NFL’s non-exclusive deal reveals truth about competition in broadcast markets

Yes, we are ready for some football! And both CBS and NBC know it. Why else would they each agree to pay the NFL an estimated $225 million for the rights to broadcast five Thursday night games each? For those paying attention not only to football, but also to the changing world of broadcast, it is a fascinating deal, and it says a lot about whether we need to be on the lookout for anticompetitive behavior on behalf of broadcasters.

The concern with exclusive contracts

In some cases, a content provider will enter a deal to distribute its output through only one outlet. This type of exclusive deal may raise concerns if the content is really popular — in other words, if it is “must-have” TV. The concern is that the distributor that holds the exclusive contract will suddenly attract so many viewers that it will destroy the competition. Indeed, in the past, there has been much regulatory concern about this anticompetitive scenario. Specifically, the Federal Communications Commission (FCC) had legacy regulatory power over Regional Sports Networks (RSNs), which permitted the FCC to force cable companies to sell competitors access to proprietary RSN programming. Ultimately, by court order, the FCC has let the cable access rules sunset, but it has signaled it would still be vigilant over RSN exclusive deals. The concern is understandable, as antitrust authorities have long known that exclusive deals can be used to damage rivals in harmful ways. As I’ve written before,

The continued concern of anticompetitive behavior with exclusive contracts is also evident in the trepidations expressed by Senate Commerce Committee Chairman John Rockefeller (D-WA), who fears that the FCC's new complaint process against cable companies that lock up programming may not be enough. He warns that ‘[i]f [the FCC’s] process does not deter anticompetitive behavior that harms consumers, Congress will need to consider whether it should restore appropriate safeguards.’

But concerns about the downsides of exclusivity must be balanced against the many procompetitive reasons why an exclusive deal might be desirable — it may make a product more attractive, ensure quality, guarantee a steady supply of an input, or reduce costs, among other reasons.

How exclusive is next year’s NFL deal?

The deal around the Thursday Night lineup is fascinating not only because it extracted high prices from broadcasters — it’s also interesting because, this time, the deal went to two broadcasters. Not just that, while CBS and NBC are broadcasting five games each, it appears that all ten games will also be available on the NFL’s own sports channel. Finally, the over-the-top (streaming) rights have not yet been sold. That means yet another powerful outlet will make this content available. In the world of “exclusive” deals, this is a group project. The non-exclusive nature of this exclusive deal speaks volumes to the competition present in the broadcast market. Clearly, the NFL is in the driver’s seat, and broadcasters lack the clout (or desire) to wrangle exclusive rights.

An example from elsewhere in the Internet ecosystem

The Thursday Night NFL deal is just one of several deals in which the format of content providers’ deals with distributors says something about competition among the latter. Take, for example, the zero-rating plans of T-Mobile, Verizon, and AT&T. Critics are going after these companies, claiming that they are using their market power to take advantage of, disrupt, or somehow disadvantage content providers. But notice that the mobile companies’ plans all feature several applications and content providers, most of which are overlapping. In other words, while exclusive deals with the major content providers might be desirable (whoever snagged Netflix would have been set), that is not the goal of mobile companies (nor, arguably, a financial possibility). This says a lot about the dynamics both among mobile companies and between mobile companies and content providers.

Non-exclusivity as a measure of competition

In both of these markets — broadcast and mobile — we seem to be looking for competition in all the wrong places. While many seem to think that it is the distributors (T-Mobile, AT&T, Verizon, or NBC and CBS for NFL broadcast) that hold all the cards, the dearth of exclusive deals with one distributor proves at least one of two things: Perhaps content providers (NFL, Netflix, Facebook) are not as weak and indefensible as some have argued, or perhaps the mobile consumer’s demand for variety makes distribution of many types of content most desirable. Either way, the type of non-exclusive deals proposed in various zero-rating plans is a win for mobile consumers.

The post NFL’s non-exclusive deal reveals truth about competition in broadcast markets appeared first on Tech Policy Daily.