[Senate Hearing 113-847]
[From the U.S. Government Publishing Office]
S. Hrg. 113-847
THE FANS ACT: ARE SPORTS BLACKOUTS
AND ANTITRUST EXEMPTIONS HARMING FANS,
CONSUMERS, AND THE GAMES THEMSELVES?
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
DECEMBER 4, 2014
__________
Serial No. J-113-75
__________
Printed for the use of the Committee on the Judiciary
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COMMITTEE ON THE JUDICIARY
PATRICK J. LEAHY, Vermont, Chairman
DIANNE FEINSTEIN, California CHUCK GRASSLEY, Iowa, Ranking
CHUCK SCHUMER, New York Member
DICK DURBIN, Illinois ORRIN G. HATCH, Utah
SHELDON WHITEHOUSE, Rhode Island JEFF SESSIONS, Alabama
AMY KLOBUCHAR, Minnesota LINDSEY GRAHAM, South Carolina
AL FRANKEN, Minnesota JOHN CORNYN, Texas
CHRISTOPHER A. COONS, Delaware MICHAEL S. LEE, Utah
RICHARD BLUMENTHAL, Connecticut TED CRUZ, Texas
MAZIE HIRONO, Hawaii JEFF FLAKE, Arizona
Kristine Lucius, Chief Counsel and Staff Director
Kolan Davis, Republican Chief Counsel and Staff Director
C O N T E N T S
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DECEMBER 4, 2014, 10:20 A.M.
STATEMENTS OF COMMITTEE MEMBERS
Page
Blumenthal, Hon. Richard, a U.S. Senator from the State of
Connecticut.................................................... 3
Grassley, Hon. Chuck, a U.S. Senator from the State of Iowa...... 5
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont,
prepared statement........................................... 54
Lee, Hon. Michael S., a U.S. Senator from the State of Utah...... 6
WITNESSES
Witness List..................................................... 25
Goodfriend, David R., Chairman, Sports Fans Coalition,
Washington, DC................................................. 8
prepared statement........................................... 30
Greenberg, Sally, Executive Director, National Consumers League,
Washington, DC................................................. 10
prepared statement........................................... 34
Lake, William T., Chief, Media Bureau, Federal Communications
Commission, Washington, DC..................................... 7
prepared statement........................................... 28
McCain, Hon. John, a U.S. Senator from the State of Arizona...... 1
prepared statement........................................... 26
Waldron, Gerard J., Partner, Covington and Burling, Washington,
DC............................................................. 12
prepared statement........................................... 42
QUESTIONS
Questions submitted to David R. Goodfriend by Senator Grassley... 57
Questions submitted to Sally Greenberg by Senator Grassley....... 58
Questions submitted to William T. Lake by Senator Grassley....... 59
Questions submitted to Gerard J. Waldron by:
Senator Franken.............................................. 56
Senator Grassley............................................. 60
ANSWERS
Responses of David R. Goodfriend and Sally Greenberg to questions
submitted by Senator Grassley.................................. 61
Responses of William T. Lake to questions submitted by Senator
Grassley....................................................... 64
Responses of Gerard J. Waldron to questions submitted by Senator
Franken and Senator Grassley................................... 67
THE FANS ACT: ARE SPORTS BLACKOUTS
AND ANTITRUST EXEMPTIONS HARMING
FANS, CONSUMERS, AND THE GAMES THEMSELVES?
----------
WEDNESDAY, DECEMBER 4, 2014
United States Senate,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 10:20 a.m., in
Room SD-226, Dirksen Senate Office Building, Hon. Richard
Blumenthal, presiding.
Present: Senators Klobuchar, Franken, Blumenthal, Grassley
and Lee.
Senator Blumenthal. Senator McCain, I was going to suggest
if the Ranking Member agrees, that you go first and then we
will give our opening statements.
Senator Grassley. Yes, go ahead.
STATEMENT OF HON. JOHN MCCAIN,
A U.S. SENATOR FROM THE STATE OF ARIZONA
Senator McCain. I thank you, Mr. Chairman and Ranking
Member Grassley, and I thank you for allowing me to testify and
thank you to Senator Blumenthal for making this hearing happen.
Senator Blumenthal's commitment to advocating for consumers has
made him a valuable partner to work with on this issue, an area
where the rules and regulations far too often leave consumers
holding the short end of the stick. I am here this morning to
discuss sports blackouts and to explain why the continued use
of blackout rules and policies fail to serve the interests of
consumers, in this case, loyal sports fans.
I will truncate my opening statement just to say the simple
fact is that the rules as they are today only serve to benefit
sports leagues and their member teams at the expense of the
hard-working fans who support them so loyally through their
money, time, and passion. Just last year during the NFL
wildcard playoffs, fans of the Cincinnati Bengals, Indianapolis
Colts and Green Bay Packers came very close to experiencing
blackouts when those games had not sold out just days before
the kickoff.
The blackouts in these regions were only averted when, at
the last-minute, local businesses bought-up tickets to bring
the total above the NFL's required threshold. Mr. Chairman,
there is something wrong with a situation in which the NFL can
say to all of those fans who have made the League what it is
today, ``you had better purchase tickets or else.'' The NFL and
its teams have benefited from myriad public benefits, including
an exemption from antitrust rules, a specialized tax status,
and taxpayer dollars that subsidize their multimillion dollar
football stadiums.
These public benefits carry with them a responsibility back
to the public an obligation to treat their loyal fans with
fairness. We have been chipping away at these rules for some
time, but there is still a lot of work to do. This year I am
happy, Mr. Chairman, to join you and introduce the FANS Act
aimed at eliminating the various causes of sports blackouts.
This legislation would condition the NFL and other leagues'
antitrust exemptions on ending blackout practices including in
those circumstances when stand-offs during contractual disputes
between broadcasters and cable and satellite companies result
in blackouts.
We would strongly prefer that the League take the
initiative itself and demonstrate leadership by reforming anti-
consumer policies and practices. But let us be clear, should
the League fail to act, we should do everything we can to stand
up for consumers by advancing the FANS Act and other
initiatives.
I look forward to hearing from the witnesses on the
following panel on ways we can work together to finally blow
the whistle on sports blackouts once and for all.
I would like to say, again, Mr. Chairman, you come from a
State where it is huge as far as sports broadcasting is
concerned. So I particularly admire your courage on this issue.
Again, it is just unconscionable to have average fans be
deprived of the ability to see an activity in a stadium they
paid for. So it is a no-brainer in many respects and if we are
not able to succeed, it is frankly a triumph of the special
interests over the public interests.
I want to thank you for your leadership and I want to thank
the Ranking Member who, as always, I have the greatest
admiration for and respect. Thank you.
Senator Blumenthal. Thank you so much Senator McCain. I
really appreciate you being here. I know it is a busy day in a
busy time of our closing days of this session and I want to
express my personal thanks for your leadership and courage in
sponsoring this bill and working with me on it and I look
forward to continuing our work together.
I know that you have another meeting and certainly you
should feel free at any time to leave despite the powerful and
riveting remarks that I am about to give. I know you will find
it difficult to break away.
[Laughter.]
Senator McCain. Thank you. I would also like to invite
Senator Grassley to come to Arizona for the Super Bowl and join
many of his constituents who are smart enough to spend the
winter with us. Thank you.
[Laughter.]
Senator Blumenthal. Thank you Senator McCain. We are going
to give opening remarks and then, unfortunately, we are going
to have to take a recess because of the votes that are ongoing
right now. We are going to come back at the end of those votes,
we hope not too long from now, in a little while to continue
the hearing at that point with the remainder of the witnesses.
I will give my opening remarks. Then Senator Grassley will
give his.
