Yankees Entertainment and Sports v. Cable. Systems

• Citation: 224 F.Supp.2d 657
• Decision Date: 04 September 2002
• Docket Number: No. 02 CIV. 3242(DAB).,02 CIV. 3242(DAB).
• Parties: YANKEES ENTERTAINMENT AND SPORTS NETWORK, LLC, Plaintiff, v. CABLEVISION SYSTEMS CORPORATION and CSC Holdings, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

224 F.Supp.2d 657

YANKEES ENTERTAINMENT AND SPORTS NETWORK, LLC, Plaintiff, v. CABLEVISION SYSTEMS CORPORATION and CSC Holdings, Inc., Defendants.

No. 02 CIV. 3242(DAB).

United States District Court, S.D. New York.

September 4, 2002.

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Alan B. Vickery, Philippe Z. Selendy, Marianne Fogarty, Edward Normand, Helen M. Maher, Boies, Schiller & Flexner, LLP, New York City, for plaintiff.

Yvonne S. Quinn, Michael T. Tomaino, Jr., Antony M. Candido, Vincent P. Sherman, Elizabeth M. Zito, Sulllivan & Cromwell, New York City, for defendants.

OPINION

BATTS, District Judge.

Plaintiff Yankees Entertainment and Sports Network, LLC (hereinafter "YES") brings this antitrust action pursuant to Section 2 of the Sherman Act, 15 U.S.C. § 2, Section 7 of the Clayton Act, 15 U.S.C. § 18, Section 4 of the Clayton Act, 15 U.S.C. § 15, as well as Section 340 of the Donnelly Act, N.Y.Gen.Bus.L. § 340, for alleged monopolization of the greater New York area sports programming, broadcast rights, advertising, and distribution of multi-channel video programming markets. Defendants Cablevision Systems Corporation and CSC Holdings, Inc. (hereinafter together "Cablevision" or "Defendant") now move to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) ten claims wholly or partially comprised in the Complaint's Counts I, II, III, IV, V, VI, and VII for failure to state a claim upon which relief can be granted.¹

For the reasons set forth below, Defendant Cablevision's motion to dismiss is denied in part and granted in part.

I. BACKGROUND²

A. The Parties

Defendant Cablevision and its wholly owned subsidiary CSC Holdings, Inc., are Delaware corporations which directly or indirectly own and operate cable television programs in various areas of New York, New Jersey, and Connecticut. (Compl. ¶¶ 25, 26, 38.) As a cable operator which provides pay television programming within its service area, Cablevision is considered to be a multichannel video programming distributor ("MVPD").³ (Compl.¶ 40.) Unlike other types of MVPDs, cable operators like Cablevision serve only those areas for which they are granted franchises by local government authorities for fixed periods of time. (Compl.¶ 36.)

Plaintiff YES, a Delaware limited liability company, is a regional sports programming network launched on September 10, 2001 which has purchased the local broadcast rights to, among others, New York Yankees baseball games beginning with the 2002 baseball season. (Compl.¶¶ 2, 4, 24.) It has since reached agreement with more than 30 television operators and satellite direct broadcast systems (with the notable exception of Cablevision) for the distribution of its programming in the greater New York metropolitan area to approximately 5.3 million subscribers. (Compl.¶ 4.)

According to YES, Cablevision's cable television systems are "clustered" in the New York metropolitan area (covering roughly more than 3 million households) and likely comprise the largest cluster of cable systems in the United States. (Compl.¶ 38.) Specifically, Cablevision provides its customers with a subscription television service which includes television broadcast networks, news, entertainment, general programming, and national and regional sports programming. (Compl. ¶¶ 36, 42.) Cablevision, subject to some regulation by local franchising authorities, decides which networks to distribute to their subscribers by paying a programming network, like YES, for the right to include a particular network in its programming options. (Compl. ¶¶ 43, 70-71, 85.)

Moreover, Cablevision, like many MVPDs, determines the package of channels available to subscribers through a tiered system, whereby a subscriber can purchase the simplest "Broadcast Basic", an expanded "Family Cable", and then three tiers of "Optimum TV". (Compl.¶ 43.) Each successive tier is more expensive and includes additional channels. (Compl.¶ 43.) Cablevision may also sell subscriptions to "premium" programming, such as HBO, not as part of a package, but separately on a channel-by-channel basis. (Compl.¶¶ 42, 85.)

In addition to its distribution of programming, Cablevision also indirectly owns a partial interest in Madison Square Garden LP ("MSG LP"), which in turn owns, inter alia, MSG Network ("MSG") and Fox SportsNet New York ("FSNY"). (Compl. ¶ 48.) MSG⁴, FSNY, and now YES are the only existing regional sports networks, that is, networks focused primarily on airing live sporting events of local sports teams, in the greater New York metropolitan area. (Compl.¶¶ 7, 29, 35, 48.) Cablevision sells MSG and FSNY to other MVPDs that want to make regional sports programming available to their subscribers as part of an expanded basic package. (Compl.¶ 83.)

