February 16, 2005
When IP Meets WHIP
That's the good news, such as it is. The worrisome news, if you're a fantasy baseball player used to having innumerable online options to feed your addiction, is that MLB has decided to dramatically restructure how it licenses companies that run fantasy games on the Web. Official licensees will now likely be restricted to a Big Three of ESPN, CBS Sportsline and Yahoo! (some reports add AOL and The Sporting News as well), plus so-called "mom and pop" shops that will be henceforth limited to 5,000 customers apiece. For everyone else, it's likely to be a choice of scaling back their operations, closing up shop, or receiving a visit from MLB's lawyers.
Those two paragraphs, I realize, may sound contradictory. If fantasy sports sites are essentially just stats services, how can MLB shut them down for publishing the same thing that appears free of charge in every newspaper in the nation? It seems a sensible enough question on the face of it, but then, these are the intellectual property wars, where common sense is generally the first casualty.
The whole kerfuffle began last month when the players union cut a deal with MLB Advanced Media (MLBAM), the same folks who brought you the revolutionary mlb.tv service that lets you watch any team's game on your computer except the ones you actually want to see (I probably watched more games pitched last year by my fantasy starters Roy Oswalt and Odalis Perez than I did by anyone on my hometown Yankees). In exchange for a payment of $50 million over five years, the MLBPA transferred selected rights to player names and images to MLBAM, which would use them in cutting deals with companies seeking to put out fantasy games (the union retained licensing rights for other products).
The consequences first came to public notice when CDM, a longstanding fantasy baseball site--it has run games for the likes of USA Today and The Sporting News, among others--applied for a license, the same as they'd done every year when the MLBPA still ran the show. This time, though, they were rejected.
As CDM Vice President Charlie Wiegert tells it, MLBAM had sent out a request for proposals from all companies that had been licensed in previous years. "On Friday [February] 4th we get an e-mail back from them that they're not going to grant us a license to operate fantasy baseball games this year," said Wiegert. "The only option that they gave us was we could send our customers to them, and if our customers signed up to play their games, they'd give us a 10% royalty."
CDM promptly sued, hiring a lawyer who'd successfully defended a client who'd published his own phone book by copying names and numbers out of a competitor's white pages. Their argument is simple: They're just providing an "accounting function" by supplying stats to fantasy players, more convenient but no different than scouring the news Web sites each night and tallying up player totals by hand.
MLB's licensing arm, though, has been careful never to assert the rights to stats, saying its only concern is with the use of player names. As Wiegert himself admits: "[MLBAM president Bob Bowman] says the stats are in the public domain, he doesn't have a problem with that. It's when you use the player names that he has a problem with, especially for a commercial purpose."
The legal issue here is something called the "right of publicity," a concept enshrined in various state laws dating back to the early 19th century. These are the laws that, for example, allowed Arnold Schwarzenegger to sue the maker of unauthorized bobblehead dolls depicting the governor of California brandishing an assault rifle (though in Ahnold's case it didn't work out too well).
The line being drawn is between news and commerce. As one online law reference notes, the First Amendment defends your right to put a picture of Madonna on your front cover if your magazine has an article about her in it; if your magazine is about casket gaskets, though, you can't slap The Artist Currently Known As Esther on there just because you want to sell a few more copies. This same distinction explains why your daily newspaper can run boxscores with player and team names, but Harold Richman has to cough up a license fee to the MLBPA for every Strat-o-Matic set he issues.
So are fantasy sites reporting news, or engaging in commerce? Most rational observers--again, the usual caveats apply about mixing rational thinking with intellectual property law--would probably say "both," which is where the law gets murky. The best precedent anyone can cite is NBA v. Motorola and Stats Inc., a 1997 case where the basketball league sued to stop a service providing real-time score updates via--man, does this ever date it--pagers. Motorola's cutting-edge score-by-pager service was more clearly a news service, whereas fantasy baseball is...well, fantasy baseball. Since stats are public domain and stats make no sense without player names, fantasy companies would seem to have a good case that using names is "fair use" and not promotion. But then, these aren't exactly the glory days of fair use, as you'll have found out if you tried to find a copy of Eyes on the Prize lately.
Further complicating the whole mess is the fact that outside of a few big-name companies, most fantasy baseball sites operated for years without ever getting licenses to use player names. Greg Ambrosius of the Fantasy Sports Trade Association estimates that only 12 of his group's 182 members were licensed by MLBPA in the past. Bill Meyer, who's been running USA Stats (the "Official Stat Service for Rotisserie League Baseball," as long as we're keeping intellectual-property count) since 1980, says: "Every couple of years I'd get a call or an e-mail from [the union], and they'd ask me to be licensed. I'd ask what authority they had, and they said they'd get back to me. I'm still waiting for them to explain to me why I have to write them a check."
Meanwhile, the fantasy-baseball landscape has certainly changed, but exactly how is still very much up in the air. CDM plans to defy the baseball owners and run its site without a license pending resolution of its lawsuit. According to Ambrosius, others are still mulling the various options open to them, including taking the 10% commission deal or scaling back to 5,000 customers. An additional holdup for many, he says, is the contract being offered by MLBAM, which among other things demands that companies turn over their customer database to MLB: "The two dollars per customer sure makes it sound good, but it's not an easy slam dunk." Among the big names still on the bubble is Fox Sports; MLBAM, for its part, says to expect more license announcements in coming days.
Meanwhile, MLB will charge ahead with its official Fantasy Baseball Opening Day tomorrow, even if half the contracts are still unsigned. One thing to watch for will be if the Big Three (Or So) try to pass along their reported $3 million licensing fees to fantasy consumers (while the MLB-enforced limits on competition would seem likely to drive prices up, it does help somewhat that companies are being charged a flat fee, not per-customer, which provides less of an incentive to jack up fees). As one data point, Yahoo!'s popular free service, a subject of much speculation among concerned Roto-heads in recent weeks, looks to have survived the new regime, if the teaser posted to Yahoo!'s Web site this morning is any indication.
The broader implication, though, is for baseball's future marketing overall. As Ambrosius says, when you limit your licensees, "at that point, you can certainly get the major sponsors to say, this is only one of three or four major commissioner services out there, this is where we can get your image out in front of everybody." What we're seeing is the dawning realization that companies will pay a premium to be part of a cartel, so it's better to divvy up the spoils among a limited number of partners than to allow all comers a piece of the pie.
Gosh, I wonder where they got that idea?
Neil deMause is a regular contributor to Baseball Prospectus. He can be reached here.