OPENING STATEMENT OF HON. RICHARD BLUMENTHAL,
A U.S. SENATOR FROM THE STATE OF CONNECTICUT
Senator Blumenthal. As Senator McCain said so eloquently,
Americans really love sports and they deserve to see them on
their terms, not on the terms that are prescribed by the
professional sports leagues in blacking out what they think
Americans should see rather than what Americans want to see on
their terms. The competitive teams of professional football,
baseball, hockey and basketball leagues represent a rich and
vibrant part of our American culture. They contribute immensely
to what makes America the greatest country in the history of
the world.
Professional sports leagues generate billions of dollars,
thousands of jobs and critical economic activity in multiple
industries. The Super Bowl is, in fact, the highest rated event
on television and last year the NFL playoffs collectively
accounted for the ten most-watched sporting events of the
entire year.
So these games are a part of what makes America great. Most
of these games were carried on free over-the-air television and
I believe we ought to keep it that way. Sports fans power this
media and merchandising juggernaut by purchasing tickets and
merchandise, watching games on TV and supporting their teams
through thick and thin.
These billion-dollar professional sports leagues derive
almost half of their revenue from licensing TV rights to cable,
broadcast and regional sports networks. Some estimate those
rights cost upwards of $17 billion a year. A large bill, a
large cost that is increasingly passed on to consumers in the
form of higher monthly rates for cable and pay-TV and we have
evidence of it at this very table when we have had recent
hearings on some of the proposed mergers.
Sadly, in return, fans and the public are often treated
like a fumbled football, sometimes even a kicked football. When
places like Buffalo, New York fail to sell out its 74,000
person stadium, the Bills game is blacked out for local fans.
When powerful cable companies and broadcasters failed to reach
an agreement, it is often the threat of holding sports
programming hostage that is used to negotiate higher fees. And,
by the way, higher rates for consumers.
Even the Internet cannot escape blackouts. When fans live
too close to their favorite baseball team, but not close enough
to actually watch them on television, they face online
blackouts that force them to drive to the next city to catch a
game. These blackouts are loathed by fans and rightly so, hated
by consumers and even reviled by most of the industry
stakeholders in the business of television.
The good news is we can do something about it. The NFL, the
NBA, the MLB and the NHL receive tremendous assistance, huge
benefits from the Congress in puting their brands, their sport
and their advertising before the American people. This public
assistance takes several forms, but chief among them is the
antitrust exemption enjoyed by the four major sports leagues.
Essentially, every American company is bound by antitrust
regulations that prevent coordination and price-fixing. Sports
leagues are an exception. Almost a unique exception to this
antitrust rule. In the Sports Broadcasting Act of 1961,
Congress granted a special exemption from the rules that govern
other companies permitting professional sports leagues to
coordinate and fix prices for negotiating broadcast rights.
The country affords these teams their special status
because of their special role in American culture. But that
does not give them the right to abuse this privilege and the
Government certainly should not endorse abusive behavior. The
public benefits come with a public trust.
The FCC recognized this when they through a flag this
September on the NFL's anti-fan blackout policy. Chairman
Wheeler of the FCC announced at that meeting, ``Federal
Government should not be a party to sports teams keeping their
fans from viewing the games.''
I am grateful that all five FCC Commissioners joined
together in a bipartisan vote and repealed their blackout rule
as I had called for there doing, along with Senator McCain,
Senator Brown, Congressman Higgins and many more. But despite
the FCC's actions in September, sports leagues and the NFL, in
particular, retain the power to blackout games through their
private contract agreements.
I believe these blackout policies are anti-fan and anti-
consumer because they disregard the public trust that the
leagues have because of the special benefits and public
benefits that they receive and because of the trust they have
to their fans and the teams. Moreover, these policies are an
affront to the direct and indirect investment made by Federal
and local governments that have provided tax exemptions,
enhanced public transportation, infrastructure to stadiums and
exemptions as, I have mentioned, from the antitrust law.
That is why I have joined with Senator McCain to introduce
S. 1721 Furthering Access and Networks for Sports Act, the FANS
Act, and that is why I have joined in seeking support from my
colleagues and I believe that support is growing, that we have
momentum on our side. This bipartisan bill leverages the
antitrust exemptions that leagues enjoy against the elimination
of these blackout policies.
Let me put it very simply. Unless the leagues end
blackouts, they will no longer be exempt from the Nation's
antitrust laws when they negotiate their billion-dollar
television contracts. The FANS Act would remove language in the
law that allows the NFL to maintain their local sports blackout
policies when stadiums fail to sell out. It would require the
leagues to instruct anyone carrying their games that they can
no longer hold sports programming hostage for higher fees and
cable rates and it would make more live games available on the
Internet.
I want to make one thing clear. This bill does not use the
heavy hand of government to force the sports leagues to do
anything. It does not require them to end blackouts with the
threat of fines or enforcement actions. It does end the blank
check from the Government to the leagues and it takes away
Congress' implicit endorsement of blackout policies.
Fundamentally, it represents a bargain to the leagues. They
can continue enjoying their exemption from existing law if they
treat fans fairly. If they want to continue their blackout
policies, the Government will not stop them, but they will no
longer get the special public benefits and protection from
antitrust enforcement that they currently have.
I want to note, particularly, that this hearing is a fact-
finding mission. We are obviously not going to pass this bill
out of the Senate or Congress this year, but I look forward to
a lively debate and Senator McCain and I are open and committed
to working with all of the stakeholders on their ideas for
changes and edits before reintroducing this bill again next
Congress which we expect to do.
Thank you very much and I yield to Senator Grassley.
OPENING STATEMENT OF HON. CHUCK GRASSLEY,
A U.S. SENATOR FROM THE STATE OF IOWA
Senator Grassley. I thank you, Mr. Chairman. You have been
very thorough in your explanation and purpose of the
legislation. I particularly compliment you for taking on a
strong, powerful force that you are taking on. That is what has
to be done if you are going to make changes sometimes.
I thank the witnesses who are here and look forward to your
testimony. I think we can all agree on one fundamental notion,
no one likes sports blackouts. The sports leagues and their
member teams do not like them, television providers do not like
them and, of course, sports fans definitely do not like them.
A particular issue in Iowa is that we do not have any major
league teams, so the entire State, one way or another, falls
within the blackout territory of six different teams: the
Cardinals, the Royals, the Twins, the Brewers, the Cubs, and
the White Sox. I can tell you the periodic blackouts are a very
frustrating experience for the fans of my State.
So there is no question that blackouts are an exasperating
experience and disfavored. The question is how best to minimize
blackouts and maximize the benefits to the consumers while also
respecting the rights of private parties to negotiate with each
other at arms length.
On that note I will add one other comment. As we all know,
the Federal Communications Commission voted unanimously in
September to eliminate its sports blackout. I think as a
general matter, the Federal Government should not be in the
business of mandating policies that parties are otherwise free
to negotiate privately. At the same time, however, I think we
need to be mindful of the flipside of the same coin. More
specifically, as a general rule the Federal Government should
not be in the business of mandating which provisions should not
be included in private contracts. Anytime such a step is
proposed, we should tread carefully.
So the Chairman just said he is beginning discussions on
this in consideration of it and I am happy to join in that
dialogue. So I thank the witnesses once again and look forward
to the hearing as a start of that dialogue.
Senator Blumenthal. Thanks, Senator Grassley, and thanks
for your excellent remarks. We are going to--I apologize--take
a recess now. I want to thank the witnesses for your patience.
We will be back literally as soon as we can and we will take
the second panel at that time. Again, my thanks and my
apologies. We will be right back. Thank you.
[Whereupon, at 10:36 a.m., the hearing was recessed.]
[Whereupon, at 11:30 a.m., the Committee reconvened.]
Senator Blumenthal. We will come to order. I am going to
recognize Senator Lee for an opening statement and then we will
proceed to the second panel of witnesses.
