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Bar Owners Have NFL and DirecTV Playing Defense

Kavitha A. Davidson is a former Bloomberg View columnist.
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As the Federal Communications Commission prepares to render judgment on the proposed mega-merger between AT&T and DirecTV, the satellite television company faces an antitrust challenge from another group: bar owners.

The crux is the NFL's exclusive deal with DirecTV for Sunday Ticket, which carries all non-network, out-of-market games to subscribers. The league and the company struck a new deal last October, effective starting this season, worth $12 billion over eight years. That means DirecTV will shell out $1.5 billion a year for the package, a 50 percent increase from its previous contract. It was certainly worth it for DirecTV, whose proposed $48.5 billion merger with AT&T reportedly hinged on its continued partnership with the NFL.

As I wrote at the time, the deal was a win for both sides: DirecTV maintained its AT&T deal as well as its status as the exclusive provider of Sunday Ticket, a major selling point over competitors and cord-cutting. The NFL, meanwhile, is betting on mobile, and probably looking to expand its streaming services to AT&T's U-Verse subscribers. 

The big losers, of course, were the fans, who already have few options for watching football and are at the mercy of the league and satellite company for increasing subscription costs. Back in June, the lawyer Thomas Abrahamian filed a class-action suit on behalf of a group of fans, contending that the exclusive television rights for out-of-market games maintains "anti-competitive" business practices that drive up prices for consumers. The suit is similar to those brought against MLB and the NHL and broadcast partners Comcast and DirecTV, challenging territorial restrictions on airing games. The plaintiffs in that case were granted class certification in May, and in June, the NHL agreed to settle by offering unbundled packages at lower prices. 

Now, a separate class-action suit has been filed, this time on behalf of owners of bars and restaurants who say the NFL-DirecTV partnership unfairly drives up the cost to show football games in their establishments. Few fans may realize how commercial pricing for subscription sports works, but it's something I came across in May, when some bar owners told me they were debating not showing the Mayweather-Pacquiao fight because it was too expensive. Rather than charging these businesses per television, cable and satellite companies charge based on the capacity of the establishment, often to the disadvantage of more spacious bars and restaurants. According to the Hollywood Reporter, a bar with an occupancy of 100 would pay $2,314 for Sunday Ticket, while much larger venues like Las Vegas hotels would pay as much as $120,000 for the year.

In the case of Mayweather-Pacquiao, that was a one-time event that a bar could reasonably get away with choosing not to show -- I, for one, was in search of a place to watch anything but the fight. And if a venue made the calculated decision to buy it, it likely passed on the thousands of dollars it paid for it to the patrons in the form of a cover charge. But a bar certainly can't get away with charging a cover just to watch football on Sundays; the sport's ubiquity at competing establishments makes Sunday Ticket mandatory. This means little to the NFL and DirecTV, which don't operate in the type of competitive landscape faced by bar owners.

Previous challenges to the league's monopolistic practices have rarely succeeded, but this time may be different. The tide is beginning to shift against the NFL's longstanding entitlement to play under a different set of rules, with the FCC finally, successfully challenging its blackout restrictions. And taking on this fight on behalf of the bar owners is Michael Hausfeld, the Washington "super lawyer" who won college athletes the right to be paid for the use of their likenesses in the landmark Ed O'Bannon case against the NCAA. He's forced changes to longstanding practices by seemingly untouchable sports entities in the past -- let's see if he can do the same with the NFL and open up the television market, which would actually increase the league's viewership, if at a fairer price.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author on this story:
Kavitha A. Davidson at kdavidson19@bloomberg.net

To contact the editor on this story:
Tobin Harshaw at tharshaw@bloomberg.net