Former NFL commissioner Paul Tagliabue told a Federal Communications Commission judge Thursday that Comcast CEO Brian Roberts used the veiled threat of collaborative action by the cable industry if the league did not license an eight-game package to its OLN network, now known as Versus. The league eventually decided to keep the games and put them on its NFL Network.
Tagliabue's remarks came during testimony at a hearing on the NFL's program carriage complaint against Comcast, with the top cable operator's CEO Brian Roberts slated to counter that characterization in testimony expected Friday.
At issue is whether Comcast discriminated against the NFL by moving the NFL Network to a sports tier. Roberts, in his prepared testimony, says clearly not, since it had a contractual right to do so. Tagliabue said he was not familiar with the details of the contract, but that the broad strokes were "wide distribution," and that the move was a retaliatory strike that reduced that distribution
In his testimony, Tagliabue said that in a Jan. 27, 2006, phone call informing Roberts that the NFL had decided to keep the games, Roberts responded by saying that "your relationships with the cable industry are going to get very interesting," which he said he took to mean it would not be "business as usual" with the cable operators, and that they could collectively favor Versus, which he said Comcast wanted to use to take on ESPN.
"In retrospect," said Tagliabue, "I believe that Mr. Roberts' statement foreshadowed Comcast's retaliation against the League and NFL Enterprises." He said that retaliation was in for form of moving the NFL Network to a premium sports tier that was "available to far fewer of Comcast's subscribers."
Comcast lawyer Michael Carroll countered that that wasn't quite accurate, since it was available to just as many, so long as they were willing to pay for the sports tier.
A lawyer with the FCC's Enforcement Bureau asked Tagliabue whether he had followed up with Roberts on the issue of whether the Comcast executive was talking about the entire cable industry or simply his own company. Tagliabue said no but added, "when North Korea threatens you, you don't ask them to be more specific."
According to a copy of testimony prepared for delivery later in the trial, Roberts indicated that he has "no recollection" of saying during the Jan. 27 conversation that relationships with the cable industry were going to get "complicated" or "very interesting." He said he did recall commenting that he was disappointed and that, as "I had before, that I foresaw that the NFL was likely to continue to face difficulties persuading cable operators to provide NFLN, given that the addition of eight live games would add significantly to the price to distributors but not materially improve the overall appeal of its content to consumers."
Roberts says Tagliabue responded that "I may not disagree with you. Perhaps the owners are making a mistake here. Your offer may be better. Sometimes the owners have to learn the hard way."
(Comcast reportedly offered $300 million to $400 million for the eight primetime games.)
Tagliabue spoke to the issue during cross examination by Comcast lawyers, saying that learning the hard way was part of a general philosophy and that he had entertained the possibility that they might be right, as well.
Roberts says that NFL president Steve Bornstein told him back in 2003 that Comcast could not expect to have "a reasonable chance to bid for access to the NFL Sunday ticket or rights to the other NFL games...unless it first agreed to carry NFLN... It was the NFL, not Comcast, that first linked the issues of Comcast licensing NFL games and telecast rights to carriage of NFLN."
For his part, Tagliabue conceded the NFL may have indicated to Comcast that it would not be taken seriously at the negotiating table for that eight-game package if it did not carry the NFL Network. But he said that was not a threat in the context of the discussions. Instead, he said, it was a suggestion of how to build a better business relationship. A threat, he said, would have been saying that Comcast could not get into the room.
Tagliabue said he was not familiar with the exact terms of the 2004 contract that gave Comcast the ability to move the NFL Network to a sports tier, but said his understanding had been that the network would get broad distribution. "You were totally out of the loop?" Judge Sippel asked. Tagliabue said yes, in terms of the contract specifics. He said that as far as he knew, the contract involved wide distribution of the NFL Network, Comcast's ability to bid on the Sunday Ticket package -- then as now exclusively held by DirecTV -- the ability to bid on the eight-game package, and exclusive VOD game highlights.
Roberts, in his testimony, asserts that Comcast never had a "meaningful" shot at the Sunday Ticket package, saying Tagliabue told him "don't waste your time."
In his testimony, Roberts also indicates that he did want to build a "new and different" relationship. Bu he also said that it was clear, and in the contract for carrying the NFL Network, that if Comcast did not get rights to Sunday Ticket or another package of NFL games for a Comcast-owned network, "it would have the right tot place NFLN on a sports tier."
But Roberts also indicates that he never threatened to place NFLN on a sport tier if Comcast did not get the games for Versus (then called Outdoor Life Network), and that moving it there "was not motivated by any desire to retaliate against the NFL."
Carroll, in his questioning of Tagliabue, pointed out that Comcast had saved $54 million by moving the NFL Network to a sports tier, a point Roberts also made in his written testimony, though the figure was blacked out. Carroll asked Tagliabue whether it was appropriate for a company to exercise that option in a contract to further its business interests. Tagliabue said yes, but in this case there was the added, anticompetitive, element. "The situation is different if it was done for a motive to restrain competition as a sham to cover anticompetitive behavior," Tagliabue said.
The NFL tentatively closed its case, with Comcast beginning to offer up its witnesses for cross-examination. Those included economic consultant Jonathan Orzag, who planned to refute the NFL network's claim that Comcast had discriminated in favor of its affiliated networks Versus and Golf Channel by placing them on a basic rather than sports tier.
According to a copy of his testimony, he argues that the most compelling case is made by the fact that six of the top seven cable operators don't carry the NFL Network at all, while they do carry Versus and Golf.
After the first two days of closing the trial two reporters after opening statements, Thursday's morning's cross-examination by Tagliabue was open to reporters, with only occasional pauses to make sure testimony was not straying into redacted (blacked or blanked out) territory (the $54 million figure above may have been a slip, since it was redacted in Roberts' written testimony).
The judge has instructed that redacted transcripts of the earlier days' cross-examinations be made public, but those were not yet ready at press time. That came after Bloomberg wrote a letter complaining about closing down the court.
The judge appeared sympathetic to the complaint, and Thursday morning's open session appeared to demonstrate that.
The hearing is expected to go through Friday, with the next program carriage complaint hearing--Wealth TV vs. Comcast, Cox, Time Warner & Bright House--scheduled to start next Tuesday.
NFL's lawyers said they would try to abbreviate their cross-examination to get through Comcast's six witnesses by end of day Friday.
The hearing comes, coincidentally, as the contract is running out on Comcast's carriage of NFLN April 30 and the operator has indicated to its subscribers that it will likely have to drop the network after that date if there is no deal.