OPENING STATEMENT OF HON. MICHAEL S. LEE,
A U.S. SENATOR FROM THE STATE OF UTAH
Senator Lee. Thank you, Mr. Chairman. First of all I want
to start by thanking you, Senator Blumenthal and Senator McCain
for bringing this important matter to the attention of the
committee. I think you have raised an important question.
No one really likes sports blackouts, least of all the
public. Yet as we all know, Congress has permitted professional
sports leagues to operate outside of our antitrust laws in
order to have them. We have done so on the theory that without
blackouts fans might stay home and watch the game on TV while
the ticket sales necessary to support the team might dwindle as
a result.
That economic assumption has now been called into question.
The proponents of the bill argue that there is no evidence to
support it. Fans, they say, will attend games if the ticket
price is right regardless of whether they could also watch the
game at home as an alternative.
At the moment, however, I am not yet prepared to support
the FANS Act without additional study on my part. I am
particularly concerned that the bill might unsettle some
legitimate contractual expectations the sports leagues have
bargained for with broadcasters without an appropriate phaseout
period. I would also like to take a closer look at the economic
evidence on both sides of this issue.
But I agree that the issue certainly merits the attention
of Congress. Professional sports leagues have asked for and
have received exemptions from the competition laws that most
other American businesses are required to comply with. Those
antitrust laws are an important and effective tool for ensuring
free markets and protecting low consumer prices.
As Ranking Member of our Antitrust Subcommittee, I take a
keen interest in ensuring that our competition laws are
functioning well and having their desired effect of protecting,
competition. For that reason, I am certainly open to examining
in the future whether the antitrust exemptions enjoyed by
professional sports leagues in their current forms rest on
sound justifications and if not, how Congress might act to
modify those exemptions.
Thank you very much Mr. Chairman.
Senator Blumenthal. Thank you, Senator Lee. I am going to
ask the next panel to please come forward and take your seats.
And actually before you take your seats, why do I not swear you
in which is, as you know, the custom of this committee.
Do you affirm that the testimony you are about to give is
the truth, the whole truth and nothing but the truth so help
you God?
Mr. Lake. I do.
Mr. Goodfriend. I do.
Ms. Greenberg. I do.
Mr. Waldron. I do.
Senator Blumenthal. Thank you. By way of introduction, let
me give a brief bio of each of the witnesses today.
William Lake is the Chief of the Media Bureau at the
Federal Communications Commission. He has served as the DTV
Transition Coordinator for the FCC, Counsel to the
Administrator at the Environmental Protection Agency, and
Principal Deputy Legal Advisor at the U.S. Department of State.
He was also a partner at Wilmer Cutler Pickering Hale and Dorr.
David Goodfriend is the founder and chairman of the Sports
Fans Coalition, the largest multi-issue public policy
organization for fans. He is currently the president of
Goodfriend Government Affairs and he has served as Deputy Staff
Secretary to President Clinton and Media Legal Advisor to
Commissioner Susan Ness at the FCC. He also previously served
as vice president of the law and public policy at DISH Network.
Sally Greenberg is the executive director of the National
Consumers League. She has testified numerous times before
Congress on consumer protection issues. From 2001 to 2007 she
worked at Consumers Union. She served for many years on the
Board of Directors of the Alliance for Justice and HALT, an
organization that focuses on protection of consumer rights in
their interaction with lawyers and the legal system.
Gerard Waldron is a partner at Covington and Burling,
representing a range of technology companies, online social and
media companies and communications client before the FCC and
Congress. Before joining Covington, Jerry served as the Senior
Counsel on the House Subcommittee on Telecommunications and
worked on the committee staff for over 10 years.
Thank you all for being here today. Let us begin with
Mr. Lake.
STATEMENT OF WILLIAM T. LAKE, CHIEF, MEDIA BUREAU, FEDERAL
COMMUNICATIONS COMMISSION, WASHINGTON, DC
Mr. Lake. Good morning Senator Blumenthal and Senator Lee.
I am Bill Lake, Chief of the Media Bureau at the Federal
Communications Commission. I am pleased to appear before you
today to discuss the recent FCC action to eliminate our sports
blackout rules.
A bit of history may provide useful context for our action.
Our sports blackout rules specifically prohibited cable and
satellite operators from airing any sports event that had been
blacked out on a local broadcast TV station pursuant to a
private blackout policy adopted by a sports league.
The Commission adopted a sports blackout rule for cable in
1975, finding that the rule was necessary to ensure that cable
importation of distant signals would not reduce ticket sales
and thus, lead sports leagues to refuse to sell the rights to
their events to distant stations, which could in turn reduce
the availability of sports programming to TV viewers--which was
the principal concern of the Commission. We later adopted
similar rules for satellite carriers and open video systems.
As you know, the Commission voted unanimously to eliminate
the sports blackout rules on September 30 of this year finding
that they were unnecessary and outdated today. The repeal of
the rules took effect on November 24.
The Commission's action followed an open and transparent
public process that began in 2011 when the Sports Fans
Coalition filed a petition for rulemaking with the Commission.
After careful review of the comments we received in the
proceeding, the Commission found that significant changes in
the sports industry since the rules were adopted had eliminated
the justification for the rules.
First, for the NFL, the only league for which the
Commission's sports blackout rules continued to be relevant,
ticket sales are no longer the primary source of revenue. The
massive popularity of pro football means that the primary
source of income for the NFL has shifted to television, with TV
revenues now the NFL's main source of revenue approaching $6
billion this year. Total NFL revenues reportedly exceeded $10
billion in 2013.
Second, the increased popularity of NFL games has brought
fans to the stadiums in numbers that make blackouts exceedingly
rare. In 1975, almost 60 percent of NFL games were blacked out
because they failed to sell out. Last year only 2 of 256
regular-season NFL games, less than 1 percent, were blacked
out, and no games have been blacked out so far this year.
Moreover, in recent years, blackouts have affected only a few
NFL markets such as Buffalo, Cincinnati, and San Diego.
Finally, the Commission determined that the impact on
consumers of eliminating its sports blackout rules would be
minimal. The NFL's existing contracts with the broadcast
networks extend through 2022, keeping games on over-the-air
stations through at least that timeframe. Beyond that, the
Commission found it is highly unlikely that the NFL would find
it more profitable to move its games from over-the-air stations
to pay-TV in the absence of the sports blackout rules.
In conclusion, I would like to note that I am limiting my
testimony to the Commission's decision and its rationale.
Elimination of our rules does not prevent the sports leagues
from continuing to have a sports blackout policy, and the
Commission does not take a position on whether Congress should
eliminate or modify existing antitrust exemptions that allow
leagues to have such blackout policies in the first place.
Again, thank you for the opportunity to appear before you
today. I will be happy to take your questions.
Senator Blumenthal. Thank you, Mr. Lake.
Mr. Goodfriend.
STATEMENT OF DAVID R. GOODFRIEND, CHAIRMAN,
SPORTS FANS COALITION, WASHINGTON, DC
Mr. Goodfriend. Thank you, Senator--thank you Senator
Blumenthal and Senator Lee and Senator Klobuchar. Members of
the committee, we appreciate very much the fact that you have
invited Sports Fans Coalition to testify on the FANS Act.
My name is David Goodfriend and I am the founder and
chairman of Sports Fans Coalition, the nations largest multi-
issue fan advocacy organization in the public policy arena.
Founded in 2009, we now have tens of thousands of members from
across the USA and are led by a bipartisan, diverse and
seasoned Board of Directors.
The Government should not subsidize or support anti-fan
activities by professional sports leagues. When a sports league
receives a public benefit, the fan should get a fair return or
the subsidy should go away. That is why Sports Fans Coalition
is proud to have lead the successful effort to end the FCC's
sports blackout rule.
