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Good Thursday Morning. Here’s the rundown of this week’s Sports Business Playbook:

• 📰 This Week’s Topic: The NFL has lost a major lawsuit stating its NFL Sunday Ticket package violates antitrust law, and the jury awarded the plaintiffs just over $14 billion in damages. While a massive number, I believe the NFL’s bold choice to take this case to trial and now try to win on appeal shows how critical it believes it needs to protect its “all for one, one for all” approach. And I think they’re going to pull it off.

• 🍸️ Impress Your Friends at Cocktail Party: Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? Hit the “Impress Your Friends at Cocktail Party” section at the bottom for a CliffsNotes of this week’s topic

• 🤯 “Whoa of the Week”: Speaking of the NFL, its national revenue numbers for this past year got leaked, and…wowza.

• 💪 Weekly Reminders that Sports are Awesome: The Brits stopping everything to watch the Euros, an unbelievable baby photo, and daddy-daughter walk-ups at the KBO All-Star game.

Hey team,

The NFL made headlines for all of the wrong reasons just before July 4th, when a jury ruled against the league in a class action lawsuit that its NFL Sunday Ticket package violated antitrust law.

The case didn’t get a lot of publicity while it was happening, but the damages number sure did. Initially set at $4.7 billion, the figure balloons to $14 billion because of the ability to “treble” damages in antitrust cases.

This is obviously a monster number, and if you’re reading only the headlines, you’d think that David has dealt a major blow to Goliath.

The problem?

As McConaughey said in Wolf of Wall Street, the numbers are fugazi.

This is definitely a setback for the NFL, but the case is far from over and given the precedent for how they’ve handled other litigation in the past, it tells me the league feels it has a pretty good chance to win and is circling the wagons to “Protect the Shield.”

In today’s SBP, we’re back to the courtroom. You’ll learn:

• How the NFL’s media deals operate

• What happened in this case and where it goes from here

• Why I think the NFL is fighting this so hard

How’d we get here

Strap in for a quick media rights 101 with Professor SBP.

While the NFL is technically 32 businesses competing against one another, it pools all of its media rights together and sells them collectively at a “national” level. Other professional leagues do this to a certain extent as well, but unlike the NFL, they also have the regional sports network models (this becomes a factor later).

While on its face this pooling of rights may seem anticompetitive, the leagues are able to do it through protections under the 1961 Sports Broadcasting Act. The SBA gave all professional leagues, including the NFL, an antitrust exemption to do a league-wide deals and negotiate collectively instead of by team with broadcast partners.

Fast forward a few decades, and this collective strategy has become the hallmark of the NFL. The NFL had 93 of the top 100 TV events in the U.S. last year, the “all for one, one for all” mentality it takes to all business matters has allowed it to ascend to the pinnacle of the sports world, and the owners/league recognize that they stand to make a lot of money by “protecting the Shield” at all costs.

In the modern media environment, the NFL’s games are split up where the major broadcasters — CBS and Fox — televise multiple games at the same time on Sunday afternoons. Which games a viewer gets depends on what local market the viewer resides in.

For example, growing up in South Carolina, my local TV games would usually feature the Carolina Panthers, Atlanta Falcons, and/or another team along the eastern seaboard.

But, as we know, fandom is transient, and there are fans of teams scattered throughout the country.

So, I grew up a Denver Broncos fan because I loved John Elway. Unfortunately, I could usually only watch the Broncos games growing up if they were playing a team in my local market or if they were playing in an exclusive national spot like Sunday Night Football or Monday Night Football.

The NFL’s solution to this: NFL Sunday Ticket.

The premium offering, costing a couple hundred bucks a season for residents and reportedly between $6,000-$78,000 per season for commercial businesses based upon the size of the venue, allows fans to watch all out-of-market games in those Sunday afternoon windows.

The service was originally on DIRECTV and just switched to YouTube TV last year (who is paying the NFL $2 billion annually for these rights). On the surface, this seems like a great solve, and the NFL and fans have both reaped the benefits of the innovative idea.

The problem is that not everyone enjoyed forking over that much money each season for something they felt was intentionally unfair. And one bar decided to do something about it.

The lawsuit

The Mucky Duck bar in San Francisco launched this nearly decade long courtroom saga in 2015.

The core complaint in the suit: the NFL violates its antitrust exemption by collectively splitting off out-of-market games and creating a standalone product well above market rate with a satellite service (DIRECTV) and now a streaming service (YouTube TV) that are not attainable on linear TV. The remedy in this scenario would be for fans to be able to buy individual teams’ out-of-market rights instead of being forced into this all or nothing option.

The case has had a number of stops and starts over the years, and many thought the NFL would settle it like the MLB and NHL did nearly a decade ago in a similar case to avoid it going further.

Instead, the league pressed on, and it eventually evolved into the major class action lawsuit in front of a jury that was decided a few weeks ago.

A jury trial is already a risky proposition, and the NFL had a number of missteps during the trial that turned the tide. For example, there were two incredibly damaging interactions with the main media partners that came out:

1. A back-and-forth with Fox and CBS where the two broadcasters asked for the NFL to keep the price high to ensure most people watched the local games

2. A series of emails with ESPN where the league declined the idea of offering a team-by-team out-of-market package

Yikes.

Plus, other leagues like the MLB and NBA offer team-based access and more cost effective options that the NFL does not.

This evidence was enough to persuade the jury to vote in the plaintiffs’ favor, which led to the $14 billion verdict we’ve been hearing about.

This case is far from over, though, and a number of signs points towards the NFL having a good shot to win post-verdict.

The league is expected to ask the judge to throw the verdict out when that process begins on July 31. As Sportico notes, the NFL has called the damages figure “nonsensical” and has a laundry list of issues with the judge and jury that lead it to believe it has a strong case for this.

