What Twitter’s NFL purchase says about antitrust and the need for regulation

In a surprise upset against Amazon and Verizon, Twitter has won the rights to live stream 10 NFL Thursday Night games. The win is a shift for Twitter, which is not known for the purchase of original content rights. What is well known, however, is that Twitter’s subscribership has plateaued. This purchase, estimated at less than $10 million for the full package (peanuts compared to the $17 million Yahoo! paid for the streaming rights to one game back in 2015), is hoped to inspire new subscribers and re-inspire current subscribers. Twitter will offer the live stream for free and will not require viewers to log in to Twitter to watch the games.

What the sale says about the NFL as a content provider

The most interesting aspect of this case is not Twitter’s involvement, however. Rather, it is the NFL’s scalpel-like precision in cutting and selling various aspects of its own broadcasting rights. Like most original content providers, the NFL is a monopolist with respect to its own content. The word “monopolist” is so negatively charged that many consumers almost have a knee-jerk reaction to it. Just the mention of “monopoly” indicates a company that should be subjected to some type of antitrust enforcement or otherwise be heavily regulated and controlled — think of the FCC’s populist hyper-regulation of ISPs with the mere allusion that ISPs might be monopolists. Consumers fear that monopolists will artificially restrict quantity so that they can raise prices. Well, yes, that is what monopolists may do. But this may not attract antitrust scrutiny because, in such circumstances, antitrust focuses on monopoly power — not monopoly pricing. The difference is important because monopoly power may be focused on preventing rival entry or innovation while monopoly pricing may encourage innovation. For example, monopoly pricing may be the only way the monopolist can recoup investment costs and bring their product to consumers in the first place. The higher prices might also be the best way to attract additional competition as potential rivals see new opportunities. Heavy price regulation may actually break that innovation cycle. To be sure, the NFL has created a bit of scarcity by restricting the number of games played in a season (compare the NFL’s brief season to the MLB’s interminable one). But after restricting the number of games, the strategy of a monopolist might be to package all the possible rights it owns (for example broadcast, rebroadcast, mobile, and digital) and sell them all to the highest bidder. The NFL has opted for a different strategy — experimentation. With the constant change in how and where viewers watch NFL games, the NFL has decided to consider all its content rights as individual, differentiated products. It first defines the particular right and then permits open bidding so potential partners (such as CBS, Amazon, Yahoo!, and others) can self-select which legal right fits that bidder’s corporate strategies. Yes, Twitter has bought the right to live stream 10 games. But those same games are also under contract (for a combined price of $450 million) by CBS and NBC — two over-the-air broadcasters. These games will also be broadcast on the NFL network — a premium cable network available by individual, consumer purchase. And wait! The mobile broadcast rights (as opposed to live-streaming digital rights) are held by Verizon and available for a fee on the Verizon mobile app.

What exactly did Twitter buy?

Technically, it appears that Twitter has bought the right to rebroadcast the CBS and NBC broadcasts. The difference between broadcast and a rebroadcast is advertising revenue. CBS and NBC have the right to sell digital advertising, while Twitter will likely only have the right to sell a smidge of time to advertisers. Twitter will content itself with the advertising the event itself provides for Twitter’s own services. The end result is that the product of an unregulated monopolist is available to consumers on a large variety of mediums with a large variety of price points — including free. Consumers can select which platform and price point to use in accordance with their own preferences and willingness to pay. The lesson here is clear: Antitrust is complicated, and hurrying towards heavy regulation and government control may not be warranted, even when there is potential for monopoly power. Allowing and encouraging experimentation with business models and pricing may be just as — if not more — consumer friendly.

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