The NFL's blackout policy prohibits a local broadcaster
from televising a game when tickets do not sell out 72 hours
before kickoff. The FCC rule, as you have just heard, bolstered
that anti-fan policy by requiring pay-TV companies, likewise,
to impose such blackouts. The efforts of Sports Fans Coalition,
National Consumers League, and others culminated in a unanimous
five to zero vote this past September 30, to end the FCC's 40-
year-old anti-fan sports blackout rule. And we could not have
done it, Senator Blumenthal, without support from you, Senator
McCain, and others. So thank you for that.
That was a great moment for fans, but the NFL's policy
remains in place. The NFL should end its local blackout policy
once and for all, effective immediately. Fans hate local
blackouts and you know this. But just listen to to fans who
told the FCC how they feel.
Denis Steinmiller from North Tonawanda, New York, said, ``I
am a disabled Vietnam vet. I also suffer from post-traumatic
stress disorder. I am unable to attend the Bills games because
of my disabilities. Watching the Bills on TV is one thing I
look forward to every year as well as to help me with my PTSD.
Please put all of the games on TV for me and the others who
gave much of ourselves for our country.''
Or listen to Mary Bash from Masaryktown, Florida, who said,
``For people like me who are disabled, this blackout rule is
discrimination against people with disabilities. I cannot
physically attend a live game at any arena. I am stuck at my
home with only the television to bring me to sports or anything
else that I enjoy watching. The NFL blackout policy from the
70s does not reflect the times of today. Technology has
changed. The NFL's market has changed. Where do they think all
of that money comes from? It is us, the consumer, who buys the
products from their advertisers. It is us, the taxpayer, who
built most of those arenas. It is us, the American citizen, who
continues to foot the bill.''
Real fans. Real comments submitted to the FCC. But the fans
are not alone. We saw economists from Stanford, Michigan, and
other institutions submit detailed declarations to the FCC
explaining why the NFL's blackout policy does not even serve
its stated purpose of getting more fans into seats.
Listen to other professional sports leagues. We submitted
depositions from the commissioner of baseball and the
commissioner of hockey who said under oath, we got rid of our
blackout policy because it does not work. And the FCC agreed
with all of this when they got rid of their own sports blackout
rule.
Now the NFL should do the right thing. It should listen to
fans, economists, other leagues, the commissioners, the FCC,
the Members of Congress and end its local blackout policy. But
failing that, Congress should pass the FANS Act.
The antitrust statutes currently shield leagues from
liability when imposing local blackouts and the FANS Act would
eliminate this ``get out of jail free card.'' Sports Fans
Coalition also believes that fans should not be used as pawns
during contractual disputes between big TV companies. The FANS
Act would take care of that too.
Finally, I would like to make clear that Sports Fans
Coalition fully supports putting as many games as possible on
free over-the-air broadcast TV. The migration of sports off
broadcast TV has created problems. All you have to do is look
at Los Angeles where Time Warner Cable took over the television
rights of the L.A. Dodgers and what happened? Seventy percent
of L.A. fans could not watch their Dodgers play in a great
season because they did not have Time Warner Cable.
So when major league baseball and the L.A. Dodgers have
received so much public subsidization, fans should have a
better access to those games and putting them on broadcast is
one way to do that. Perhaps a revised FANS Act could require
all sports leagues to maintain just a certain amount of games
on free over-the-air TV so that fans have access to at least
some games.
Thank you and I look forward to answering any questions.
Senator Blumenthal. Thank you very much, Mr. Goodfriend.
Ms. Greenberg.
STATEMENT OF SALLY GREENBERG, EXECUTIVE DIRECTOR,
NATIONAL CONSUMERS LEAGUE, WASHINGTON, DC
Ms. Greenberg. Good morning Senator Blumenthal, Senators
Lee, Klobuchar and Franken.
My organization, the National Consumers League, was founded
in 1899. We are the Nation's pioneering consumer organization
and our nonprofit mission is to advocate on behalf of consumers
and workers in the United States and abroad. We very much
appreciate your inviting the consumer point of view for this
very important bill, S. 1721.
I'm delighted to see my fellow Minnesotans here because I
grew up going to Minnesota Viking games and Minnesota Twins
games. I am an avid fan. I love watching professional sports,
but like me, millions of Americans define themselves, in part,
by the teams they support. However, the professional sports
leagues are also multibillion dollar businesses that benefit
from a multitude of public subsidies.
These take the form of exemptions from Federal antitrust
laws, tax breaks and public funding for stadiums,
infrastructure support from municipalities and blackout
policies that benefit the leagues and their broadcast partners.
As the leagues enjoy huge profits, taxpayers are right to
question what they receive in return for these public benefits.
For example, a Harvard University study recently calculated
that seventy percent of capital costs of National Football
League stadiums have been provided by taxpayers whether they
are sports fans are not. A 2012 Bloomberg study estimated that
tax exemptions on interest paid by municipal bonds issued for
sports facilities cost the U.S. Treasury $146 million a year.
Over the life of the $17 billion of exempt debt issued to build
stadiums since 1986, taxpayer subsidies to bondholders will
total $4 billion.
Lavish public subsidies for stadiums are not the only way
that taxpayers subsidize professional sports. The rising cost
of acquiring sports programming is also a significant driver of
rising cable bills which have gone up at more than three times
the rate of inflation since 1998. Due to the widespread
practice of channel bundling, the increasing cost of sports
programming are passed along to all cable and satellite
subscribers regardless of whether they actually watch sports.
Sports programming costs are also a major driver of the
fights between broadcasters and cable television providers over
retransmission fees that have contributed to the increasing
number of programming blackouts. In return for the Government
largess lavished on sports leagues, consumers are right to be
outraged when essential services are cut to subsidize
unaffordable tickets at publicly funded stadiums.
Cable and satellite subscribers, fans and nonfans alike are
angry that their bills go up due to ever higher sports
programming costs when the games even make it on the air. The
game is clearly rigged in favor of the professional sports
leagues and taxpayers are getting the short end of the sick. So
it is, indeed, time for Congress to step up and began to level
the playing field.
That is why NCL is proud to support the FANS Act. The bill
would benefit consumers in a number of ways by reigning in
cable rate hikes, reducing incentives to blackout games and
giving consumers access to online game broadcasts. To
elaborate, the bill conditions sports leagues antitrust
exemptions on the requirement that their broadcast partners not
blackout games as a result of contractual disputes with cable
and satellite companies.
NCL believes the consumer should not be used as pawns in
disputes over retransmission fees. Thus, the bill helps to
reduce the incentive to use blackouts as a negotiating tactic
and promises to reduce the frequency of these programming
interruptions.
Second, the bill eliminates the antitrust exemption for
local sports blackouts in the event that games do not sell out
their tickets. This will benefit millions of fans in smaller
markets such as Buffalo, many of which have larger stadiums but
smaller populations and thus, are less likely to sell 85
percent of their seats.
Third, the bill benefits consumers living in teams'
overlapping broadcast territories by conditioning the League's
antitrust exemptions on the provision of alternative platforms
like the Internet. This would particularly help major-league
baseball fans who live in States like Arkansas, Connecticut,
Nevada, Oklahoma that are overlapped by separate clubs in their
home television territories and thus, subject to local
blackouts.
Finally, the bill corrects a historical anomaly by bringing
major-league baseball under the auspices of the Clayton
Antitrust Act in the same way as the NFL, NBA and NHL are
currently treated. In doing so, the statutory conditions placed
on existing antitrust exemptions by this bill would also apply
to MLB.
In conclusion, I would like to reiterate our strong belief
that the FANS Act addresses some of the unfair and unbalanced
subsidies and preferential policies like antitrust exemptions
that professional sports leagues enjoy at the expense of
taxpayers and sports fans alike.
