Such squabbles between networks and service providers are hardly exotic in the intricate tapestry of television programming and sports broadcasting. A perfect example is one such episode that is going on right now between DirecTV Dish Network and SportsNet Philadelphia. Both DirecTV and Dish Network have faced calls to arbitration, but the companies have staunchly rejected this approach, choosing, presumably, to voice their complaints and try to resolve any issues through other avenues. This rejection provides a fascinating case study in the confluence of law, business strategy, and consumer rights.
Background
SportsNet Philadelphia authentic local broadcast rights to the Philadelphia Phillies, Philadelphia Flyers, and Philadelphia 76ers. The lockdown it has on local sports broadcasting makes it a massive piece of leverage for the network. The two largest satellite TV providers in the U.S., DirecTV, and Dish Network, have been handcuffed for not having the ability to carry SportsNet Philadelphia — leaving a big hole in their service to customers in the region.
The Heart of the Dispute
That creates tension because local sports fans must have SportsNet Philadelphia material on air DirecTV and Dish Network say that the rates requested by SportsNet Philadelphia to carry the games are too high and make them financially unworkable to carry. On the flip side, SportsNet Philadelphia contends its costs match its premium content that plays perfectly to the rabid fan base around Philly sports teams.
The Arbitration Offer Rejected
Arbitration is supposed to be a quicker, friendlier, and less expensive alternative to going to court. Arbitration has been known to some as a valuable way to resolve disputes in the media and telecommunications sectors, and the Federal Communications Commission (FCC) has advocated it often in an effort to keep bickering in the markets between long-litigious parties and potentially hurting the consumer.
But the decision by DirecTV and Dish Network to avoid arbitration is a strategic calculation that, experts said, left AT&T certain to see its proposal rejected by the commission. Arbitration could force DirecTV and DISH Network CIOs to accept judgments with which they do not agree. Though the arbitration process is private and generally quicker, it may not be sufficient to sideline the business and strategic interests these corporations intend to protect. The arbitrators could see the arbitration landscape as positively tilted for the content providers, especially in a context where regional sports are concerned as premium, must-have TV.
Strategic Implications
Both DirecTV and Dish Network are presumably betting that in either case, they can negotiate more favorable terms, or just use the threat of their decision — made public by the commission and available in the markets at issue where broadcasters can take note — to drive a resolution. The fact that local sports coverage has been blacked out only increases frustration among Philadelphia area subscribers. Chances are both are counting on consumer anger and frustration to lead to pushback against SportsNet Philadelphia’s pricing and terms.
Implications for Consumers and the Law
There is no clear-cutting legal issue in the arbitration if there is no mandatory arbitration clause which I’m pretty sure does not exist in such a broadcast contract. But for consumers, the blow can be quickly felt: a sudden disappearance of beloved local sports programming.
If the impasse is not resolved, the FCC could be critical to the process The FCC has to step in to protect consumers, the broader public interest compels that. The regulatory body can also intervene and facilitate or set certain terms for a way out.
For DirecTV, Dish Network, and SportsNet Philadelphia, the failure to arbitrate tailspins through legal defense, financial reform, and market provision. The standoff highlights the enormous value of sports broadcasting rights and the steps service providers will take to preserve their dominance in the market. In the end, although arbitration looks like a simple solution, the complex nature of strategic interests and market dynamics makes simple solutions very complicated.
