The Federal Communications Commission (FCC) is considering an end to the regulatory support of sports league blackouts. Briefly stated, a blackout generally occurs when a televised program is not broadcast in a specific media market at the request of the rights holder. The FCC’s 1975 sports blackout rules adds regulator muscle to these private contracts. When a league (and only a league) has contracted with a broadcaster to abide by the league’s blackout criteria, the FCC rules prevent cable and satellite carriers, which if not restrained by the rules could easily transmit from a market that is not blacked out into a market that is blacked out, from doing so. What the rule (or its elimination) does not do is prevent leagues and telecasters from continuing to enter into private contracts that include a blackout provision.
This regulatory regime came into being largely to protect the gate receipts of sports leagues (the National Football League (NFL) in particular) and has been continued in part to protect local broadcasters. To help the leagues, in 1975 the FCC argued that the rule was necessary to supplement congressional legislation and to get people off their couches and into the stadium. The FCC’s justification was that if gate receipts were reduced by local broadcasts, and the leagues became economically unviable as a result, then there would be no sports telecasts for the general public to quibble about.
But almost 40 years later, the sports industry has changed and the sports blackout rules are beginning to show their age. Today’s leagues and teams boast multi-billion dollar telecast contracts and decreasing reliance on ticket revenues. In addition, as noted by the FCC–with the exception of the NFL– teams, not leagues, negotiate their own telecast contracts, but only league contracts benefit from the FCC’s blackout rules. In light of these industry changes the FCC questions whether the rules are still in the public interest.
Key opponents to elimination of the rule are the NFL and the National Association of Broadcasters (NAB). Broadly speaking, the NFL argues that although blackouts have been steadily decreasing over time, the blackout rules still play an important role in getting people to the stadium. However, nine, well-known sports economists counter this rationale by characterizing the issue as follows “should the federal government assist the NFL in forcing a few hundred people a few days per year to choose between not seeing a game and attending the game in bad weather, while simultaneously preventing fans who do not have tickets from watching the game on television?”
The NAB’s concern is more nuanced, and ultimately more complicated. The broadcasters are concerned that without the rules, sports events could appear on local cable—and to a lesser degree on satellite–even when prohibited on the local broadcast station. As executive vice president Dennis Wharton has stated, such a state of affairs could “hasten the migration of sports to pay-TV platforms” and “erode the economic underpinning that sustains local broadcasting and our service to the community.”
Historically the FCC has been sympathetic to the needs of local broadcasters. But the broadcasters’ argument has more teeth to it than mere supplication for FCC preference. Broadcasters, unlike cable and satellite operators, are uniquely constrained by their compulsory license requirements that dictate the broadcaster to grant liberal retransmission rights to cable operators and, to a lesser extent, satellite operators. Indeed, the FCC has called for specific comments as to the likelihood that cable and satellite providers may use these compulsory licenses to “circumvent” sports leagues’ contracts for broadcast rights to their games.
This may well be a dispositive issue as to the total or partial elimination of the rules. Currently it appears that the FCC is not convinced by the argument and believes “that a sports league could prevent unwanted MVPD retransmission through its [private] contracts with broadcasters by requiring, as a term of carriage, the deletion of specific sports events [from MVPD retransmission].”
The FCC will be accepting comments to its proposed rulemaking until mid-February and it is not yet certain when, or if, a final vote will be scheduled.
–Babette Boliek is an Associate Professor of Law at Pepperdine University School of Law and a frequent contributor to AEI’s Techpolicydaily.com.