B. The Markets

YES has identified and defined four relevant markets for the purpose of the instant case: (1) local sports broadcast rights, (2) regional sports programming, (3) distribution of multi-channel video programming, and (4) advertising on regional sports networks. (Pl.'s Mem.Law at 3.) The first, the purchase and sale of local broadcast rights to local professional sports teams, concerns the sale by the owners/creators of sporting events of their rights to televise to owners of Programming Networks such as MSG and YES. (Compl.¶¶ 30, 31.)

The second, the purchase and sale of programming of local professional sporting events, occurs between the aforementioned Programming Networks and various MVPDs, such as cable operators, for delivery to their subscribers. (Compl.¶¶ 27-29.)

The third, the market of the distribution of multi-channel programming, involves the purchase and sale of pay television services between competing MVPDs and the residents and businesses in their respective service area. (Compl. ¶¶ 32, 33.)

Finally, the advertising on regional sports networks market refers to the buying and selling of advertising time on regional sports programming services between advertisers and either the Programming Network or the MVPD. (Compl. ¶¶ 34, 35.)

C. The Dispute Between YES and Cablevision

Since its creation in September 2001, YES has actively sought to have its network distributed to the largest possible audience, and YES reached agreement with more than thirty subscription television distribution systems for its broadcast as part of expanded basic cable service, the "most popular tier of subscription television services." (Compl. ¶¶ 4, 62.) Cablevision is the only large cable operator in the greater New York metropolitan area with which YES has not reached an agreement, making New York Yankees games unavailable to Cablevision's 3 million subscribers. (Compl. ¶ 63.)

Despite a series of negotiations dating from October 2001, YES and Cablevision have been unable to reach agreement on two major issues: the tier of service on which YES would be offered to Cablevision subscribers and the price to be paid by Cablevision to YES.⁵ (Compl. ¶¶ 65-73.) Specifically, YES states that Cablevision, in alleged violation of Federal Communications Commission ("FCC") regulations, stated that "it would carry YES Network only if there were cable exclusivity, and YES Network would be unavailable to satellite distributors." (Compl. ¶ 66.) Further, YES alleges Cablevision offered to carry YES as a "premium" channel, instead of carrying it on an expanded basis tier — "an offer deliberately constructed to ensure that the YES Network would have minimal market penetration because regional sports networks generally cannot be successfully marketed on premium channels." (Compl. ¶ 67.) YES further characterizes Cablevision's offer of providing YES with its own wholly controlled subscription channel as unprecedented and untenable, since YES is not set up to administer billing or collections. (Compl. ¶ 70.) Finally, YES claims that the per-subscriber rate proposed by Cablevision is "significantly below the economic value of the YES Network by any standard industry measure" and is designed to "drive YES Network out of business." (Compl. ¶ 90.)

In sum, YES alleges that Cablevision "is using its status as a vertically integrated multichannel video programming distributor⁶ to protect its monopoly over local sports programming by refusing to grant YES Network carriage on its system on nondiscriminatory terms such as those terms and conditions available to its affiliates." (Compl. ¶ 99.) YES claims injury stemming from "having fewer viewers, less advertising at reduced fees, and the loss of revenue from subscriber fees." (Compl. ¶ 121.)

As such, on April 29, 2002, YES set forth eight Counts alleging: (1) attempted monopoly of regional sports programming market in violation of the Sherman Act; (2) attempted monopoly of local broadcast rights market in violation of the Sherman Act; (3) depriving Plaintiff access to an essential facility in violation of the Sherman Act; (4) refusal to deal to maintain monopoly of regional sports programming in violation of the Sherman Act; (5) illegal monopoly leveraging in violation of the Sherman Act; (6) anticompetitive horizontal integration in violation of the Clayton Act; (7) anticompetitive vertical integration in violation of the Clayton Act; and (8) anticompetitive arrangement and combination in violation of the Donnelly Act. (Compl. ¶¶ 116-169.)

Cablevision now moves to dismiss on the following grounds:

1. YES does not have antitrust standing to pursue a claim of attempted monopolization of the alleged "local broadcast rights" market because no causation exists for YES' alleged injury and alternatively, the injury is not cognizable as an "antitrust injury".

2. YES does not have antitrust standing to pursue a claim for attempted monopolization of the alleged market for "sale of advertising time" solely on regional sports networks because no causation exists for YES' alleged injury and alternatively, the injury is not cognizable as an "antitrust injury".

3. YES has...