MLB Loses Most of Cable Royalty Fight, but Court Still Throws Out Copyright Board’s Split

Major League Baseball lost nearly all of its challenge to how federal copyright officials valued sports programming, but a federal appeals court still threw out the final split of millions of dollars in cable television royalties after finding that the Board never adequately explained how it arrived at the numbers.

The U.S. Court of Appeals for the District of Columbia Circuit on Tuesday vacated the Copyright Royalty Board’s allocation of cable retransmission royalties collected from 2014 through 2017 and sent the matter back for further proceedings. The ruling came even as the court upheld most of the methods challenged by MLB and Public Broadcasting Service.

MLB brought the appeal on behalf of the Joint Sports Claimants, which also include the NFL, NBA, NHL, WNBA and NCAA. The sports group received 36.13% of the basic royalty fund for 2014, worth about $81.6 million, before its share fell to 11.42% in 2015. It received 10.72% in 2016 and 12.36% in 2017.

The money comes from cable companies that retransmit broadcast stations outside their local markets. Cable operators pay into a federal royalty pool rather than negotiate separately with every copyright owner whose programming appears on those channels. The Copyright Royalty Board then divides the money among groups representing sports, commercial television, public television and other programming.

A major shift in the cable market changed the value of sports programming during the period covered by the case. WGNA, then the most widely retransmitted distant station and a major source of Chicago professional sports, converted from a broadcast station into a cable network in 2015. Its departure sharply reduced the sports programming included in the federal royalty system.

The Board relied mainly on two measures to value what remained. One examined cable operators’ actual carriage decisions and royalty payments. The other asked operators how they would divide a hypothetical programming budget among different categories.

MLB and the other sports claimants challenged several parts of that process, including how the Board treated systems paying only minimum royalty fees and an adjustment that increased the value assigned to public television.

Chief Judge Sri Srinivasan, writing for the court, largely sided with the Board on those disputes. The judges found that changes in the cable market gave the Board reasonable grounds to adjust how it evaluated operator behavior and upheld its treatment of the competing valuation evidence.

The case turned instead on what happened after those calculations were complete. The Board described how much weight it placed on the different valuation methods, but the appeals court found that its written decision never showed how those judgments became the percentages ultimately assigned to each claimant group.

MLB’s 2014 share made the problem particularly clear. One valuation method put the sports group at 37.48%, while the survey put it at 39%. The Board said it placed heavy weight on the survey, yet awarded sports 36.13%, below both estimates.

The court found similar gaps elsewhere in the allocation. Some claimant groups ended up close to the survey results, others landed substantially above them and sports fell below them, despite the Board using similar language to describe how it weighed the evidence.

Federal agencies have broad discretion when choosing among competing economic models, particularly in technical proceedings. A reviewing court, however, still needs enough reasoning to follow how the agency moved from the evidence to the result. The D.C. Circuit found that connection missing here and vacated the allocation.

The ruling does not guarantee MLB a larger share of the royalty pool. Most of the valuation methods challenged by the sports leagues survived review, leaving the Board to revisit the final allocation and explain how those accepted methods produced the percentages it awarded. The agency could ultimately reach the same numbers with a fuller explanation or alter the distribution when it reexamines the calculations.

Public Broadcasting Service also appealed the 2014 through 2017 allocation, arguing that public television had been undervalued. The court rejected its principal methodological challenges along with most of those raised by the sports claimants.

Senior Circuit Judge Judith Rogers agreed that the allocation should be vacated but wrote separately that the court should have waited for the Board to explain its calculations before resolving several of the remaining challenges.

The case is Office of the Commissioner of Baseball v. Librarian of Congress, consolidated case Nos. 24-1259 and 24-1260.