Something Washington may agree on: NFL blackouts

Zac Bissonnette, special to CNBC

Democratic and Republican senators may not agree on much, but here's an issue that's crossing party lines: outrage over a rule that National Football League games are blacked out in their local television markets when they don't sell enough tickets.

The Buffalo Bills take on the Green Bay Packers at home. Last season, former Bills owner Ralph Wilson averted a blackout at the last minute by buying thousands of tickets himself.
Getty Images

The NFL's "blackout rule" blocks TV broadcasts in a team's local market unless the stadium sells out games by 72 hours before kickoff. (Teams can opt to set the sold-ticket threshold at 85 percent, but must pay a penalty under that option.) The rule, or some version of it, dates back to 1973.

But all of a sudden, Washington is taking a close look at blackouts.

The rule has been relaxed in recent years. Before 2012, the NFL required teams to sell all of their tickets in order to avoid a TV blackout. The 85 percent modification came two years ago, at least partly in response to declining attendance. Only two games were blacked out last year, and no games have been blacked out so far this season.

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In the 1990s, as many as 30 percent of games were blacked out with little political fuss. But in recent years, the narrow concentration of the blackouts has prompted localized uproar. There were 16 blackouts in 2011, for example, but six of those struck the Cincinnati Bengals at home.

In September of this year, the Federal Communications Commission voted unanimously to stop enforcing the league's blackouts. The NFL can still enforce its own blackouts in accordance with its contracts, but cable companies can now—in theory at least—import distant signals to show games on cable when the local TV version is blacked out. But experts on both sides of the issue say there are still legal and logistical impediments to that actually happening.

It's part of an ecosystem. You change it, and you create uncertainty.
Gerard Waldron
attorney representing the NFL

With the FCC's new rule mostly symbolic, senators from both parties are spending the closing days of the lame-duck session ripping into the league.

Sens. Richard Blumenthal, a Connecticut Democrat, and Arizona Republican John McCain teamed up to introduce the FANS Act, which would require the league to end blackouts—under penalty of losing its antitrust exemption from the Sports Broadcasting Act of 1961. That exemption allows the NFL to negotiate broadcast agreements for all its teams, and it's vital to the huge TV deals that professional football depends on.

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At a Senate Judiciary Committee hearing this month, Sen. McCain said that "the rules as they are today only serve to benefit sports leagues and their member teams at the expense of the hardworking fans who support them so loyally through their money, time and passion."

The NFL sees things differently.

Gerard Waldron, an attorney with Covington & Burlington, which represents the NFL, said that the ability to black out games is "part of the foundation upon which the NFL has built its goal of maximizing fan engagement."

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The NFL remains the only major sports league that shows all of its games on local broadcast television (except for the games it blacks out for home team markets; games broadcast on ESPN and the NFL Network are blacked out on cable in the teams' local markets in order to drive viewers to the broadcast airings). Waldron said that the blackout rule has been central to its ability to do that.

A quarter of the NFL's revenue comes from ticket sales, and the league claims that the blackout rule helps to ensure full stadiums every week.

"It's part of an ecosystem," Waldron said. "You change it and you create uncertainty."

Teams are already well-incentivized to avoid blackouts, Waldron says. Blackouts lead to disgruntled fans, angry advertisers, annoyed TV affiliates and embarrassed owners.

The prospect of a blackout does seem to scare owners and other stakeholders into taking steps to avoid them. Some of those unsold tickets have been given to the Wounded Warrior Project; last-minute blackout-averting bulk buys by other owners have also supported children's charities.

"We're being accused of making billionaires spend money to help poor kids," said Waldron.

But David Goodfriend, founder of the Sports Fan Coalition, said that it's often less-than-rich people who step in to help prevent the blackouts.

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"Local groceries, local bars and local restaurants are not billionaires," Goodfriend said. "NFL team owners are billionaires. The winners here are the billionaires who suck off a federal antitrust exemption they defend against all logic and morality. The NFL could give away tickets to poor kids who can't afford their astronomical $80+ face value tickets."

Hal J. Singer, an economist with consulting firm Economists Incorporated who has done consulting work for the NFL, argued in a paper earlier this year that the blackout rule actually lowers ticket prices by giving teams incentive to fill stadiums, even if it's at the expense of maximizing revenue. Without the blackout rule, he said, teams might be content to sell fewer tickets for more money.

What's the worst-case scenario for football if the blackout rule is lifted? In the short term, its lawyer and its economist admit, maybe nothing.

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"I'm not saying it'll be the end of Western civilization," Waldron, the NFL attorney, said.

But in the long run, Singer said, preventing teams from using blackouts to drive ticket sales could push the NFL to put more of its games on cable rather than broadcast. That would lock out U.S. households that don't have cable television and strip revenue from local affiliates.

We don't really understand why they're fighting this. It's silly and it gives them a black eye with the public.
Sally Greenberg
executive director, National Consumers League

As Singer sees it, the demand to end the blackout rule is really about politicians promoting the interests of cable companies at the expense of the autonomy of the league and the broadcast networks.

He noted that the leading advocate for ending the blackout rule, Sports Fan Coalition head Goodfriend, is a former vice president of law and public policy at Dish Network. Goodfriend, a registered lobbyist, told a reporter on assignment for CNBC that the coalition is funded by Enterprise Rent-A-Car, but noted that he also does lobbying work for Dish.

The political attacks on blackouts, the league's advocates suggest, are really part of a plot to weaken the bargaining position of broadcast television for the benefit of cable companies.

But Sally Greenberg, executive director of the National Consumers League and an opponent of blackouts, wonders how, given the rarity of blackouts, they could really be so vital to the league's strategy. She said that shining a light on the blackout issue is really about getting the American public focused on the public benefits the NFL receives in the form of stadium subsidies and tax breaks—and the league's unwillingness to show its gratitude to the public.

"We don't really understand why they're fighting this," she said. "It's silly and it gives them a black eye with the public. I think [the NFL owners] just don't want to be told what to do by anybody."