Sports blackout rules don’t fit Internet Age

In a society whose entertainment is increasingly Web-centric, it was only a matter of time before technology caught up with our desire for streaming video anywhere, anytime. For most, that now means Hulu and Netflix. For sports fans, the next generation arrived with ESPN360 ESPN3 WatchESPN (Reliable service; inconsistent branding). Loads and loads of sporting events from the worldwide leader. Stuff that was airing on ESPN or ESPN2, plus tons of smaller college and second-tier sports not televised anywhere. Watch it live, watch a replay, watch on your computer, on your TV, on your phone. The future is now! Unless:

“We’re sorry, this game is not available in your area.”

Ah, the regional blackout. Designed to protect television and radio networks from hemorrhaging audience share to competing outlets, thus insuring lucrative broadcast rights, blackouts are part of making the games work financially for all parties. Traditionally, it kept national broadcasters from airing games in the two teams’ hometown markets. So, if ESPN wanted to nationally televise a game between the Tampa Bay Rays and the Detroit Tigers, they can do so. But, folks in Florida and Michigan wouldn’t be able to see the ESPN broadcast, because local television contracts require that the hometown broadcast be the only show in town. Same thing for the NBA, NHL, and major college athletics. There are exceptions, but you get the general principle.

(The NFL blackout policy is much worse. Comparable to a ransom, it further requires a team to sellout its stadium before a game can be televised in that team’s home market. You want TV? Buy up our outrageously priced tickets. At times, it has led to TV stations and advertisers buying up remaining seats at the league’s 72-hours-to-kickoff deadline.)

The Internet messed this up. People are becoming more accustomed to receiving content whenever and wherever they please. And they can… except when it comes to sports, where the old blackout rules carried over into the digital age.

Always close to home

Yahoo! Sports has separated itself from the crowd journalistically in recent years by investigating the perceived evils of college football – the BCS, Ohio State, Miami, Jerry Sandusky – all with a tilt toward the Average Joe fan, poor and forthright, who clinches his fists in response to the mountebank schemes of the rich and unscrupulous.

Jeff Passan recently followed this approach and aimed it squarely at the MLB, the largest and longest serving perpetrator of blackout regulations.

Major League Baseball did not grow into an $8 billion business over the last two decades without burying some bodies along the way. There’s a mass grave in Iowa. Plenty more scattered throughout Las Vegas. A few in North Carolina. Some in Buffalo. Lots strewn about Canada. Everywhere in Hawaii. That was the price for baseball fattening itself on television money: poor fans who just want to watch a ballgame but can’t because of MLB’s greed and gluttony.

What distinguishes MLB from its peers in the blackout realm is the ridiculously large swaths of land considered to be a team’s home market, and the overlap it causes. The Atlanta Braves have the largest home market in the United States, stretching from North Carolina to Mississippi. The Cincinnati Reds home market extends to central North Carolina and northern Mississippi. The Toronto Blue Jays home market is the entire nation of Canada. Folks in Vancouver, a few hours north of Seattle, are considered home market for a team located a short drive from Detroit (which, ironically, is not in the Jays market).

It leads to overlaps, which Passan highlights in his column. Iowa, for instance, cannot receive national broadcasts for the Brewers, Cardinals, Cubs, Royals, Twins, or White Sox. In Las Vegas, no Athletics, Angels, Diamondbacks, Dodgers, Giants, or Padres. In Hawaii, about 2,500 miles from the mainland, they get a six-pack blackout too: Athletics, Angels, Dodgers, Giants, Mariners, Padres.

Hawaii cable providers don’t offer the Mariners and Padres regional affiliates. Nor does Charlotte, N.C. include Fox Sports Ohio among its offerings (“It wouldn’t, of course,” says Passan).

MLB Territorial Rights Map. Courtesy Wikimedia Commons.

When I lived in Arkansas, I could not watch games involving the Astros, Rangers, Royals, or Cardinals. It was enough for me – a cableless fan – to turn down MLB.tv, the league’s online streaming service. Even on the league’s exclusive product, I would be blacked out of up to four games each night. Even assuming every team in the league is playing that day, that’s over a quarter of the contests. In one of the six-team markets, that could equate to being in the dark for 40 percent of games on a full day of action.

Hard to pay good money for that.

