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TheStreet Open House

Even the FCC Couldn't Stop NFL Blackouts

Stocks in this article: DISDTVFOXACBSCMCSA

PORTLAND, Ore. (TheStreet) -- Hey, the Federal Communications Commission voted to eliminate the sports blackout rule! That means the archaic agreement between the National Football League and the government is no more, right? That means that fans will never miss another game again, no?

Well, not really.

The FCC's vote is a huge symbolic move. It shows the government's willingness to get out of the sports business and to stop being the muscle behind the NFL's television policies. What it doesn't do, however, is completely nullify the blackout rules that apply to all NFL games. Just ask Bills fans in Buffalo how much it helped them watch their team's last home game against the Miami Dolphins last weekend. That was just the latest in that team's string of late-season blackouts.

The FCC vote, taken on Dec. 18 and lauded by politicians including Sen. Sherrod Brown (D., Ohio) and Sen. John McCain (R., Ariz.), applies only to the government's role in enforcing television and cable blackouts. It also isn't binding, as the FCC is still waiting for Congress' permission to take that minor step.

And, yes, it is minor. Even if the FCC ends its enforcement of cable and satellite blackouts of NFL games in home markets, there's nothing preventing the NFL from making blackouts a stipulation in its contracts with broadcast partners. If Walt Disney's (DIS) ESPN wants to keep its $1.9 billion annual deal for "Monday Night Football" or DirecTV (DTV) seeks to maintain its $1 billion per season agreement for the NFL "Sunday Ticket" package that is set to expire in 2015, they may have to enforce the NFL's blackout wishes or do what ESPN did when a blackout threatened a broadcast of a game in San Diego -- shell out for leftover tickets and keep the game on the air themselves.

Why would they do that? Because not only are NFL games regularly the highest-rated shows on cable, but they're the 19 of the 20 highest-rated shows of any kind this season. It's the reason Fox (FOXA) CBS (CBS) and Comcast's (CMCSA) NBC agreed to pay the NFL $28 billion for broadcast rights through 2022 and why television revenue accounted for $4.5 billion of the league's $9.5 billion in revenue last season.

That might is secured by the NFL original television rule, which dates back to an act of Congress in 1961 and was more clearly defined in the early 1970s. Under that rule, home games couldn't be shown on TV stations that broadcast within a 75-mile radius of the stadium if nonpremium tickets weren't completely sold out 72 hours before kickoff. Last year, the NFL allowed teams the option of calling games "sellouts" at 85% capacity and keeping them on local television.

The rule change didn't prevent NFL teams from blacking out a total of 15 games in 2012, but it's a big part of the reason the league's had only one blackout this season compared to 16 in 2011 and 26 in 2010. The optional blackout threshold successfully shifted blame from the league to individual team owners, which left teams scrambling to either embrace the lower threshold or take advantage of a loophole that allows them to buy back unsold tickets at one-third of the cost and give them to charities.

McCain still doesn't think that's good enough. The Arizona senator introduced legislation in May that would prevent the NFL from blacking out home games played in stadiums built with public money. A full 30 of the NFL's 31 stadiums have had a portion of their costs paid with tax dollars. It cost an average of $525 million to cover each of 20 NFL stadiums built since 1997, according to a Minnesota study looking into the likely costs of a new stadium for the Vikings. It says that 56% of those stadium costs, or roughly $238 million per stadium, were paid for with public funds. That's nearly $4.8 billion in tax dollars spent on NFL stadiums alone, but economists estimate that continued costs including maintenance, infrastructure and renovations dip into more tax money and force the public to pay upwards of 70% of a stadium's cost.

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