Thank you very much.
Senator Blumenthal. Thank you very much, Ms. Greenberg.
Mr. Waldron.
STATEMENT OF GERARD J. WALDRON, PARTNER,
COVINGTON AND BURLING, WASHINGTON, DC
Mr. Waldron. Good morning, Senator Blumenthal, Senator Lee,
Senator Klobuchar and Senator Franken and Members of the
committee. My name is Jerry Waldron and I am here today in my
capacity as outside counsel to the National Football League on
television related matters.
I appreciate the opportunity to discuss the NFL's
commitment alone among the professional sports leagues in
ensuring that all of its games are available across the country
via free over-the-air television. For more than five decades,
the Sports Broadcasting Act has been a key component in this
strategy enabling the NFL, major league baseball, the NBA, and
the NHL to put their games on broadcast television.
In the NFL's case, the League has agreements to put all 256
regular-season games and all playoff games on free TV. That is
a claim that no other sports league can make about all of its
playoff games, let alone all of its regular-season games. Quite
simply, the sports broadcasting act is working to benefit fans
and the public interests. For this reason, the FANS Act which
attempts to dictate business decisions, would ultimately be
harmful to fans.
For context, the NFL strategy serves three main goals.
First, because NFL teams generally play once each week, the
League tries to make each game a special event and obtain the
widest possible audience for those games. Second, the League
wants to encourage strong fan support in each local market. And
third, the broadcast television agreements generate substantial
revenues that are shared equally by the 32 NFL clubs. Thus,
clubs in Buffalo, Green Bay or Minneapolis receive the same
amount from TV contracts as teams in the New York City and
Chicago media markets.
To promote these goals, the NFL has long maintained a
blackout policy which is incorporated into the League's
contracts with the broadcast networks. The hallmarks of NFL
games are full stadiums, excited crowds and competitive games.
Sold-out games improve the experience both for fans in the
stadium and for those watching on television. Increased
attendance at games also helps to support local jobs,
businesses and taxes.
The League's business judgment is that it serves these
objectives well. While some may disagree with the League's
television policy, strong television ratings matched with high
attendance demonstrates that the policy is working.
The debate about blackouts of NFL games should be seen in
context. NFL game blackouts are at an all-time low. Last season
only two games were blacked out across the League. This season
there have been no blackouts. So over the past season and two
thirds, with almost 450 NFL games played, there have been just
two blackouts. This reduction reflects adjustments in the NFL's
blackout policy that the League has made over the years to
promote both game attendance and viewership.
The sports broadcasting act encourages broad-based game
viewership. Congress passed a law in 1961 to enable league
agreements with broadcast networks and a sharing of revenues.
Under the SBA, the NFL has created the most proconsumer
television plan in sports today. The NFL has maintained its
commitment to broadcast television even in extending its
contracts to 2022 with its broadcast partners despite the
dramatic change in the broadcast industry and, frankly, trends
by the other sports leagues off of free TV and toward paid
television.
The FANS Act proposes changes to the SBA that would
ultimately harm fans by creating uncertainty around the future
of sports on free television. A possible result would be to
migrate popular sports programming from free broadcast
television to pay-TV.
This committee has long cautioned against such a move. The
FANS Act proposes untenable conditions on the SBA's antitrust
provisions. The bill would deny a sports league the antitrust
provision if third-parties, such as a television station and a
cable or satellite company, have a contract dispute.
Yet, the NFL is not a party to those contracts and has
absolutely no control over the outcome of these disputes. No
business can plan its operation under laws that could change at
a moments notice due entirely to the actions of third parties.
In conclusion, NFL television policies made possible by the
SBA bring fans across the country a wide range of outstanding
television content each week. The NFL and the other sports
leagues practice of televising games on free over-the-air
television is made possible by the SBA. These arrangements
benefit fans and are in the public interest thus, the
underlined policies should not be altered.
Thank you and I will take any questions.
Senator Blumenthal. Thank you, Mr. Waldron. I have some
questions that I am going to pose to you and then yield to my
colleagues. I particularly am grateful to Senator Klobuchar,
the head of the Antitrust Subcommittee of the Judiciary
Committee, for being here today.
You mentioned the uncertainty of fans. The reason for their
uncertainty right now is the potential deprivation they suffer
from blackouts. There may have been few this year, but the
potential for blackouts is what creates their apprehension that
they may be deprived of access to these games.
So I wonder whether you have additional evidence that was
not presented to the FCC that you have to present to this
committee or whether it is your contention that the FCC failed
to consider the evidence that you presented in reaching its
conclusion.
Mr. Waldron. Senator, I have sort of two comments. One, it
was mentioned that a sports economist provided a study.
Actually, Dr. Hal Singer also provided a study on the sports
economists saying that an important reason why the NFL keeps
games on broadcast television is because it is able to control
its product. So there was conflicting evidence before the FCC.
I respect what Mr. Lake said, that the FCC made one conclusion.
The NFL's business judgment is that this is very important.
But I think it misses sort of a larger point. Senator, with
respect to your constituents, they have seen every Giants game
this year, last year, the year before, the year before that,
all the way back to the early 1990s.
If you look at the Knicks games, all of those Knicks games
are on cable television. They have to pay $80 a month to get
their Knicks games, to get their Rangers games and to get
almost all of their Yankees games. But they have seen every one
of their Giants games and I daresay every one of the Jets games
going back for that same timeframe.
So I recognize that there are blackouts of NFL games. They
are few and far between, but the NFL's commitment to broadcast
television, actually, I think stands out among the other sports
leagues.
Senator Blumenthal. But the threat continues to exist in
Connecticut and around the country that they will be deprived
of access to those games. And if the reality is that they are
seeing the games anyway, why continue with the threat of
blacking them out?
It seems to me that your contention is that the blackout
policy is essential to your business policy. In fact, it is the
antitrust exemption that is essential to your business policy.
Without the antitrust exemption you would not be able to
negotiate the enormously lucrative broadcast agreements that
you have and the revenue-sharing pacts that you enjoy and as a
condition for receiving that very public and unique benefit,
why not eliminate the threat to Connecticut consumers and
others around the country, fans across the United States that
simply because of a failure beyond their control of big
business interests to reach an agreement, they may be deprived
of access?
Mr. Waldron. I recognize that the Sports Broadcasting Act
gave an exemption to all of the sports leagues. In our view,
the NFL has used that exemption very responsibly by putting
overwhelmingly its games on television. But to be clear, major
league baseball testified last year before the Senate Judiciary
Committee, the only reason why the World Series is on Fox
television is because of the Sports Broadcasting Act.
So it ensures that broadcasters--and I would say, if you
look at the NFL in comparison to the other leagues, I think the
League has used its antitrust exemption very responsibly by
putting so many of its games, all of its regular-season games
and all of its playoff games on free television. I acknowledge
that there is--last year there were two. This year there have
been none so far, that they are few and far between, but the
overwhelming number of games are on television and we think
that is a responsible use of the SBA provision.
Senator Blumenthal. And the overwhelming number of games
also are sold out in the stadiums. Are they not?
Mr. Waldron. Yes, that is correct. Yes.
Senator Blumenthal. So why the blackout policy?
Mr. Waldron. Because we think over the long term it has
served to promote that benefit. It is easy to--remember that in
the late 1990s, 25 percent of games actually were still being
blacked out.
Senator Blumenthal. In fact, are there not other actions
that the teams regularly take? During the 2012 season, the
Miami Dolphins bought tickets to prevent a blackout for seven
of its eight home games. The Jacksonville Jaguars have covered
approximately 10,000 seats at EverBank Field with tarps since
2005, reducing their stadium capacity from 76,000 to 67,000.
