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.