Sports Blackout Rules on the Ropes?

FCC proposes to eliminate rules designed primarily to enforce NFL blackout decisions.

Looks like the clock is running out for the sports blackout rules.

In a Notice of Proposed Rulemaking (NPRM) the FCC has proposed their elimination, although the NFL, MLB, NAB and a number of network TV affiliates appear poised to mount a late-game defensive surge to try to save them. The outlook for the rules, however, isn’t brilliant.

The sports blackout rules as they currently stand generally prohibit certain multichannel video program distributors (MVPDs – think cable systems, broadcast satellite services, open video systems) from carrying, within a protected geographical area, a live sporting event not available live on a local over-the-air (OTA) TV station in that area. You can find the rules themselves in Sections 76.111 (cable operators), 76.127 (satellite providers), 76.128 (application of sports blackout rules), 76.1506(m) (open video systems) of the FCC’s rules. Importantly, the rules themselves are not the source of sports blackouts; rather, the respective professional leagues determine the availability of OTA game broadcasts. The FCC’s rules effectively impose league-initiated blackouts across the various MVPD services.

The blackout rules developed in a piecemeal fashion over the course of more than 50 years. Initially applicable to broadcast stations only (since the other video services didn’t exist in the early 1960s), they were gradually expanded and tweaked as necessary to apply to the various MVPD services as those services came online and were embraced by the viewing public.

In the 1960s, the NFL, whose activities were limited thanks to antitrust litigation dating back to the 1950s, pressed Congress for permission to pool and sell as a package the TV rights of the league’s teams. Congress agreed, passing the Sports Broadcasting Act of 1961 that exempted from antitrust laws the packaging of video rights by professional football, baseball, hockey and basketball leagues. The law also permitted leagues to blackout OTA broadcasts of home games within the home territory of a league member. 

In those halcyon times it was believed that gate receipts were a team’s primary revenue source; the ability to blackout coverage of local games was thought necessary to maximize attendance and, thus, receipts. From the leagues’ perspective, the goal of the Sports Broadcasting Act was to allow the league to equalize revenues among its members. By contrast, the FCC emphasized that its concern was “not in ensuring the profitability of organized sports, but rather in ensuring the overall availability of sports telecasts to the general public”. According to the FCC, the overall availability of sports telecasts was “of vital importance to the larger and more effective use of the airwaves” – a sentiment that most sports lovers would wholeheartedly endorse.

By the early 1970s, though, football fans were unhappy that they couldn’t watch home games on local TV even when the games were sold out. Baseball, basketball and hockey fans were not similarly unhappy because, unlike NFL games, TV coverage of MLB, NBA and NHL games were not all pooled at the league level; rather, TV coverage of the majority of non-football games was subject to contracts negotiated between the individual teams and local TV stations.

At the urging of football fans, Congress added language to the Communications Act prohibiting blackout of local TV broadcast in a team’s home territory if the game was being televised elsewhere (thanks to the league’s TV deal) and the game was sold out 72 hours before game time. Although enacted only as a two-year experiment set to end as of December 31, 1975, this approach to blackout has lived on since then: The NFL has voluntarily imposed the approach since 1976 (although it was modified somewhat in 2012).

As cable, and then open video, and then satellite services gained footholds in the video arena, Congress and the Commission imposed variations of the original blackout rules on each, leading to the present-day state of affairs.

But in 2011, a number of groups petitioned the Commission to toss all the blackout rules. The groups – fan-based (Sports Fan Coalition, League of Fans) and/or traditional public interest (National Consumers League, Public Knowledge, Media Access Project) – view blackout rules as “anti-consumer” and no longer necessary to protect gate receipts.

The FCC agrees: “It appears that the sports blackout rules have become obsolete.”

But before it can take the rules off its books, the Commission must seek public comment. Hence the NPRM, where the FCC asks a wide range of questions, including: Does it have the authority from Congress to toss the rules? If so, what effect do the rules currently have, and would their retention serve any purpose? How do the blackout rules affect sports other than the NFL? Are gate receipts still the most significant source of revenue for professional sports teams and, if not, are the rules still necessary to ensure availability of sports telecasts to the public?

The prospect of eliminating the blackout rules raises thorny questions on at least two other fronts. First, because of compulsory copyright licenses to which MVPDs are entitled under the copyright laws (and the related must-carry laws), in the absence of the blackout rules MVPDs might be entitled to retransmit OTA games broadcast by distant stations even when broadcast of such games in the MVPD’s local area is blacked out. Avoiding that result could force renegotiation of a wide range of agreements involving TV networks, their affiliates, the sports leagues and MVPDs. Would such renegotiation really be necessary and, if so, would it be practical? (The NFL suggests that renegotiation would be both necessary and hugely complicated; the petitioning fan groups disagree.)

A second issue also flows from the copyright laws: Would elimination of the blackout rules prompt sports leagues to abandon OTA television coverage in favor of direct carriage on MVPD platforms? This concern arises from the fact, noted above, that MVPDs are entitled to retransmit OTA broadcasts in certain circumstances thanks to the compulsory copyright license. That license arguably undermines the leagues’ – and particularly the NFL’s – ability to control retransmission of their games. Since the compulsory license does not apply to non-OTA transmissions, leagues interested in exercising maximum control of their game content might, absent governmentally-imposed blackout rules, be inclined to abandon OTA broadcast distribution in favor of other methods – such as dedicated, MVPD-distributed sports channels or even Internet services (e.g., MLB.tv).

The result would, in the view of the NAB and others, be a reduction in localism and the ability of local TV stations to make investments in “high quality, diverse informational and entertainment programming.” Loss of OTA broadcast coverage would also impose costs on fans who could no longer access local games for free on TV. (Note, however, that the NFL has recently re-upped its deals with CBS, NBC and FOX through the 2022 season, so we’re all presumably safe for the time being.) Whether those prospects will discourage the Commission remains to be seen.

While some, including maybe even the FCC, may view elimination of the sports blackout rules as a slam dunk, that’s probably not the case. The complex interplay of copyright considerations and elaborate contractual relationships already in place could afford opponents an effective prevent defense. Grab a beer and some chips and stay tuned.

The deadlines for comments and reply comments in response to the NPRM have not yet been announced. Check back here for updates.

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