The teams regularly take actions to fill their stadium,
giving away tickets, selling them for less than face value so
as to avoid blackouts. Why not just eliminate the blackouts?
Mr. Waldron. Well, Senator, I view that activity as very
pro-fan. I think it is evidence that the clubs actually
understand. Look, the NFL does not want blackouts. The clubs do
not want blackouts. Senator Lee and Senator Grassley both made
that point in their opening statements. No one likes blackouts
and that includes the NFL.
So I think the examples that you have shown are clubs
trying to respond and the League has adjusted its policy to be
more responsive. We think over the long term it has served and
it is in the business judgment of the League that it has served
it, but as that shows, clubs take extraordinary examples to
avoid them.
Senator Blumenthal. I am going to continue this
conversation with you and the other witnesses, but I now turn
to Senator Klobuchar.
Senator Klobuchar. Thank you very much Senator Blumenthal.
Thank you to all of the witnesses.
I thought I would start with you, Mr. Waldron. The blackout
rule was put in place in 1961. Is that right?
Mr. Waldron. The Sports Broadcasting Act was adopted in
1961. The FCC's rule was put in place in 1975.
Senator Klobuchar. All right. Good. Well, most of the money
made by sports tickets--it has been pointed out in the
testimony--from that time came from ticket sales. But today NFL
games are consistently among the most popular television
programs, certainly in my State where we are proud of the
Vikings. With that, comes a significant increase in revenue--as
has been pointed out by the other witnesses--for the League.
The cost of tickets has also significantly increased. It is
a big expense. Do sports teams need blackout rules the same way
they did half a century ago? If not, why do we still have the
same rule?
Mr. Waldron. No question that those facts are all right. I
will say--and this is in the record--it may surprise people
that as much as a quarter of the revenue of the NFL still comes
from ticket sales. So ticket sales still sort of remain
important.
The NFL has a balance. They want to have popular games on
television and they want to have a stadium that is full. You
can imagine a scenario in which--the other sports, they play
162 games or 82 games. So every game is not a special event.
In the NFL they work hard to make every game a special
event. So they try to balance that, maximizing the full stadium
capacity with the engaging of the fans on television. It is a
balance and they have, frankly, adjusted that balance over the
years. So we do think that the blackout policy sort of strikes
that balance correctly by encouraging fan attendance and also
encouraging fan engagement over television.
Senator Klobuchar. Thank you. Mr. Lake, the FCC unanimously
voted to repeal its sports blackout rules which prevented cable
and satellite operators from airing sports events blacked out
on a local station. What prompted the FCC to change its stance
and is there anything preventing the NFL or other sports
leagues from negotiating blackout rules directly with cable and
satellite operators now?
Mr. Lake. What prompted the Commission's action was the
change in the sports industry since 1975 when we adopted our
rule. Principally, the two facts that the Senator has noted, in
1975, the principal source of revenue for the NFL was ticket
sales, and over 60 percent of the games failed to sell out. Now
those facts are both reversed. TV revenue is the principal
source of revenue for the NFL and most games are sold out.
What the Commission concluded from that was that there was
very little risk that elimination of the FCC's rule would lead
the NFL to move its games from broadcast television to pay-TV.
The objective of our rule from the outset was not to maximize
the revenues of the sports leagues or the broadcasters, but to
try to protect the right of viewers to see games.
At the time the rule was adopted, it was thought that the
rule would help to keep games on broadcast TV by eliminating
the risk that if a cable operator, for example, imported a
distant station, this might lead the leagues to fail to sell
the games to that distant station and more viewers would lose
the right to see the games. We concluded that because of the
changes in the industry, the risk no longer existed and
therefore the rule was outdated.
I should note though that, to your last question, the
Commission's action simply eliminates the support for the
private blackout policies that was previously in the
Commission's rules. That action does not prevent the leagues
from continuing to implement their blackout policies as a
private matter without FCC support. Although as I say today,
blackouts are increasingly uncommon, the risk of blackouts
continues.
Senator Klobuchar. All right. Thank you. Does anyone want
to add anything to that, any of our witnesses?
Mr. Goodfriend.
Mr. Goodfriend. Thank you Senator. I think this discussion
would be helped by understanding how we got the law in the
first place. We are talking a lot about the antitrust exemption
as though it has always been there. Let us talk about how we
got here.
In 1953, the United States Department of Justice Antitrust
Division succeeded in litigation with the NFL on antitrust.
Are you commenting on the Packers tie?
Senator Klobuchar. Yes. We are commenting on that. We just
noticed it and it might not have been your smartest move given
that half of the Senators here are from Minnesota right now.
[Laughter.]
Mr. Goodfriend. I was realizing that as I started talking.
But we gave you Brett Favre.
Senator Klobuchar. I mean we are not at all distracted. Are
we Senator Franken?
[Laughter.]
Senator Franken. I was just thinking of Senators Feingold
and Kohl.
[Laughter.]
Senator Klobuchar. They used to be----
Senator Franken. How they would have enjoyed that.
Senator Klobuchar. But we are on here now.
Mr. Goodfriend. Yes, you are.
Senator Klobuchar. Continue on answering.
Mr. Goodfriend. I love the color purple. I am wearing a
purple----
Senator Klobuchar. All right. Yes, yes, yes.
Mr. Goodfriend. So 1953, U.S. v. NFL, the Department of
Justice won a judgment against the NFL for violating antitrust
laws. Why? Well, there were four things that the court spelled
out.
Number one, the League restricted the broadcasts of games
locally during a home game. Number two, the League restricted
the broadcast of an away game in the home market. Number three,
same restrictions with respect to radio and number four, a kind
of blanket power given to the NFL commissioner to restrict
broadcast overall.
The court said no. Three of those four violate antitrust
laws. One, the restriction of broadcasting games locally during
a home game, the judge allowed to stand. That was 1953.
In 1960, a new football league, the American Football
League came along and did a deal with the ABC television
network whereby it pooled all of the teams' broadcast rights
and did one nationwide deal. So the NFL tried to do the same
thing. It entered the same type of deal with CBS.
No, said the court. That violates our 1953 order. So what
did the NFL do? It came right here to this committee, the U.S.
Congress, and it said we need your help. How can it be fair
that the AFL gets to pool its broadcast rights, but we do not?
That is not fair. Congress agreed, and the Sports Broadcasting
Act of 1961 was expressly designed to overturn the 1953 Eastern
District of Pennsylvania decision while at the same time
preserving that court's decision to allow local blackouts.
That is how we got here. It was to overturn a case brought
by the United States Department of Justice during the
Eisenhower Administration. So what does that mean for today's
discussion?
The court in 1953 and Congress in 1961 both premised their
decision on the importance of local ticket sales, on the
importance of maintaining the economics of the League. That was
over a half-century ago. It is perfectly legitimate for this
committee to revisit the statute from 1961 and ask whether the
same economic principles apply today.
We at Sports Fans Coalition believe they do not. Moreover,
we think that anytime the Government gives a gift to a
professional sports league, it is perfectly legitimate to ask,
should any conditions be attached to that gift? Does the gift
still make sense? It is, after all, a gift from the American
people to a private multibillion dollar organization to get an
antitrust exemption for your type of business practice.
Senator Klobuchar. Thank you very much. My time has
expired.
Senator Blumenthal. Senator Franken.
Senator Franken. Mr. Goodfriend, the threat of blackouts
during retransmission contract disputes is especially
concerning to me because that could potentially affect fans of
any major sports league. Such contract negotiations seem to be
growing increasingly contentious each year.
Last year, for example, negotiations between Time Warner
Cable and CBS led to a month-long blackout of programming that
affected millions of consumers. As you know, Comcast's proposed
acquisition of Time Warner Cable is currently being reviewed by
the FCC and the Department of Justice.
