Chicago-Kent College of Law Scholarly Commons @ IIT Chicago-Kent College of Law All Faculty Scholarship Faculty Scholarship January 2012 Competitive Entertainment: Implications of the NFL Lockout Litigation for Sports, Theatre, Music, and Video Entertainment Henry H. Perritt Jr. IIT Chicago-Kent College of Law, [email protected] Follow this and additional works at: https://scholarship.kentlaw.iit.edu/fac_schol Part of the Entertainment, Arts, and Sports Law Commons Recommended Citation Henry H. Perritt Jr., Competitive Entertainment: Implications of the NFL Lockout Litigation for Sports, Theatre, Music, and Video Entertainment, 35 Hastings Comm. & Ent. L.J. 93 (2012). Available at: https://scholarship.kentlaw.iit.edu/fac_schol/447 This Article is brought to you for free and open access by the Faculty Scholarship at Scholarly Commons @ IIT Chicago-Kent College of Law. It has been accepted for inclusion in All Faculty Scholarship by an authorized administrator of Scholarly Commons @ IIT Chicago-Kent College of Law. For more information, please contact [email protected], [email protected]. Competitive entertainment: Implications of the NFL lockout litigation for sports, theatre, music, and video entertainment Henry H. Perritt, Jr.1 Table of Contents I. Introduction .......................................................................................................................... 7 II. Background of the NFL controversy ............................................................................... 11 III. Entertainment product and labor markets ................................................................. 18 A. Industry structures and labor markets ....................................................................... 19 1. Corporate structures................................................................................................ 19 2. Sports and the rest – similarities and differences ............................................... 21 3. Proximity of labor and product markets: thickness of the production function 28 4. Geographic scope ..................................................................................................... 29 5. Strength of worker attachment .............................................................................. 29 6. Bifurcation of live performances and recordings ................................................ 30 1 Professor of Law and former Dean, Chicago-Kent College of Law. Member of the bar: Virginia (inactive), Pennsylvania (inactive), District of Columbia, Maryland, Illinois, Supreme Court of the United States. Professor Perritt is the author of more than a dozen books and eighty law review articles on labor and employment, law and technology, international affairs, Kosovo, and entertainment law. He is a playwright, screenwriter, and musician, having written and produced a musical, two full-length straight plays, a movie screenplay, several short plays, authored three novels, and recorded two music albums. He appreciates good research, analysis, and ideas from his research assistant, Jeremy B. Abrams. 1 7. Day jobs ..................................................................................................................... 30 8. Stratification ............................................................................................................. 30 9. Cross subsidization ................................................................................................. 31 10. Sources of revenue ................................................................................................... 31 11. Stickiness of demand ............................................................................................... 32 12. Financing ................................................................................................................... 32 13. Attitude toward collective bargaining.................................................................. 32 14. Defining the boundary between product and labor markets............................ 33 15. Sources of controversy ............................................................................................ 33 B. College sports--the enigma ........................................................................................... 34 IV. Analytical approach ....................................................................................................... 39 A. Antitrust generally ......................................................................................................... 39 1. The antitrust laws .................................................................................................... 39 2. Rule of reason ........................................................................................................... 41 B. Labor law ......................................................................................................................... 44 1. Collective bargaining .............................................................................................. 44 2. Economic weapons .................................................................................................. 46 3. The labor exemptions to the antitrust laws—in general .................................... 48 4. Statutory anti-competitive approaches—FLSA................................................... 62 V. Tolerance of certain anti-competitive arrangements .................................................... 66 A. Supreme court touchstrones for anti-competitive labor market arrangements ... 67 B. Concerted refusals to deal ............................................................................................ 68 2 C. Salary caps and other limitations on compensation of employees ......................... 73 D. Employee mobility ......................................................................................................... 73 E. Assuring a stream of new talent .................................................................................. 76 F. Contracting out ............................................................................................................... 80 G. Regulating channels for reaching audiences ............................................................. 81 H. Sharing new product-market revenue streams ...................................................... 82 I. Limiting competition by independent contractors ................................................... 84 J. Controlling other labor-market intermediaries ......................................................... 86 VI. The revolution and the rule of law .............................................................................. 87 A. Implications for the future ............................................................................................ 88 1. Entrepreneurship continuum ................................................................................ 88 2. Trends in industry structures ................................................................................ 88 3. Doctrinal accommodation ...................................................................................... 92 4. Areas of possible conflict ........................................................................................ 92 5. Contraction of the labor exemption and more rule-of-reason analysis ......... 101 6. Two hypothetical scenarios .................................................................................. 102 VII. Hope for the future ...................................................................................................... 110 Competitive entertainment: Implications of the NFL lockout litigation for sports, theatre, music, and video entertainment .................................................................................. 1 I. Introduction .......................................................................................................................... 7 II. Background of the NFL controversy ............................................................................... 11 III. Entertainment product and labor markets .................................................................. 18 3 A. Industry structures and labor markets ..................................................................... 19 1. Corporate structures................................................................................................ 19 2. Sports and the rest – similarities and differences ............................................... 21 3. Proximity of labor and product markets: thickness of the production function 28 4. Geographic scope ..................................................................................................... 29 5. Strength of worker attachment .............................................................................. 29 6. Bifurcation of live performances and recordings ................................................ 30 7. Day jobs ..................................................................................................................... 30 8. Stratification ............................................................................................................. 30 9. Cross subsidization ................................................................................................. 31 10. Sources of revenue ..................................................................................................