FCC Kills NFL Blackout Rule Giving CBS, FOX, NBC More Power

NEW YORK (TheStreet) -- The NFL blackout rule is dead, and with it the power that professional football team owners had to prevent a game from being locally televised if ticket sales failed to reach a certain threshold.

The unanimous decision Tuesday by the Federal Communications Commission removed government protection of the NFL's 39-year-old blackout rule, and with it handed the networks -- CBS (CBS) , Fox (FOXA) and Comcast (CMCSA) -owned NBC -- the final say as to whether a game wouldn't be televised within a 75-mile radius if non-premium tickets weren't completely sold out 72 hours before kickoff.

The NFL, the country's most profitable professional sports league with some $6 billion in annual television revenue, is likely the big loser in this decision given that the networks have had little incentive to pull games they've paid billions of dollars to broadcast. The fans, well, they're the winners. Fans shouldn't have to suffer even if games aren't worth the price of attending, or a local team is badly managed.

Blackout critics says the FCC's vote sent a clear message to the owners.

"Sports fans have finally scored one against the leagues," Brian Frederick, an adjunct professor of sports industry management at Georgetown University, said in an e-mail. "The free ride they've received for decades is over."

"It's time for the NFL and the other leagues to stop abusing fans with blackouts and high ticket prices," added Frederick, author of Upset!: How Sports Fans Beat the NFL and Ended the Sports Blackout Rule and board member of Washington, D.C.-based fan lobbying group the Sports Fans Coalition.

As the FCC emphasized in its decision, blackouts declined precipitously in 2013. Only two games were blacked out in all of last season. That's because a year ago, the NFL allowed teams the option of calling games "sellouts" at 85% capacity and keeping them on local television. That reduced blackouts and shifted blame for them from the league to its individual owners.

In 2012, 15 games were blacked while 16 were removed from local broadcast in 2011 and 26 in 2010. NFL owners have been loathe to willing relinquish blackout authority if they didn't have to.

After Tuesday's FCC decision, the only way those owners can black out games is if their broadcast partners agree to do so. CBS, NBC and Fox are paying the league roughly $1 billion per season to broadcast Sunday games, playoff games and the Super Bowl through 2022. Disney (DIS) -owned ESPN is paying $1.9 billion per season for the rights to Monday Night Football during that same span, while CBS shelled out $275 million for just one season of Thursday Night Football.

DirecTV (DTV) , meanwhile, is in the final season of its deal to broadcast out-of-market games through its exclusive NFL Sunday Ticket service. The satellite television provider is currently negotiating a new deal, and the result will decide if AT&T's  (T) $48.5 billion bid for DirecTV goes through. The league has openly threatened to move games to pay television outlets if the blackout rule isn't enforced, saying in a letter to the FCC that "by ensuring that televising games will not reduce live attendance, the sports blackout rule encourages sports leagues to reach deals with broadcast networks.

The league further noted that any change to the blackout rule would result in "a decrease in the amount of professional sports on broadcast television" and went so far as to include the CBS and Fox logos on its "Protect Football On Free TV" website. On Tuesday after the FCC's vote, the NFL backed off that stance.

"NFL teams have made significant efforts in recent years to minimize blackouts," the NFL said in a statement issued Tuesday. "The NFL is the only sports league that televises every one of its games on free, over-the-air television. The FCC's decision will not change that commitment for the foreseeable future."

The pressure on both owners and the league to abandon blackouts has been mounting for several years. In 2013, Arizona Republican Sen. John McCain introduced legislation in May that would prevent the NFL from blacking out home games played in stadiums built with public money. He received bipartisan support from Connecticut Democratic Sen. Richard Blumenthal, who's also no fan of the current blackout policy. 


Republican Sen. Tom Coburn of Oklahoma, meanwhile, is trying to strip the NFL's status as a tax-exempt organization under Section 501(c) of the Internal Revenue Code. That exemption makes it possible to take a look at commissioner Roger Goodell's $44 million salary, but also gives owners a means of obscuring the sources and true amount of the league's revenue, which was close to $10 billion last year alone.

Last year the FCC made a non-binding decision to end NFL blackouts. In an op-ed for USA Today published earlier this month, FCC Chairman Tom Wheeler said sports blackouts "are obsolete" and “make no sense at all.” Five sitting U.S. Senators openly supported Wheeler's efforts to drop the blackout rule.

The most intense pressure, however, may be a result of the league's success on free broadcast television. In 2013, the NFL averaged 17.6 million viewers per game on CBS, NBC and Fox. For ESPN's Monday Night Football that same year, that average shrank to 13.7 million viewers. More importantly, the NFL's most-watched game of the 2013 regular season, a CBS Thanksgiving matchup between the Oakland Raiders and Dallas Cowboys, drew 31.7 million viewers. ESPN's most-watched Monday Night Football game -- last year's season opener between the Philadelphia Eagles and Washington Redskins -- drew 16.5 million viewers.

That broad viewer base not only draws multibillion-dollar deals with broadcast partners, but draws official sponsors including PepsiCo (PEP) , Procter & Gamble  (PG) and General Motors (GM) . Anheuser-Busch InBev alone pays more than $1 billion for a multi-year deal that not only makes its Budweiser brand the official beer of the NFL, but gives A-B products exclusive commercial rights during each year's Super Bowl broadcast.

NFL blackouts may not be completely dead, but the FCC and the NFL's financial reality are dimming the prospects of removing games from broadcast television any time soon.

Follow @notteham

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