He Shoots and Scores: An Analysis of the Nhl's Win in Their Battle over Media Rights

He Shoots and Scores: An Analysis of the NHL's Win in Their Battle over Media Rights

April 25, 2012

Word Count: 3,050

Source:

Michael Huntowski, Blades of Steal? The Fight For Control Of Sports Websites And Media Rights In Madison Square Garden, L.P. V. National Hockey League, 16 VILLANOVA SPORTS & ENTERTAINMENT LAW JOURNAL 123 (2009)

I. Introduction

The importance of the use of the internet for companies has grown more and more since its inception. Companies are finding it more and more useful to connect with their customers and increase their revenues and profits. The same can be said for sports teams and professional leagues. They can use it to help their fans keep up with the current events of their favorite teams as well as stay up to date on the action around the league. However, the decision of who has control of team and league websites has been a discussion of late. Should the teams be able to control their own websites independent of the professional sports leagues they are a part of? Or should they be subject to league policies and regulations in order to benefit the collective interests of all the teams in the league? This is an important topic for everyone because these decisions not only affect how our beloved sports teams are able to connect with us but also how internet and media rights will be regulated with regard to the Sherman Antitrust Act.1

The discussion of these questions between league ownership of the media rights versus team control came to head in one of the least likely of leagues. The National Hockey League ("NHL") found itself being accused of "squandering opportunities to improve its business and solidify the leagues fan base through its post-lockout initiatives, thereby violating section 1 of the Sherman Antitrust Act" by the New York Rangers.2 The article written by Michael Huntowski in the Villanova Sports & Entertainment Law Journal will be the center of discussion for this paper. The article, Blades of Steal? The Fight for Control Of Sports Websites And Media Rights In Madison Square Garden, L.P. V. National Hockey League, was published in May of 2009 and discusses the aspects of the case regarding the potential implications of league ownership of internet rights, how this case relates to the Sherman Antitrust Act of 1890, and the potential implications of the decision on the NHL and other professional sports leagues.3

This paper will first summarize the main points of Mr. Huntowski's article and his opinion on the various arguments for both Madison Square Garden, L.P. ("MSG") as well as the NHL. This will include a look at the NHL's Media Strategy, whether it violates the Sherman Act under quick look analysis and the Rule of Reason test, analysis of the Court's ruling, and the possibility of the single entity defense. After this I will discuss and evaluate the article with regards to his writing style, the purpose of the article, the validity of his conclusions, and the usefulness of the article for potential others. Finally, I will discuss the insights I gained from completing this project as well as what I have learned and what I would also have researched if I was given more time to look further into this topic.

II. Summary

A. The NHL's New Media Strategy

In 2005, a New Media Strategy was implemented by the NHL that transferred each team site onto a common platform to connect team sites better with the league site at NHL.com.4 Previously, teams had their own sites and the league had its own site. Combining the team sites with the league site would enable the NHL to attract national advertisers to advertise across the entire league and also reduce transaction costs for advertising negotiations. MSG rejected this idea because they were concerned that smaller market teams would benefit at the expense of the larger market teams like the Rangers. In 2007, the Rangers violated league rules for media use by setting up an independent website for Ranger's merchandise as well as streaming live broadcasts of Rangers games on the internet in the local broadcast territory.5 The NHL stated they would fine the Rangers $100,000 per day if they continued these initiatives.6 MSG then filed a complaint for injunctive relief stating that the NHL was taking over their website and that the league was preventing competition among clubs. In 2007, the District Court for the Southern District of New York denied this motion.7

B. Violations Under the Sherman Act of 1890

Under the Sherman Act, section 1 states there is an antitrust violation if a contract "imposes an unreasonable restraint on trade or commerce."8 There are two doctrines that are used to prove whether or not there is restraint of trade which are the per se illegality or Rule of Reason standard.9 The per se illegality is used when "surrounding circumstances make the likelihood of anticompetitive conduct so great as to render unjustified further examination of the conduct."10 This means that the plaintiff must only prove that the defendant engaged in actions that were obviously anticompetitive. This doctrine was not used to for the case, however. Rule of Reason analysis is then used when the actions are not deemed to be under the per se illegality offense. This is a review where members of a joint venture have a purpose as well as anticompetitive effects.11 The Rule of Reason must identify the market and prove the agreement has an "adverse effect on competition."12 An abbreviated version of the Rule of Reason, known as the "quick look" analysis has been established. This differs from the Rule of Reason approach because it reduces the need to identify the market and the anticompetitive effects must be obvious.13 The quick look analysis and Rule of Reason standard were used by the Court in the dismissal of this case.

C. Rejecting the Quick Look Analysis

The district court quickly dismissed the idea that the quick look analysis was applicable in this case.14 There were no obvious anticompetitive effects of the New Media Strategy. In fact, the strategy would help the league grow by increasing brand awareness as well as attracting national sponsors that would be able to advertise throughout the entire league.15 With these facts, the quick look analysis was rejected and the court then moved to the Rule of Reason doctrine.

D. Rejecting the Rule of Reason

The court concluded that MSG