DOJ's Claims Against DirecTV Seen as Part of Broader MVPD Collusion Picture

The alleged collusion among multichannel video programming distributors that's the focus of a DOJ lawsuit against DirecTV is more commonplace than just the MVPDs' interactions with regional sports network (RSN) SportsNet LA, programmers tell us. No one in the pay-TV industry is shocked by the DOJ complaint calling AT&T-owned DirecTV the ringleader of an information-sharing cabal of MVPDs trying to negotiate with the RSN (see 1611020034), but there is surprise about how the DOJ got the information it cites in its complaint, one independent programmer CEO told us. AT&T, DOJ and NCTA didn't comment.

The DOJ "could not be more wrong in this case," telco lawyer Jonathan Lee said in his TeleComSense blog Friday. If not for that exchange of information, the MVPDs involved would have paid "the supra-monopoly prices" charged by Time Warner Cable, which has exclusive rights to most Los Angeles Dodgers live games, Lee said. "Vertical distribution contracts -- which are responsible for the sports programming price increases (that DoJ is incomprehensibly fighting for) -- were under antitrust scrutiny, and coming up short, throughout the relevant time period covered by the DoJ suit," he said. "After looking at these contracts in the light of antitrust precedent, we can truly appreciate just how wrong the DoJ was to go after the victim -- and not the cause -- of spiraling sports programming costs."

One independent programmer said he and a handful of his peers discussed collusion among MVPDs. He said indie programmers often receive almost word-for-word identical responses from MVPDs when they talk about getting carriage, which points to behind-the-curtain discussions and executives at MVPDs working out group positions on issues like retransmission and paying for channels. He also said that an executive at one major cable distributor told him that MVPDs discuss tactics for turning away indie programmers. He said after signing a contract with a major MVPD that contained a unique -- and confidential -- arrangement, in discussions with another programmer trying to get launched on a separate MVPD, he found that second MVPD was pushing that identical arrangement. Alternative distribution method and most-favored-nation (MFN) clauses in contracts started with a few programmers and rapidly became universal provisions using boilerplate language, also indicating some MVPD collusion, he said.

Programmers said the mergers and acquisitions in the cable distribution universe, and the frequent moves of programming executives from one MVPD employer to another, likely laid the foundation for such MVPD collusion. Those pay-TV interactions would have been far more difficult 15 or 20 years ago, when there were numerous, regionally strong MVPDs, compared with today's more consolidated marketplace, one indie programming executive said. He said the revolving door of MVPD inside and outside counsel and auditors also sets up a framework for accommodating such talks. It wouldn't be surprising if MVPDs at minimum pass along tips to one another about terms or conditions that came up in audits of MFN compliance, he said. The executive also said he suspected major MVPDs talk quietly about retransmission prices and terms for TV station groups, but they likely don't do so for indie networks since indies don't represent the big expenses that RSN and broadcast stations do.

The allegations of MVPD collusion "are very concerning to our company and other independent programmers" given the difficulty of them getting carriage on major MVPDs, Ride-TV CEO Michael Fletcher said.

The suit liberally quotes voicemails and texts between DirecTV Chief Content Officer Daniel York and counterparts at Charter, Cox and AT&T, even citing the duration of those calls. It also points to DirecTV financial analyses indicating that not carrying the channel's Los Angeles Dodgers content would cost it tens of millions of dollars annually in subscriber revenue, though that loss would be cut 40 percent if no DirecTV competitors other than TWC -- which has exclusive rights to Dodgers games and has been offering MVPDs the right to buy a license to telecast SportsNet LA -- carried the games. It also cites testimony by a Cox senior executive saying Cox and DirecTV agreed "to give one another a 'heads-up' before launching the Dodgers Channel." And it cites a spring 2014 call between York and his Cox counterpart during which DirecTV pledged if it reached a deal to carry the channel, it would let Cox know so Cox could sign first and protect any MFN terms. "The allegations against DirecTV ... are shocking but not surprising," Dodgers CEO-President Stan Kasten said in a statement.