The 2015 National Football League season has begun, which can only mean one thing: Sports bars across Los Angeles will be packed every Sunday with football fans hungry for hot wings, cold beer and a chance to catch every bit of the action on big screens.
To feed that appetite, sports bar owners have no choice but to buy the NFL Sunday Ticket package from El Segundo satellite TV provider DirecTV, the only company to offer every out-of-market NFL game on Sunday.
But Jerry Jamgotchian, who opened Flights Beer Bar in Hawthorne in March, is among the many owners who’ve learned that showing football each Sunday comes with a hefty price.
After he saw his bill for $2,314 for the season, Jamgotchian decided to fight back.
Flights this month joined other sports bars around the country in taking the NFL and DirecTV to court with claims that their exclusive arrangement violates antitrust laws.
“The NFL Sunday Ticket causes a significant economic burden on all businesses who purchase this programming because DirecTV and the NFL owners have essentially conspired to create a monopoly, which establishes an artificially high product price that cannot ever be negotiated or competitively bid,” Jamgotchian said in an email. “This seems unfair on its face and is nothing more than another large subsidy to the NFL owners.”
But Dallas telecommunications giant AT&T Inc., which bought DirecTV for $49 billion in July, insists that the NFL Sunday Ticket package doesn’t violate any laws.
“These lawsuits are without merit,” said Fletcher Cook, an AT&T spokesman. “We are fully confident in the legality of our agreement with the NFL.”
There is, however, a growing field of bar owners who disagree.
Ninth Inning Inc., which owns San Francisco’s Mucky Duck pub, led the charge against the NFL and DirecTV in July by filing the first antitrust complaint seeking class-action status in the U.S. District Court in Los Angeles.
At least eight other sports bars – located everywhere from New York to New Orleans to Rhode Island – have filed virtually identical claims in federal court, with Hawthorne’s Flights becoming the most recent entrant, also filing in Los Angeles.
Much like the other claims brought so far, Flights’ parent company, Jammers Inc., alleges DirecTV charges inflated rates for its football package as the result of an alleged conspiracy.
A restaurant or bar with the capacity to accommodate between 51 and 100 people would have to pay DirecTV more than $2,300 a year for the NFL Sunday Ticket package, according to Flights’ complaint, which was filed Sept. 3. Charges escalate with the venue size; the largest establishments, such as hotels in Nevada, could be charged more than $120,000 a year. Bars and restaurants that can accommodate between 101 and 200 patrons are charged $4,630.
NFL spokesman Brian McCarthy declined to talk about the league’s partnership with DirecTV.
The NFL Sunday Ticket includes all regular-season out-of-town games played on Sundays. It does not include nationally televised or local games, but those are picked up by other channels.
Uphill battle
The NFL and DirecTV announced last October that they agreed to extend their partnership. Terms of the deal weren’t publicly disclosed, but several media reports – and Flights’ lawsuit – indicate DirecTV would pay the league $12 billion over eight years.
The value of that deal was so great to DirecTV’s bottom line that AT&T had the right to back out of its massive deal for the satellite TV provider if it failed to secure an extension to its exclusive NFL deal, according to a December filing with the Securities and Exchange Commission.
Despite the bill Flights has to pay, the fight might be more about principle than dollars and cents.
Brian Gudmundson, an attorney representing Flights, said the NFL’s agreement is significantly different than broadcast arrangements other professional sports leagues have made in that it’s the only one with an exclusivity clause for its out-of-market games. A bar owner, for example, can choose among several basketball and baseball packages from various cable and satellite companies.
For example, DirecTV, which has a nonexclusive deal to broadcast Major League Baseball games, charges an establishment that can accommodate between 51 and 100 viewers $805 a season, according to the complaint. That price is held down because there are several competing offerings; Gudmundson argues that the lack of choices for the NFL package is what allows DirecTV to keep the football price so high.
“The results are telling,” he said. “The prices of this product are through the roof.”
On the other hand, some might argue that the price is reasonable considering that the football games attract crowds. With 17 regular-season Sundays in the NFL package, Flights’ $2,314 bill comes to about $136 a week. The first 17 beers the bar sold on any given Sunday would cover that bill.
Gudmundson said a petition had been filed to consolidate the nine cases filed so far, plus each additional filing in the future, into a single class-action suit. The Judicial Panel on Multidistrict Litigation could decide whether to grant the petition as early as next month, but the decision is more likely to come down in early December.
Regardless of that outcome, Ricardo Cestero, partner at Century City’s Greenberg Glusker Fields Claman & Machtinger who reviewed Flights’ complaint for the Business Journal, said the sports bar owners will have an uphill battle in court.
Cestero pointed out that the lawsuits attack the NFL’s exclusive agreement with DirecTV but are silent on the NFL’s other exclusive agreements. For example, CBS has been selected to air home games for teams in the American Football Conference whereas Fox gets the National Football Conference teams’ home games.
“I find it difficult to say that the NFL can enter into an exclusive arrangement with the broadcasters but not with the multichannel satellite providers,” Cestero said. “That, to me, would be inconsistent.”
Yet, despite the odds, Jamgotchian said his fight against the NFL and DirecTV is one worth attempting to wage.
“In my opinion, this policy seems to unduly restrict expanded access to this programming because if the price was more affordable, many additional businesses would be able to purchase it and further expand the NFL’s branding opportunities,” he said. “Hopefully, my complaint will serve to help all parties by not only eliminating the obvious monopoly but also help to expand the NFL’s programming to other businesses who currently cannot afford the NFL Sunday Ticket.”
