DirecTV Fights U.S. Antitrust Suit Over L.A. Dodgers Channel

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  • (Bloomberg) -- DirecTV says it refused to pay top dollar for Time Warner Cable Inc.’s Los Angeles Dodgers channel because it had been “burned” earlier overpaying to air Lakers games, not because it was conspiring with others to get an edge on a competitor.

    That’s the defense the biggest U.S. satellite-TV provider, now part of AT&T Inc., will use when it asks a judge to throw out a Justice Department lawsuit accusing it of scheming with competitors in 2014 to gain an advantage over Time Warner Cable in licensing negotiations.

    The government says DirecTV was the ringleader of a conspiracy among Los Angeles-area distributors that left about 70 percent of pay-TV subscribers in the second-largest U.S. media market without access to Dodgers games in 2014.

    That was two years before Time Warner Cable was acquired by Charter Communications Inc.. That deal made it the L.A.-area provider of Dodgers games, and hundreds of thousands of fans still lack access to live game broadcasts, the Justice Department said. Charter said in a statement that it doesn’t expect any other pay-TV distributors to carry SportsNet LA by opening day of baseball season this year.

    DirecTV offers a more benign explanation for why no L.A. pay-TV provider picked up the channel of the local Major League Baseball franchise: “TWC’s exorbitant prices and bargaining intransigence.” Having paid a premium to carry Time Warner Cable’s Lakers channel only to see the National Basketball Association team’s performance and ratings tank, DirecTV resolved not to make the same mistake with the Dodgers channel, the company said in a court filing.

    The case in Los Angeles federal court is playing out at a delicate time for AT&T, which is trying in Washington to win permission to buy Time Warner Inc. President Donald Trump wasn’t shy about voicing opposition to the deal during his campaign and, since taking office, he’s said to have privately told people he still opposes it. AT&T bought DirecTV in 2015.

    Read More: Dodgers TV Fight Fuels Unease Over Comcast-Time Warner Deal

    The dueling narratives about the Dodgers channel will be debated at a hearing set for March 13 in which a judge must decide whether to let the lawsuit proceed.

    DirecTV’s chief content officer and his counterparts at AT&T, Charter and Cox Communications Inc. shared information with each other about their negotiations with Time Warner Cable before the start of the 2014 baseball season, the government claims. Their unlawful communications, including text messages and phone calls, took away the risk that one would make a deal for the Dodgers channel, thus forcing the others to accept Time Warner Cable’s terms or lose subscribers to the one who could show the games, the U.S. says.

    Charter and Cox aren’t named as defendants in the case.

    Both the government and DirecTV agree on one thing: the broadcaster approached the Dodgers situation with the lesson of the 2012 Lakers season still fresh in its mind. DirecTV paid 50 percent more than what it thought the channel was worth to stop an exodus of subscribers to rivals Charter and AT&T, which had reached deals before the start of the season to carry Time Warner Cable’s Lakers channel.

    DirecTV maintains the steep cost of the SportsNet LA is why it isn’t widely distributed, saying Time Warner Cable set a dramatically higher price for the Dodgers channel -- about $5 per subscriber -- because it paid an “extravagant” price for local broadcast rights: $8.3 billion over 25 years. SportsNet LA is owned jointly by the Dodgers and Time Warner Cable.

    The Justice Department contends DirecTV’s frustration over the Lakers deal drove the company to organize a boycott of SportsNet LA. "DirecTV approached the Dodgers channel negotiations determined not to allow TWC to successfully pit" the distributors against each other again, the Justice Department said in a Feb. 8 filing.

    The Justice Department isn’t seeking damages. Instead, it’s asking for the court to rule that the alleged sharing of negotiation strategies violates antitrust law and order AT&T and DirecTV to train and monitor their executives more carefully.

    The case is U.S. v. DirecTV Group Holdings LLC, 16-cv-08150, U.S. District Court, Central District of California (Los Angeles).

    Bloomberg