With Lynn Swann as pitchman, NFL seeks support of 40-year-old blackout rule
06/27/2014 6:28 PM
06/28/2014 6:54 PM
The NFL is worried, and Lynn Swann is here on behalf of that worry.
This is a strange place for the NFL to be. The NFL is not used to worrying. The NFL is used to victory. The NFL is used to gobs and gobs of cash, incredible television ratings and the ease of selling a product so popular that more Americans watched this year’s draft than any World Series, NBA Finals or World Cup game so far.
The NFL does not like to worry. So Swann is here, in a conference room at The Star, trying to convince us that a rule that essentially forces sponsors and fans to buy increasingly expensive tickets they don’t want is good for fans.
“Everybody benefits from this rule,” he says.
The Hall of Fame receiver is talking about the sports blackout rule put into place in 1975 — the same rule that is currently being reconsidered by the FCC, which is seeking public comment on whether blackouts should still be allowed. As of now, the rule is that NFL teams must have a sellout 72 hours before kickoff for games to be shown on local TV.
The logic Swann uses in backing government-imposed blackouts on behalf of the NFL is presumptive at best and insulting at worst.
Swann and the NFL ignore that the league could always choose to put games on free broadcast TV and that the primary reason the games are shown on networks is because they are so popular (and lucrative for the league and networks alike).
They also ignore that the commissioners of Major League Baseball and the NHL have stated in sworn depositions in federal court that blackouts don’t help their attendance, and may actually harm ticket sales, a case long made by various economists.
Having games on TV is the best kind of promotion leagues can have, and why they continually push to get more and more games broadcast. Baseball, for instance, has never had more games on TV and never had better attendance than in the last decade. That wouldn’t be the case if baseball blacked out games locally.
The difference with the NFL is that it is now so popular it can leverage the threat of blackouts into maximum ticket sales. The league is basically using its power to make sure no dollar is left behind, even if people who can’t afford cable are blacked out.
Economists would find the idea of a team canceling a broadcast shown to millions (with the supporting advertising revenue) in order to sell a few hundred or thousand more tickets an incredibly dense business decision.
But this is an especially attractive situation for owners because they keep a greater percentage of local ticket sales than their equal share of national broadcast contracts. It’s not as attractive for sponsors and broadcasters who are bullied into buying junk tickets — or fans threatened with blackouts if they don’t buy enough tickets for games at stadiums increasingly funded with public money.
Broadcasters are falling in line with the NFL’s wishes on this, but of course they want to be able to show the games. That’s why they (or sponsors) allow themselves to be on the hook for unsold tickets when teams can’t sell enough seats.
It’s also likely part of why the league loosened its blackout restrictions. The NFL defines a sellout as 100 percent of the non-premium tickets sold, but allows individual teams to drop the threshold as low as 85 percent. Most teams do that, and they are often granted extensions to the 72-hour rule.
So many of the NFL’s approved arguments for this are empty. Among Swann’s company lines is a fear that eliminating the FCC rule would allow cable companies to effectively steal the broadcasts for local pay TV. But this would almost certainly be deemed illegal by existing contractual language and copyright laws.
The NFL will say that full stadiums are good for the local economy, but when it gets bad enough for blackouts to be threatened, those last-minute tickets aren’t being sold to out-of-towners filling up hotel rooms and restaurants.
The NFL also talks about half-empty stadiums providing a lesser viewing experience, but that has nothing to do with blackouts. The Chiefs’ last blackout was in 2009, but during that 2-14 disaster in 2012 they played in front of depressingly sparse crowds at Arrowhead Stadium. The blackout did nothing to fill Arrowhead or improve the experience last year — firing the general manager and improving the team did that.
Swann and two NFL employees spent about an hour at The Star on Friday going over this discussion. At one point, I asked them how much of the fight over the blackout rule was also a fight the NFL and all sports leagues are in — the competition teams have with a constantly improving in-home viewing experience.
Swann contradicted himself here. On the battle with the in-stadium experience, Swann talked of teams and stadiums needing “to compete.” He rightfully talked about improvements many NFL stadiums have made, including better video boards and Wi-Fi, and certain video made available inside the stadium exclusively to the paying customer.
I asked why that’s different from the blackout rule. If teams and stadiums need “to compete,” then why do they need the blackout rule? Especially when their concerns — the league could always impose blackouts without an FCC rule — would be covered by existing contracts and copyright laws?
Swann’s answer here may be a window into the league’s thinking. He used a favorite analogy of his, comparing the issue to a game of Jenga. He knows the league will be fine with or without the federal blackout rule, but he talked of pulling those blocks out of a Jenga tower and “a loss of the integrity of the structure.”
So the league isn’t so worried about this blackout rule specifically. The league is really worried about what removing this block would mean to one of the most successful businesses in American history. If the blackout rule is overturned, maybe people start asking more questions about the NFL’s antitrust exemption, nonprofit status and why they ever thought they could black out games in stadiums largely paid for with tax money in the first place.
The NFL does about $10 billion in annual revenue now, and has a stated goal of $25 billion by 2027. That’s a lofty target, and the league can’t afford too many obstacles. That’s what this is about.
In a free market, when there are unsold tickets, NFL teams would need to improve their product or lower their prices. But the league has created its own ecosystem in which it can depend on sponsors and broadcasters (who already pay a fortune) to buy tickets that the teams otherwise can’t sell.
For the public, that means paying prices artificially propped up by a government law put into place 40 years ago and doing it under the constant threat of not being able to watch the games.
For the league, it means a terrific business model if they can actually convince their paying customers that this is good for them.
The NFL isn’t wrong often. Here’s hoping we’ve found an exception.