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Sports Fans! Comcast Is Coming to Take Away Your Games!

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If you think that sounds like a sportscaster after a few too many Red Bulls, consider what will happen if the Obama Administration allows the largest cable operator in the U.S., Comcast, to acquire the second largest cable operator, Time Warner Cable, both of which own Regional Sports Networks ("RSNs") in some of the biggest sports markets in the country and have a history of keeping games from fans who don't pay a steep ransom.

Ask sports fans in Philadelphia who can't afford or simply just hate to be Comcast subscribers and instead turned to competing pay-TV companies for service, or fans of the Portland Trailblazers who live in rural Oregon where Comcast is not available. They will tell you about being unable to watch home games because they do not subscribe to Comcast.

As for Time Warner Cable, ask the majority of Dodgers fans in Los Angeles --they do not subscribe to Time Warner Cable and they will tell you, no Dodgers games for me. Time Warner Cable makes the games available to its own subscribers and not too many others. Or Charlotte Bobcat fans who subscribe to Time Warner Cable, which refused to carry the Bobcats games on an independent network, and only carried the games once that network had gone bankrupt and Time Warner Cable's own RSN acquired the rights.

That's just how these companies roll. Pay me my outrageous rates or kiss your local team sports goodbye.

We are not halucinating, sports fans. This is real. There is economic evidence supporting what we see. Three noted economists (Kevin Caves, Chris Holt, and Hal Singer) published a study last year showing that when a cable operator owns a RSN, fewer people have access to their local sports teams on TV than when the RSN is independently owned. They also conclude that the bigger the cable company, the worse the problem gets. In other words, it's bad enough now that Comcast and Time Warner Cable control access to our local games on their RSNs; after the merger, it will only get worse.

Why does all this matter? Americans subsidize professional and collegiate sports through taxpayer-funded sports arenas, public infrastructure, statutory antitrust and tax exemptions, and other regulatory relief at the federal, state, and local levels. Fans therefore have every right to ask: what do we get in return? Sports programming is different than any other kind of programming because it is publicly subsidized, by far the most highly rated, and therefore critical to robust competition in the video market.

Still, in the face of direct questioning from Sen. Richard Blumenthal (D-CT) at the Senate Judiciary Committee's recent hearing on the proposed Comcast/Time Warner Cable merger, Comcast Executive Vice President David Cohen brushed off the issue:

SEN. BLUMENTHAL: "...[L]et me focus for the moment on regional sports networks, also known as RSNs. The most recent information I have details Comcast owning 11 RSNs in the country's largest markets, and Time Warner Cable owning five RSNs along with 16 local sports channels . . . a very formidable amount of local sports programming in the largest media markets in the country. . . . I think that is a practical, hard fact of life--Means and incentive to overcharge for an economically crucial element of programming involving sports."

DAVID COHEN: "RSNs are not national networks. . . . They're offered in a particular market. And so, there's really nothing in this transaction that changes the competitive dynamic in any market in the country."

In this exchange, Comcast's top executive in charge of winning government approval of the proposed merger tells a United States Senator, don't worry your pretty little head about sports! All this stuff is local. If you live in a market with Time Warner Cable service and get sports through a Time Warner Cable RSN, then combining that company with the same cable operator in Philadelphia won't change your life one bit. Right?
Wrong.

Let us just for a moment set aside all the economic research done by Caves, Holt, and Singer, which shows that bad behavior by a cable company vis-à-vis sports only gets worse when the cable company gets bigger. That alone undercuts Mr. Cohen's answer to Sen. Blumenthal's questions.

No, just open the business pages (or watch Comcast's very own CNBC) to see the latest news that Comcast just entered a deal with Charter, the cable company that tried unsuccessfully to acquire Time Warner Cable. Under this deal, Comcast sells some of its cable systems to Charter but also receives from Charter certain subscribers including -this is the punchline--in markets served by Time Warner Cable and its Regional Sports Networks today. All those assurances by Mr. Cohen at the Senate Judiciary Committee about no increase in local sports concentration due to the merger, swept away in a single Securities and Exchange Commission filing (available here).

Sen. Blumenthal, this just in: Comcast wears no clothes.

Here are just a few of the markets where a combined Comcast/Time Warner Cable also will have cable systems currently owned by Charter, increasing the combined company's leverage over sports fans:

  • Los Angeles, where Dodgers fans are blocked by Time Warner Cable from watching their games;
  • Portland, Oregon, where rural Trailblazers fans long lacked access to Comcast's RSN;
  • Charlotte, North Carolina, where Time Warner Cable prevented its subscribers from seeing Bobcats games.

...not to mention New York City, Boston, and Dallas (where just a few sports fans live). Overlay the markets where Comcast owns the NBC local affiliate, like New York and LA, and you can add NFL games on broadcast TV to the list of local sports Comcast will control.

The impact of this proposed merger on sports fans does not end with cable TV, however. Perhaps the biggest future impact would be the restriction of online sports to only those fans who get their broadband from Comcast. The post-merger company would control 40-50% of the high speed residential broadband market, depending on how one defines the threshold speeds needed to support high-quality video (hint: DSL is not as good as cable, which is why most new broadband subscribers are cable's). Netflix CEO Reed Hastings has publicly described the shake-down he recently received when his subscribers who used Comcast to watch their Netflix video experienced rapidly deteriorating service, leaving Netflix no option but to pay Comcast a premium in order to stay viable. Comcast logically would view Netflix as a competitor to the Comcast online video service, so why not extract an extra pound of flesh from Netflix if it can? If Comcast can exercise that kind of leverage pre-merger, it will only get worse post-merger.

And so it shall be with sports. We already see how Comcast and Time Warner Cable treat independently owned sports programmers in the traditional pay-TV market and how they withhold sports from fans who do not subscribe to their cable systems. Why would the merged cable behemoth behave any differently online? With more and more sports programming moving online, like MLB.com and Verizon's NFL live video app, the future looks bleak for sports fans who want to see their home team's games--unless, of course, you don't mind paying Comcast's ever increasing ransom.

Comcast and Time Warner Cable already witthhold sports from fans in order to increase subscribership. The two companies combined will only make matters worse. The two companies with additional Charter subscribers in key sports markets will be fatal. The high concentration of residential broadband subscribers they will control will replicate all these evils as sports programming migrates to online and mobile platforms. Sports fans, be afraid. Comcast is coming to take away your games.

David Goodfriend is Chairman of Sports Fans Coalition, which opposes the Comcast/Time Warner Cable merger, and Adjunct Professor at the Georgetown University Law Center. His clients also include DISH Network, eBay, and SunStreet (a new solar homes company).