Updated Coverage of Supreme Court Decision

Don Walker of the Milwaukee JournalSentinel wrote this article that was on the front page of their business section today:

http://www.jsonline.com/story/index.aspx?id=757530

He includes a quick quote from me. I never received a cease-and-desist letter from MLB like many of my larger business partners (the Draft Analyzer includes players names and stats from our content providers, but we are well below the radar of MLB). But there was always a worry that if they did own the rights to players names that I would eventually have to get a license and pay them 7% of my top line revenue (equates to 20-30% of net income for a typical business) or that they would not provide me with a license and put me out of business entirely. With the possibility of having to give the leagues a significant chunk of my profits or be forced out of the market, I would not be able to raise enough capital for my business (i would have to give up a larger chunk of the company for less cash) and I would certainly spend less on improving my products/sites and have less incentive to take the risk of creating innovative new applications such as playersearch.com that revolve around these athletes. I could not imagine the negative effects on my business if I had to pay the major sports leagues every time someone did a search on www.playersearch.com.

Here is a CNBC interview with Bob Bowman, CEO of MLB.com:

http://www.cnbc.com/id/15840232?video=759532846

Here is a Fox Business News interview with Charlie Wiegert, Founder of CDM and defender of the free fantasy sports world:

http://glickreport.blogs.foxbusiness.com/2008/06/03/a-fantasy-win/

Derrick Ekardt at RotoNation has some good links as well.

Supreme Court denies hearing for MLB case

It appears that MLB has exhausted its chances to overrule two previous court rulings that stated player statistics and the player names associated with those statistics are in the public domain. It was pretty incredible watching this case from the very beginning all the way to the Supreme Court. CDM Sports has been a business partner of mine since 2005 and they have been great people to work with. As a board member of the FSTA, I was also involved in the decision to fund three briefs on behalf of CDM Sports and the fantasy sports industry in general…so I have watched this case closely from start to finish. (can’t believe MLB brought it all the way to the Supreme Court…but if you look at the economics of it it isn’t that surprising that they refused to give up…although their legal expenses are reportedly well over $2 million, the value of owning the rights to players names is worth ten times that; in fact ESPN reportedly opted out of a seven-year, $140 million deal with MLBAM after 3 years after MLBAM lost its appeal in late 2007).

I wrote about this case previously here.

Charlie Wiegert, a business partner of mine and colleague on the FSTA board, deserves full credit for taking on and beating MLB by himself. It cost him high six figures to defend his business and he had to do it alone (larger companies that could afford to cover legal fees such as ESPN, Yahoo, and SportsLine already had licenses from MLBAM and also had more important TV deals with MLB and the NFL; smaller companies like mine could only afford to pray for Charlie and offer him a beer at the next FSTA conference).

Rudy Telscher, lead counsel for CDM, also deserves a lot of credit. He spoke a couple of times (when legally practicle) at the FSTA conferences and it was clear he understood an incredible amount of detail and every little nuance of this case and related cases. This was nothing short of a David versus Goliath effort and accomplishment.

It will be very interesting to see what happens to the partnership between MLB and MLBAM after this. In 2005, MLBAM paid MLB $50 million to acquire the on-line rights to players, including for fantasy sports purposes. This isn’t exactly an arms length transaction as MLBAM is a subsidiary of MLB, but it is clear that a significant chunk of those on-line rights are now worth a lot less. MLB.com is still in great shape (13mm Unique Visitors in April; top 5 sports destination) and can continue to grow by adding games, video, content and other innovations that draw customers to its site.

I will post further information here as I get it. Charlie recently started his own blog which is here. It sounds like Charlie is getting ready for TV interviews at this point so he may not get a chance to blog about this until later.

More coverage by RotoNation here and here. I just spoke with Don Walker at Milwaukee Journal Sentinel. Don is writing an article that will be in the print edition of the Milwaukee Journal Sentinel tomorrow (my favorite hometown paper).

MLB files petition with Supreme Court to Monopolize Fantasy Sports

MLBAM and the MLBPA have filed a petition to the Supreme Court to continue their battle with CDM Sports (my long-time business partner) over the right to use baseball player names and stats in a fantasy game. In short, MLB wants to monopolize fantasy baseball to make sure that MLB benefits directly from any subscription or ad revenue generated from the 4-6 million fans that play fantasy baseball.

According to Eric Fisher at SportsBusiness Daily:

“The pair’s [MLB and MLBPA] filing to the Supreme Court argues that a series of prior lower court rulings involving First Amendment and right of publicity issues have created an inconsistent mess, and that “the appropriate legal test for balancing state-law publicity rights and First Amendment interest is a recurring and important question on which this Court’s instruction is needed.”

Full article: http://www.sportsbusinessdaily.com/index.cfm?fuseaction=sbd.main&articleID=118908

This filing does not mean that the case will be heard by the Supreme Court, in fact it is highly likely this case will be thrown out. Lawyers involved with this case have stated in the past that MLB had a better chance of winning this case at the state level than the federal level because of the protection provided by the First Amendment.

In its efforts to litigate this issue, and subsequently losing, MLB has lost at least $4-$6 million in annual licensing revenue from ESPN, Yahoo, Fox, CBS and other smaller fantasy baseball operators that are no longer forced to pay these licensing fees. MLB’s loss has also affected all other sports leagues (NFL, NBA, NHL, Nascar, etc.) as they are no longer able to force companies into paying licensing fees to operate fantasy games for their sports. The winners of all this are the small businesses that MLB was trying to shut down and customers who benefit from lower prices and more innovation.