The NFL is now facing one of the most significant legal challenges in years to its existing media model, with a trial now starting in Los Angeles threatening to render billions of dollars in damages to the league and upend how it distributes out-of-market games.
Jury selection began Wednesday in a class action antitrust case nearly a decade in development, advancing on appearances in other courts before ultimately reaching the U.S. District Court. A group of more than 2.4 million residential and 48,000 commercial subscribers to NFL Sunday Ticket on DirecTV is asking a jury to find the league liable and award them as much as $7 billion in damages. That figure would then be tripled under federal rules, resulting in potentially a bill reaching $21 billion for the NFL.
The plaintiffs allege the current NFL Sunday Ticket structure artificially drives up prices, and point to costs now starting at $349 per year for the residential packages. If they prevail, NFL teams could be freed to strike their own individual and market-specific out-of-market rights deals, and consumers would likely get the ability to purchase individual games or team-specific packages. The league, conversely, is likely to present NFL Sunday Ticket as a premium-level product expanding consumers’ access to games.
The case could also result in key figures such as NFL commissioner Roger Goodell (above, left), Cowboys owner Jerry Jones, Patriots owner Robert Kraft (above, right), and former CBS Sports chairman Sean McManus being called to testify, potentially opening a rare window into the inner workings of how the league develops key business contracts such as this one.
The case also highlights some of the uniqueness of how the NFL manages its media rights. Some other major leagues have moved to create team-specific options for their out-of-market game packages. But the NFL has not allowed that, and that has continued even as the residential portion of NFL Sunday Ticket has moved to YouTube. The streamer is not a defendant in the lawsuit, and related claims against DirecTV are on hold pending arbitration.
The YouTube deal is worth $14 billion over seven years, creating a situation that if a significant award is made to the plaintiffs, the economic value of that deal could essentially be negated.
Potentially Messy Situation
One possible scenario, however, is still a last-minute settlement. That’s because the dispute also sets up another test of the NFL’s tolerance for possibly embarrassing public disclosures.
In a trial setting, powerful figures such as commissioners and team owners are no longer in control, and it’s a dynamic the NFL and other major leagues have often sought to avoid, and why they often prefer in-house structures to resolve various disputes and render discipline.
To that end, the NFL’s $820 million settlement with St. Louis officials over the Rams’ relocation to Los Angeles was struck about six weeks before a scheduled trial there.
