Compulsory Licenses Show Need for Sports Blackout Rule, Leagues Say

Sports blackout opponents can’t have it both ways, by keeping the compulsory license while killing the rule, said the NFL. The league was singled out in the November request, which petitioners say may eventually prompt the commission to revisit the rule (CD Nov 15 p3), and on which comments were posted Tuesday in docket 12-3 (http://xrl.us/bmr4pb). “Where a distant station has given its consent to be retransmitted into a local market, the rights-holder’s ability to manage how its games appear in the local market would be frustrated by the compulsory copyright regime, in the absence of the sports blackout rule,” the NFL said. “The law giving MVPDs a compulsory copyright takes rights away from programming owners, who in a completely market-based system would control when and where their programming is shown. The network non-duplication, syndicated exclusivity, and sports blackout rules protect rightsholders’ valid interests in managing the televising of their programs. Those opposed to the FCC’s sports blackout rule are trying to pick and choose."

The rule has outlived its usefulness, as leagues rely far more on TV rights for revenue than they do gate receipts, said various filings backing the petitioners’ quest not to let leagues black out televised games in the markets of a competing team when the contest doesn’t sell out. Both the professors and senators pointed to the declining number of blackouts, though for different reasons. “Because NFL teams sell out almost all of their games, the NFL’s blackout policy causes a few games (16 in 2011, or about 6 percent of the regular season schedule) not to be televised,” wrote Roger Noll, professor emeritus of Stanford University and an adviser to the American Antitrust Institute, Smith College sports business Prof. Andrew Zimbalist and others. The filing noted that the academics filed with the FCC independently and received no compensation from anyone.

The senators pointed to the number of blackouts to say they're “ruining the experience of rooting for the home team.” There were 23 blackouts in 2010 and 22 in 2009, noted Democratic Sens. Richard Blumenthal of Connecticut, Sherrod Brown of Ohio, Tom Harkin of Iowa, Frank Lautenberg of New Jersey and Debbie Stabenow of Michigan. “These blackouts occur regardless of a team’s success.” The rule “is a relic of a different time,” given that its “purported purpose” of “protecting the league’s ability to make a profit by encouraging fans to attend games” may “have been valid when it was implemented decades ago,” but with “multi-billion dollar NFL TV contracts, the sports blackout rule appears to be merely punitive.” The senators also asked the FCC to consider banning the blacking out of live sports events during retransmission consent disputes. They cited a retrans impasse between DirecTV and Sunbeam TV that led the NFL divisional playoff to be blacked out and a 2010 regional sports cable network dispute between Dish Network and News Corp.’s Fox.

It’s unsurprising the petition doesn’t mention Sections 111 and 119, as if those “compulsory licenses did not exist,” said the commissioner of baseball’s office. “The Sports Rule should remain in effect as long as the cable and satellite compulsory licenses remain in effect,” it said. “It would be particularly inappropriate to undertake the rulemaking sought by Petitioners during the pendency of litigation involving the scope of the Section 111 compulsory license and its applicability to online video distributors,” which “has the potential either to reaffirm or to change dramatically,” the office said. It said both “gate receipts” and TV audiences are “critical components” of a Major League Baseball team’s success.

"Broadcasters understand and sympathize with fan frustration over sports blackouts,” since “ideally, no blackouts would ever occur,” NAB said. “Elimination of the FCC’s” 1975 rule “would not solve the problem” and would hurt TV stations, which could experience a faster “migration of popular sports programs from free to pay TV,” the association said. It said the FCC rule bars MVPDs from “using statutory compulsory copyright licenses to circumvent the sports leagues’ privately negotiated contracts for distribution of their content.” There’s no evidence that nixing the requirement “will alter those private contractual agreements, eliminate the relatively few blackouts that occur, or cause sports leagues to lower ticket prices,” the NAB said. The NFL estimated hundreds of contracts would have to be rewritten at “substantial cost and effort,” if the rule goes because the league’s deals with CBS, News Corp.’s Fox and Comcast’s NBC broadcast networks lack “privity” with network affiliates or MVPDs.

The FCC “perpetuates” the NFL’s “problem” of requiring games be blacked out if tickets don’t all sell, the Sports Fans Coalition and four others said. “The leagues are at the root of the problem because they currently charge exorbitant prices for tickets, which in turn results in lower attendance.” The FCC has “ample authority” to end the rule, because the 1961 Sports Broadcasting Act gives the leagues some antitrust exemptions that include the ability to black out games on only terrestrial TV. “The only Communications Act amendment enacted during this period was an anti-blackout law that restricted sports leagues’ ability to black out games at will,” because President Richard Nixon unsuccessfully in the early ‘70s asked the NFL to end blackouts of sold-out local games, said the petitioners, which also include the Media Access Project and Public Knowledge.