MLB’s control also extends to audio. Radio broadcasts are universally blacked out online. The league forces stations to stream alternate programming during baseball games, so as not to interfere with MLB.tv’s exclusive online audio rights. ESPN Radio owns exclusive rights to the World Series, meaning that even a team’s regional market will be blacked out from their own regional broadcast. Only the two teams’ flagship stations (the ones in the teams’ home cities) are allowed to broadcast, and only if they run the ESPN Radio advertisements during the game, meaning the only revenue local broadcasters can receive during the Fall Classic is what they sell for pregame and postgame coverage.

You get the feeling that the status quo cannot stand much longer. The Internet has changed consumer habits and broadcast potential. Using overbroad “home” markets to pad the pockets of regional cable outlets that pressure cable providers with outlandish subscriber fees*  only serves to deny fans the opportunity to watch their teams. And that’s not good for baseball.

*Subscriber fees are the amount a cable/satellite channel charges the cable/satellite provider to include the channel in your cable/satellite package. Basically, the more in-demand your channel is, the higher your subscriber rate can be. Most channels charge between $0.50 and $1 per household. ESPN charges over $5 – the most of any non-premium channel (HBO, etc.). Regional sports networks tend to demand between $2-3 per household, an astounding amount considering their relatively poor ratings. Ad revenues at these networks are porous, so these blackout arrangements for regional sports coverage are the only things that keep the networks operating.

March Madness gets buckets

College basketball does it right. I purchased NCAA March Madness on Demand for $3.99 this year (it was previously free). I was able to watch every game of the tournament live or archived in high definition. The games were airing on CBS, as well as the Turner cable networks – TBS, TNT, and TruTV. The vast improvement in picture and streaming consistency was well worth the nominal fee. But the traditional approach would have been for the networks to block all other forms of coverage and force me onto those channels, especially those cable channels.

Instead, I watched online. The games were still overlaid with the respective network’s branding. There were plenty of commercials (during which I could not switch to another game). I got to watch games I would have otherwise missed; CBS, Turner, and the NCAA got me to pay for something filled with paid ads. It doesn’t seem like a bad business strategy (in fact, it sounds just like the cable TV model). Indeed, the service saw 51.6 million views during the tournament, down only six percent from when it was free. (The perversely funny part? MMOD was facilitated by MLB Advanced Media, the digital arm of Major League Baseball).

Of course, this was the death nail for the television networks. The end of their domination. No longer would people pay the premium to find TruTV on their cable dials, sandwiched somewhere between a Spanish-language religious prosthelytizer and a 24-hour informercial channel hocking Brazilian Butt Lifts and Shake Weights.

It was a sad day for the prehistoric medium of television, as CBS and Turner managed only the best tournament ratings in 18 years.

Accessible channel, reasonable price

This doesn’t have to be a losing battle for content providers. Internet users are coming around to the idea of paying for good stuff. Apple, more than any other company, has succeeded in leading tech users back to the checkout line for content. Quality content in a pay-per-product marketplace has achieved financial sustainability and success.

Remember the turn of the century? Record companies wouldn’t budge when it came to selling individual songs online. They rejected the Internet and raised the prices of physical copy. The Internet society rejected the record companies. They chose to steal what was not presented to them through a desirable channel, bankrupting the labels and the brick-and-mortar stores. Worse (or perhaps “why”), it felt justified: the theft of copyrighted music seemed about as illegal as jaywalking down an empty street. Finally, Steve Jobs got the labels to cave, iTunes started selling songs for 99 cents a pop, and almost instantly, music piracy became a fringe activity. An accessible channel was provided at a reasonable price, and reasonable people ditched Napster and the like forever.

The same thing is happening right now for video content. Piracy is decreasing as Apple and its competitors offer easy ways to obtain movies and television shows at a fair price.

Sports content, on the other hand, is still ruled by an old guard who, like the record labels in the late 1990s, refuse to budge from a system that is profitable today. But what about tomorrow? Because pirate streaming websites today specialize in sports. Do a Google search. It’s rampant, as are blogs about how to bypass various blackout attempts.

Fans have demanded an accessible channel at a reasonable price, and the leagues continue to balk. In the Internet society, that’s a perilous, if not self-destructive strategy. Major League Baseball and the like would be wise to look past their current financial successes and devise a plan to remain profitable in the future, because cable-placating blackouts only serve the brick-and-mortar, and the Web is eventually going to cause it to crumble, whether the leagues are on board or not.

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