve the right to refuse service to...."
3) refused to allow teams to sell their out-of-market games individually; and
> Undoubtedly true, but doesn't the NFL have anti-trust exemption due to its franchise structure (and a sweetheart deal with congress decades ago)? Consequently, the teams do not sell TV rights, the league does. That is, it is not a matter of the league office preventing individual teams from selling because the teams are the league and agreed this among themselves. And, by the way, isn't this the collusion alleged in the other claims?
4) allowing teams to sell all of the their out-of-market games is good for competition in the marketplace.
> Could be, depends on where you see competition. If each team is competing for viewers, then prices might drop (at least for some games), and also team revenue would vary, possibly by a lot. This would undoubtedly lead to varying levels of investment in a team and inevitably varying levels of quality on the field. This is precisely why the NFL acts as a single business and shares revenue. So, if you see the competition as between the NFL and every other form of sports entertainment (as the NFL clearly sees itself with its increasingly awful advertising campaigns), then the football is a TV show competing with everybody for ratings.
Yet the NFL lost this round. I confess I'm surprised. I read somewhere that there is a huge number of lawyers working in the league office so I'd expect them to do better in a case like this. That said, I've read the 9th is a district hostile to business (and the law as it is actually written) so maybe it's no surprise.
TGR is right. This will go on for years.
Leatherhead
June 30, 2024 at 08:18 pm
The Packer games are all out of market for me. 40 years ago, unless it was a Monday night game or part of a national broadcast, I couldn't see them. But then, the miracle of cable TV and Satellite Dishes spawned the sports bar. That was the option. Did I spend any money at Fatso's? Oh yeah.
Then, we got the Sunday Ticket, and that was great, but I wasn't really interested in most of the non-Packer games. By then, the Packers were good and they were on MNF, SNF, national doubleheaders, etc. Out of 16 games probably about 10 of them were included in my cable package, and I went to Fatso's for the rest.
The point is,quite a few games were just part of basic cable for me. Since then, it's become possible for me to stream games on the internet....for free.....and watch it that way. Extra cost? Nothing, I just upgraded to Google Fiber. It's perfect. So now I get to watch all 17 games for nothing except the price of internet, which I'm paying for anyway.
The people who have the power and money [The Man] are always going to stack the deck, and people are going to continue to find ways around the rules to get what they want.