And if that fails, it will go through the appeals process — first to the Ninth Circuit Court of Appeals, and from there (if needed), the Supreme Court.

If it goes through the appeals process, the case will likely take years to resolve, dragging things out even further.

So, why did the NFL choose this more risky path?

What matters to the Shield

The NFL has dealt with its fair share of litigation across a variety of issues over the last several decades.

It has shown a balanced strategy of going to trial when it thinks it has a strong case/can win on appeal (the Maurice Clarett NFL Draft case), but also knowing when to settle due to having “bad facts” and avoiding further damage (the $765 million concussion lawsuit settlement and the $800 million settlement over the league’s questionable methods for pushing through the Rams’ relocation plan from St. Louis to LA).

In the moment, it seems odd that the league chose the trial path when other leagues have settled similar suits and the downside risk with losing (blowing up their multi-billion dollar media cash cow model) is so great.

But their strategy, even with the knowledge that some damning evidence would come out at trial, tells me they think they’re going to win this and things will return to business as usual.

In addition to having a strong case, I think the existential factor of protecting the “Protect the Shield” collective mentality is driving this bold attempt to score a definitive victory.

The NFL has been able to become the giant that it is due in no small part to the “whole is greater than the sum of its parts” approach to revenue.

This socialized revenue structure has enabled the teams to steadily grow national revenues together and prevent the massive gaps between big and small market clubs that you see in other sports.

Yes, local revenues and valuations are different across the league, but the fact that each team receives an evenly distributed nine-figure payout annually from national pooled revenues is the tide that raises all ships:

• There are no major financial issues with the teams currently

• The lowest valued NFL team is still worth over $4 billion (better than all but a few of the biggest teams in other leagues)

• The expectation is that each will continue to be able to function at a high level on the national revenues they work so hard to aggregate and protect. It is an “idiot-proof system” as some owners have called it.

Media rights are one of the biggest driving forces for this national revenue, and the NFL consistently resets the market when its rights come up for negotiation. See: it’s ~$126 billion in media deals locked in for the next decade.

Breaking this model up would pose two major issues for the league:

1. Requiring each team to sell its out-of-market rights separately would likely result in the fragmentation that is plaguing many of the other leagues amid the slow demise of the RSN, and it would mean that the bigger clubs would expect to keep more of the revenue they bring in instead of sharing it evenly. This new model would place the NFL into a similar scenario as other leagues where the “have’s” and “have not’s” begin to emerge, causing major friction amongst the clubs and shifting how the league does business.

2. If packages like Sunday Ticket are ruled anticompetitive, it creates an immediate vacuum for the current partner — YouTube TV — that is going to want to renegotiate the $2 billion annual fee it pays for exclusivity. It would also likely result in the league’s broadcast partners coming back to the table to determine how to pay less because the model has shifted and not all teams will work with them on airing their games (or vice versa). Lastly, it likely means deprioritizing other holistic streaming packages (i.e., the MLS-Apple deal) that the NFL may consider at some point in the distant future as consumer habits continue to shift due to the impending risk of litigation.

To me, this is the biggest reason the league is taking a more bare knuckle, albeit riskier, approach.

It’s protecting the very model that enabled the NFL to ascend to this level, and it doesn’t want to jeopardize that moat.

🍸️ Impress Your Friends at a Cocktail Party

Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? This section is the CliffsNotes of this week’s topic

• Opener: The NFL has lost a major lawsuit stating its NFL Sunday Ticket package violates antitrust law, and the jury awarded the plaintiffs just over $14 billion in damages.

• Shot: The NFL sells its out-of-market games as a collective package. The 1961 Sports Broadcasting Act gave all professional leagues, including the NFL, an antitrust exemption to do a league-wide deals and negotiate collectively instead of by team with broadcast partners. In the modern media environment, fans can watch their local teams in market and the national exclusive games (i.e., Sunday Night Football), but they will need to purchase Sunday Ticket to watch those out of market games.

• Shot: The lawsuit alleges that the NFL violated its antitrust exemption by collectively splitting off out-of-market games and creating a standalone product well above market rate with a satellite service (DIRECTV) and now a streaming service (YouTube TV) that are not attainable on linear TV. Through a series of missteps by the NFL and some legitimate questions about the model, the jury ruled in favor of the plaintiffs.

• Shot: While this is a setback and it is surprising the league did not try to settle along the way, the NFL is going to attempt to get the verdict thrown out in late July and then escalate to higher appeals courts (including the Supreme Court potentially) if it fails. Based upon prior litigation, this would imply they believe they can win.

• Chaser: The NFL is likely looking to score a knockout punch here because it wants to protect its “all for one, one for all” business model that has gotten it to where it is today. Losing this suit would likely require a restructuring of the media rights model and have far reaching implications on how the teams interact with each other/do business together. Making a definitive statement entrenches that model and bolsters the NFL's biggest moat.

🤯 “Whoa” of the Week

Insane, mind-blowing things constantly happen in the sports business world. Here was my favorite of the past week.

1. Speaking of the NFL, the clubs get $400 million in revenue before they even factor in local revenues. Truly astounding how big the league is, particularly when compared to other leagues.

💪 Weekly Reminder that Sports are Awesome

This newsletter is, of course, mostly centered on the business side of sports and the things that happen off the field. That being said, it’s important to remember why we fell in love with sports in the first place, though.

This section is meant to highlight the amazing things that happened in sports this week that serve as that reminder.

1. The Euros make the Brits stop what they’re doing and pay attention

2. On the topic of the Euros, this is one of the wildest coincidences of all time.

3. On the topic of babies, daddy-daughter walk to home plate at the KBO All-Star Game

Thanks for reading! Let me know what feedback you have.

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Until next time, sports fans!

-Alex