It is a deal that would unite the two largest cable
operators in the country, and in my view--as I have made very
public--it should be rejected. I think it is simply a bad deal
for consumers. I do not believe it would improve service or
choice and I believe that it will result in higher prices.
A combined Comcast-Time Warner Cable company would exert
particular power in the sports programming market. Mr.
Goodfriend, you have noticed that both companies have long
track records of trying to prevent individuals who do not
subscribe to cable from viewing games. Can you explain what
that means and tell us what you think the implications of the
proposed acquisition deal would be for sports fans?
Mr. Goodfriend. Thank you, Senator Franken. Let me just
note that Sports Fans Coalition is on record opposing the
Comcast-Time Warner Cable merger and filed a petition to deny
at the FCC to that effect.
Your question regarding the effect on sports--my learned
friend from Covington and Burling mentioned Hal Singer, the
economist who opposed us in the sports blackout proceeding.
Interesting to note, Mr. Singer also authored a paper that we
cited extensively in our pleading that said when a cable
company owns a regional sports network, the tendency is for
fans who do not subscribe to that cable company to not be able
to see the game. That is the trend. As opposed to, let us say,
an independent regional sports network that is carried more
widely on other providers.
Mr. Singer and his colleagues went on to conclude that the
bigger the local cable company, the worse the problem gets. And
that just makes sense intuitively. If I am going to give up
some revenue by not sharing my sports with you, the smaller you
are, the bigger I am, the less of a loss it is to me. So that
was the conclusion of Singer et al.
Now, in the context of the proposed merger between Comcast
and Time Warner Cable, take a market like Los Angeles. Los
Angeles today has Time Warner Cable and as I mentioned earlier,
Time Warner Cable owns a regional sports network. The merged
entity would acquire roughly a quarter of a million new
subscribers from Charter.
So what does that mean? The local cable company is getting
bigger. As a result, the trend we already see today, when Time
Warner Cable owns Dodgers games and will not televise those
games to most fans, it is just going to get worse if the cable
footprint gets bigger. So that is why Sports Fans Coalition has
chosen to oppose the merger.
Senator Franken. Thank you. I am going to get on a little
bit of a different subject, but I think--Mr. Waldron, this is
addressed to you. We have spoken a lot today about the
significant taxpayer support and public benefits that sports
leagues, including the NFL, enjoy. I think that as a country we
provide such enthusiastic support for professional competitive
teams, at least in part, because we recognize all of the ways
in which they can enrich our culture.
Yet, we have a team in the NFL that continues to call
themselves by an offensive name, a racial slur. The use of the
name is hurtful and insulting to so many people in our country,
including in my home State of Minnesota where we have a large
and vibrant Native American community. I have heard from Tribal
leadership in my State who understandably find this name
offensive and harmful, as do I. A simple step would be for the
NFL to address the need for a name change. What is the League
considering doing at this time?
Mr. Waldron. Senator, I recognize the importance of your
question. I am not in a position to answer it. I advise the
League on television matters, but I will consult with them and
get back to you with an answer.
Senator Franken. I would appreciate that. Thank you.
Mr. Chairman.
Senator Blumenthal. Thank you, Senator Franken.
Just to continue with some of what we were discussing and I
think Mr. Lake addressed part of this issue.
Mr. Waldron, I guess it is your contention that the FCC
failed to consider certain evidence and therefore reached the
wrong conclusion by a 5-0 vote?
Mr. Waldron. Sure. I am not embarrassed to say that. I
think it is an assessment of uncertainties and Mr. Lake cannot
prove that he is right any more than I can prove that Mr. Lake
is wrong when he said the FCC's prediction was changing the
sports blackout rule will have no effect on what the NFL does
with respect to it.
Their judgment in looking at the evidence and looking at
the sports economists study and the Dr. Singer study that Mr.
Goodfriend cited, they said no. That was their judgment looking
at the evidence. The NFL has been at this for 50 years. It
actually wants to maximize the number of people in the
stadiums.
Senator Blumenthal. But things have changed over that 50
years.
Mr. Waldron. I understand that and they watch this every
week. I assure you the NFL watches this every week.
Senator Blumenthal. Is not the present policy in effect to
the disadvantage of certain cities over others, certain fans
over others? For example, the Ralph Wilson Stadium in Buffalo
represents 28 percent of the population in that city. That
stadium can hold 28 percent of the population compared to the
capacity of Soldier Field in Chicago which represents 2 percent
of the population of that city. The stadiums in the New York
area, probably even a smaller percent which may be the reason
that they are regularly filled.
But the threat is there for all fans, New York,
Connecticut--maybe it falls more heavily on Buffalo,
Cincinnati, San Diego, Tampa Bay where economic recession
population trends may have made the markets less robust. Is
there not a discriminatory aspect here? Also, insofar as it,
frankly, hits the elderly, disabled and folks who cannot attend
because of the price?
Mr. Waldron. Two parts to that answer--the first is I think
the League has recognized that different stadiums and different
clubs are in different situations which is why it has adopted
and adjusted its policy and adopted more flexibility. Frankly,
the flexibility that was adopted in--I believe it was 2011 or
2012, frankly, it has benefited the very clubs that you
mentioned, sort of Tampa and San Diego and Cincinnati. That is
one of the reasons why we have not seen.
To the point about the elderly--and we have all seen the
studies. It may surprise people, but----
Senator Blumenthal. If I may--and I will let you finish on
the elderly and disabled and people of modest means who may not
be able to afford tickets right now. If you are worried about
filling the stadiums, why not just lower the ticket price? That
is the way the market normally works.
You have the immense benefit of an exemption from normal
market forces in the antitrust exemption. Why be greedy about
it? The antitrust exemption are the keys to the kingdom. They
are the gold mine for you and it seems to me you continue to
take a step too far. Is it not in your own enlightened self-
interest to eliminate the blackout rules--step to legislation?
Mr. Waldron. Well, I will say all of the sports leagues
enjoy that exemption. Congress passed it to actually benefit
the public by putting sports on free television. That was the
judgment when Congress passed it in 1961. But yes, it has been
a benefit to the League. I do not want to suggest otherwise,
Senator. We recognize that. But I think it also has been a sort
of benefit to the public in that regard.
The Dr. Singer study that was cited earlier, he actually
found that it actually does have a downward pressure on prices
for the very reasons that you cite which is that if you want to
put people in the seats, then you are going to lower your
prices and you actually have an incentive. Because of the
blackout policy, clubs have that incentive that you sort of
point at.
But I do not want to lose sight of your very important
comment about the elderly and Latinos. Many of those same
people actually cannot afford cable. And yet to watch every
Sabres game they are going to have to pay $80-$100 a month to
watch every Sabres game and that is for 6 months of the season.
To watch their Bills--everyone wishes they would watch all of
their games, but they certainly watch all of their away games.
Every Buffalo Bills away game is on free, over-the-air
television in Buffalo and as many as are sold out.
So we think that the League has actually used its benefits
under the SBA responsibly and to benefit the public.
Senator Blumenthal. I am going to ask some of the other
witnesses to respond to the points that you have made very
well, Mr. Waldron.
Mr. Lake, in essence, I think you have heard Mr. Waldron
say that the FCC could and should have adopted a contrary
conclusion. What would you say to that?
Mr. Lake. We held a public proceeding in which we received
extensive comments from a wide variety of parties, including
conflicting presentations by economists. The conclusion of the
five unanimous Commissioners was that based on that record,
elimination of our sports blackout rule would not be likely to
lead the League to move their games off of over-the-air
television and on to pay-TV.
We also noted, the Commission noted that the contracts
today extend through 2022, so that ensures that they will
remain on over-the-air television until at least within that
period.
Senator Blumenthal. So the FCC, in essence, to put it from
the fan's perspective, found no uncertainty as to what would
happen to broadcasts?
