Padres bloggin' since 2007

Don’t blame Cox for the Padres’ poor decisions

January 26th, 2010 by Melvin

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups. -Henry Hazlitt

FCC ruling may let more Cox rivals carry Padres” reads a Union-Tribune headline, sitting atop a story that the Federal Communications Commission will change a rule about what deals Cable companies are allowed to make with content providers. The clause allowed companies to negotiate exclusive deals with content providers, and would render the Padres’ own exclusive TV deal with Cox Communications illegal.

The fact most relevant, is that the Padres voluntarily signed the deal with Cox, and likely received compensation in exchange for exclusivity. Instead, reporter Mike Freeman frames the topic as a matter of the FCC saving the day from evil corporations, referring to the clause in question as a “loophole” when in reality the parties acted within the stated intentions of the legislation.

After one to takes a broader, long term look at such an intervention, the consequences become apparent. In the long term, this may hurt fans more than help them. Such disruption in the affairs of content creators and service providers is a strong incentive to avoid creating content that people enjoy and to stop investing in infrastructure so they may have access to it.

Freeman does not print a direct quote in response from a Cox executive, though one appears near the bottom of a previous piece on the topic. Cox’s response clearly reveals the major hitch in the FCC arguments:

“AT&T has the iPhone and doesn’t allow other wireless providers to offer it to their customers, and DirecTV has exclusive rights to NFL Sunday Ticket,” Ceanna Guerra, a spokeswoman for Cox in San Diego, said in an e-mail response to questions. “We lawfully negotiated and paid for the rights to distribute Padres content when no one else wanted to make the investment, and now because of the success of our vision, AT&T wants the law changed so that it can benefit from our investment.”

A more personal perspective

Imagine if Cox offered The Sacrifice Bunt a large sum of money in exchange for exclusive distribution rights of the blog. Then the FCC informs us we aren’t allowed to make such a deal.

Ray and I work hard, invest our own time, money, and hard work, all of which is done at our own risk, to develop and grow The Sac Bunt’s content and reader base. We should the right to do with it what we wish, no matter how dumb of a deal I’m likely to sign if given the opportunity. The same applies to The Padres, Cox, and anyone else who risks their own resources to provide goods and services to others, in exchange for a voluntary fee.

Cox’s exclusivity is likely to change when the contract is up come 2012.

In July, Padres President Tom Garfinkel told The San Diego Union-Tribune that the exclusivity of the Padres’ deal with Cox may be on the table when the contract comes up for renewal.

“Our goal is to make our broadcasts available to as many fans as possible in the future,” Garfinkel said.

Supporters say the FCC’s actions are necessary to create competition:

AT&T and satellite TV providers have long complained that cable companies are using the loophole to gain a competitive edge. They say local sports such as Padres games are “must have” content for many potential subscribers. By blocking access, Cox has hamstrung its competitors.

Should it be a surprise that those making the case for it such an action are the ones who stand to gain the most? AT&T’s operations in San Diego demonstrate the competition does exist, and will likely have every opportunity to challenge Cox’s exclusivity through the same type of negotiation that occurred when the original deal was signed.

The “need” to intervene

Thanks to our country’s (mostly) market economy, there is no need for government intervention based on the “best interest of the fan”. Why? Because fans are the Padres customers. It’s in the best interest of the Padres to keep the best interest of the fan in mind. If the Padres alienate the fans, the Padres’ lose even more. And since those fans only exist because of the work, investment, and risk of the Padres, it is the Padres who have earned the right to market the team how they choose.

Who knows, perhaps the money the team receives in exchange for exclusive TV rights contributes largely to player payroll. At that point, the decision of what is or is not in the fans’ best interest becomes quite blurry.

Posted in media | 12 Comments »

12 Responses to “Don’t blame Cox for the Padres’ poor decisions”

  1. Ray says:

    If it’s in the best interest of the Padres to not alienate the fans, why’d they sign the exclusive contract in the first place?

