The FCC has eliminated its sports blackout rules. The vote was unanimous. Each Commissioner released a separate statement upholding fans’ rights to see local teams on the air.
It is important to note that the blackout rules never applied to television. Rather, the Sports Broadcasting Act of 1961 authorized professional football, baseball, basketball and hockey leagues to pool their teams' television rights and to black out home games, all without violating anti-trust laws. In 1973, Congress limited the blackout right to games that were not sold out 72 hours in advance. Even though that statute expired in 1975, the NFL has continued the practice ever since. (No other sports league has a history of invoking blackout rights.)
In order to prevent cable systems from frustrating the leagues’ blackout policies, in 1975 the FCC adopted its cable sports blackout rule that barred the importation of signals of distant stations carrying a game that was blacked out on a local television station. The Telecommunications Act of 1996 applied the same rule to open video systems. The 1999 Satellite Home Viewer Improvement Act extended the rule to satellite carriers within the same 35-mile zone of protection that applies to cable systems.
In its current decision, the FCC determined that the blackout rules are no longer needed to bolster gate receipts, which once were the primary source of teams’ income but now are dwarfed by revenue from television rights. (In that regard, the Commission noted that, in constant dollars, annual NFL TV rights had soared from $242 million in 1975 to $6 billion this year and that each NFL team now is worth an average of $1.17 billion.) In light of the rarity of non-sellouts, the Commission concluded that blackouts are no longer necessary to promote attendance at games. It further concluded that the dominance of television revenues would ensure that sports programming is made widely available to television viewers, a factor that it considers far more relevant in assessing the public interest than the profitability of wealthy sports franchises.
The FCC dismissed as unlikely the NFL’s contention that without the blackout rules its games would migrate from free, over-the-air TV to pay TV. The Commission reasoned that sports is the highest-rated programming on TV and attracts desirable demographics, provides valuable promotional opportunities for other programs, and is mostly watched live rather than time-shifted to bypass commercials. Consequently, sports profitability would be impaired by switching from free TV to platforms with lower viewership. The Commission further noted that current distribution contracts extend through 2022, and so any changes would not be imminent. Moreover, the FCC found no credible nexus between the blackout rules and any likely impact upon future distribution.
The FCC further dismissed NFL claims that the rules were needed to uphold contractual exclusivity rights, noting that the combination of retransmission consent agreements and standard clauses found in most network affiliation agreements with both broadcasters and MVPDs already serve to provide effective blackout protection. It further noted that compulsory copyright license fees are structured so as to strongly discourage cable from retransmitting a distant signal carrying a blacked out local sports event.
Even aside from the FCC’s reasoning and conclusions, elimination of the blackout rule is apt to have little impact as a legal or practical matter. All it will do is to remove the FCC as a potential enforcer of NFL contractual provisions. Nowadays, though, the popularity of the NFL and other professional sports leagues provides them with sufficient power to be able to negotiate all the blackout and other protections they might need. Even so, the threat of expensive litigation provides sufficient incentive to ensure compliance with their contracts without resort to the FCC’s limited and cumbersome powers of enforcement.
The rule changes are to become effective 30 days after Federal Register publication. A complete copy of the FCC’s Report and Order in MB Docket No. 12-3 is available on the FCC’s website at: http://transition.fcc.gov/Daily_Releases/Daily_Business/2014/db1002/FCC-14-141A1.pdf.