    • Melvin says:

      My guess is it had to do with the market at the time.

      Either way, the Padres are a lot better equipped to market their team than the FCC is.

    • Ray says:

      Is anyone saying otherwise?

    • Melvin says:

      The FCC, apparently.

    • Ray says:

      Then I suppose it’s a good thing the Padres don’t disagree (if you trust Jay Posner’s inference):

      “Our goal,” Padres President and COO Tom Garfinkel said, “is to make our broadcasts available to as many fans as possible in the future.”

      That sounded good to the Padres when they signed the contract with Cox, but Garfinkel clearly isn’t a fan of a deal he inherited. Garfinkel’s too smart to come out and insult a business partner, but it’s pretty obvious what he meant when he talked about making the broadcasts more available.

      When asked if that could take place with a new deal, he said, “I’m optimistic that could happen.”

      Padres pursuing definition of ‘broadcast’

    • Melvin says:

      Oh yeah, definitely. I would bet the current ownership thinks the current deal isn’t great by 2010 standards.

    • Ray says:

      According to this, Alderson was NotAFan and Moorad wants to get a piece of that Riverside pie.

  2. […] – The Friarhood Where’s The Sunscreen? – The Official Blog of Matt Antonelli Don’t blame Cox for the Padres’ poor decisions – The Sacrifice Bunt Padres complete rotation, sign Jon Garland – Who’s your Padre? Possibly related posts: […]

  3. Chris says:

    The way I see it is the Padres should embrace more exposure. If 40% MORE San Diegans watched them on TV, like everywhere else in the US, there’d be more fans, more people at Petco, more interest and probably higher salaries, better team etc. At least the whole city could watch them if they wanted. Only Cox cable customers and high-end Time Warner customers even get a chance to see our Padres. How many viewers is that? Cox is just mad that the law the rest of the country abides by, now applies to them, finally. To me, exclusivity is borderline monopoly, something no one likes. The PADRES will be the big winners and on a much bigger stage now.

    • Melvin says:

      You’re right, Padres should embrace more exposure. If you think about it, this is exactly why government intervention to force the issue is unnecessary at best.

      And an exclusive deal isn’t a monopoly. You can’t just make up a new definition for the word and apply it to this deal because you don’t like it.

  4. Chris says:

    And an exclusive deal isn’t a monopoly. You can’t just make up a new definition for the word and apply it to this deal because you don’t like it.

    You’re right. I had such a great point going, (and it still is) and I went wtih the “m” word. It’s just that the lame examples that Cox and the other cable companies have used are the NFL Sunday Ticket, (which is nothing like ours and Philly’s situation. The ST broadcasts games OUTSIDE of the local area. In fact, the local football team in every other city, including ours, can be watched with an antenna, for free. Nice try there.)
    Then, they say AT&T has an exclusive deal for the iPhone. Again, a cool new phone is hardly a comparison to a local baseball team that has fans for over 50 years, wins, loses, cries and cheers with their hearts for the HOME TEAM. (I don’t see anyone wearing an iPhone hat)
    I have DISH Network, which costs half as much as Cox, and I just think it’s not fair that I can see the Chargers for free, but, have to buy Cox cable to watch the Padres. I’m just excited that I’ll be able to become a Padre fan again, because I’ll be able to actually see them play. We’ll all win!

    • Melvin says:

      The real losers here are anyone who enters a mutually beneficial contract, which is a lot of people. They won’t know if it will be an agreement they can rely on, because at any moment the FCC could come and change the rules. That’s the danger.

      Lets say you wanted to pay me $500 / month to write content exclusively for a web site. The reason you want it to be exclusive is because you are going to spend $2,000 in time and training materials teaching me the best way to create content. But then, a competitive website accuses your deal with me of being illegal, and the FCC therefore grants me free access to write for any website I want. Wouldn’t you think twice about ever investing money into a writer again?

      It’s that investment that leads to innovation and the development of cool things like iPhones, baseball teams, and awesome websites. And such rulings by the FCC discourage them.

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