Mr. Lake. They certainly concluded that the very likely
result is that this would not take games off of over-the-air
television.
Senator Blumenthal. Mr. Goodfriend, do you agree with that
conclusion and particularly as it affects the smaller cities
and fans in those cities and the threat to fans in larger
cities as well?
Mr. Goodfriend. Well, Senator, you will note from our prior
conversation, I am wearing a Green Bay Packers tie, so I care
about small market teams very much. And I think it is a little
bit of a red herring to argue that all this is made possible
solely by the beneficence of the U.S. Congress in granting the
antitrust exemption.
The NFL is not running a charity. They are a highly
profitable multibillion dollar organization. They put their
games on television because that is where the money is. They
put their games on broadcast because that is where the audience
is. The day that Pepsi and Budweiser and GM stop paying top
dollar for top ratings on broadcasts, we will see a change. But
until that day comes, the NFL is maximizing its revenues as any
rational business actor would.
Now, Professor Rod Fort at the University of Michigan, in
the submission that he made to the FCC, pointed out that even
under the most exotic assumptions, the threat of a local
blackout might put a few thousand more people in seats on any
given Sunday. Contrast that with the loss of revenues from
taking a game off broadcast. It would be in the millions,
perhaps tens of millions.
So, Professor Fort concluded the rational economic actor
would say, I am not going to give up all of that money on the
broadcast TV side just to put a few thousand more people in
seats. That is why, intuitively, you could say there really is
not going to be too much of a connection between putting games
on broadcasts and having a local blackout policy or an
antitrust exemption that sustains it.
Rather, the League will make money. That is what it does
best. And if it thinks it is going to make more money putting
games on broadcasts, then it will do so. If it thinks it is
going to make more money putting it on ESPN, as we saw with
Monday Night Football, or putting games on Thursday night on
the NFL Network, it will do so. It already has.
So I think it is important to differentiate between what
the League gets from its local blackout policy and broadcast
TV. I think it is a red herring to threaten taking games off
broadcasts unless we get this antitrust exemption for local
blackouts. The numbers just do not add up.
Senator Blumenthal. Ms. Greenberg, what does this mean for
ordinary consumers and fans? How are they impacted?
Ms. Greenberg. Well, there is a problem with fans being
able to afford to go to games. Our figures are that from 2010
to 2013 the cost for a family of four to attend an NFL game
increased by 8 percent to $459.
So that is out of the--pun intended--the league of many,
many families. So, of course, they turn to free broadcasts to
get access to their games.
I am curious about something that Mr. Waldron has said on
several occasions, that the NFL has evidenced a lot of
flexibility about the blackout rule and wonder what evidence
there is of that. I think what we are really talking about, as
David has just pointed out, it is enormously profitable, not an
act of charity on the part of the NFL. It is enormously
profitable for the League to have games on broadcast television
and that is why they do it, not because they are so flexible.
I do not understand, as you pointed out, fighting this
blackout rule issue when it does not seem to be a problem for
them and they could be part of the solution instead of being
part of the problem. So for fans, it is obviously critically
important for those fans who cannot make it to the game--for
physical disabilities, because the costs are too high, because
they have kids at home--I am puzzled by why the NFL is fighting
your very, I think, sensible proposal.
Senator Blumenthal. Mr. Waldron, has any consideration been
given within the NFL--I know you cannot speak for other
leagues--but within the NFL to changing the blackout rule?
Mr. Waldron. After the FCC repealed its rule in late
December, Commissioner Goodell said that he was going to study
it and my understanding is that the owners' committee is
studying this issue.
Senator Blumenthal. And is there a time line for it
possibly, actually, reversing the rule?
Mr. Waldron. I am not aware of any time line for that,
Senator. I can get back to you. I am not aware of any time
line.
Senator Blumenthal. If you could let us know whether there
is any time line for the committee reaching a conclusion, I
would appreciate it.
Mr. Waldron. All right.
Senator Blumenthal. What will be the determining factors in
the consideration that the owners and they are the ones who
decide? Am I right?
Mr. Waldron. Yes.
Senator Blumenthal. What will be the determining factor in
their decision?
Mr. Waldron. Well, it is a really good question and I will
come back to a comment that was just made. My colleague, Mr.
Goodfriend, referred to an economist's study that said
blackouts actually increase ticket sales by 4,000. That is
actually the League's contention and so that is the balance
that the League has faced which is we want to have fans in
attendance and we want to have games on television. That is the
balance that we face and it has been adjusted over the years in
order to, frankly, take care of some of the large stadiums that
were out there and lots of sort of consequences.
So that is the consequence which is the incentive for fans
to attend as well as maximizing broadcast television because we
do not like blackouts. No one likes blackouts, but they sort of
look for that balance. So that is exactly what the owners'
committee is looking at.
Senator Blumenthal. I would strongly encourage them to do
the right thing on their own. I think they would become heroes
rather than the opposite which they are now. It is an outdated
really outmoded obsolete rule which in many respects, to be
very blunt, the owners seem to work hard to avoid imposing as a
matter of practice. That is why they issue free tickets or low-
priced tickets or fictionalize their attendance in other ways.
I do not mean fictionalized in the sense of any fraudulent
activity, but----
Mr. Waldron. I understand.
Senator Blumenthal. They go through the pretense of filling
a stadium so as to avoid a blackout, which is against their
interests and the threat of the blackout gives them a black eye
no matter what they do. So I look forward to hearing more.
Mr. Waldron. I will share that perspective. Thank you,
Senator.
Senator Blumenthal. Ms. Greenberg, I hear about cable rates
all of the time. You have raised the issue very appropriately.
When we talk to cable companies, they point to the costs of
sports as driving, in many respects, these rates skyward. Is it
fair to blackout games after driving up those costs to the fans
of, in effect, buying the cable services? Mr. Waldron has
raised this consideration as well.
Ms. Greenberg. Absolutely not and consumers are right to be
furious about the fact that they are paying these very high
rates and may not even have access to the sports programming
that they are paying for. Not to mention, all of the other
subsidies that taxpayers and consumers provide to sports teams.
No, it is patently unfair and that is one of the reasons why we
are so strongly supportive of this legislation. We think
consumers are angry about it and they have a right to get
access to the programming that they paid for.
Senator Blumenthal. And when you go back to your client
whom you have represented well here today, Mr. Waldron, I hope
you will remind them that we are acutely aware of those other
public benefits that the League enjoys and not just your
league, again. It is not meant to put the focus only on the
NFL, but those benefits and subsidies, and infrastructure
whether it is transportation or stadiums or other kinds of
public benefits that professional sports enjoys and we have
chosen to single out one, which is the antitrust exemption, but
these public trusts really demand a public trust from the
League itself. Special public benefits, in my view, demand a
recognition of that public trust from the League.
Do any of the other witnesses--Mr. Goodfriend.
Mr. Goodfriend. Senator Blumenthal, there is one category
of Americans here who has not been mentioned and is harmed by
the local blackout policy. I just want to make sure this goes
on the record. Local broadcasters, local grocery stores, local
business people often scramble at the last minute to buy up
blocks of tickets in order to avoid a blackout.
Now if ever there was an example of a tax being imposed on
business people, that is it. And it is a tax imposed on them by
virtue of this protection, the antitrust exemption, allowing
the League to threaten a blackout.
Now I will point out that Sports Fans Coalition in our
reply comments described allegations provided to us by an
executive who wished to remain anonymous. This person said that
the reason why those three playoff games that you alluded to in
your opening statement in Green Bay, Indianapolis, and
Cincinnati, the reason why those threatened blackouts did not
occur, it was alleged, was because the NFL pressured broadcast
networks to buy up unsold tickets in order to avoid the
blackout.
Now let us just assume for a moment that that allegation is
true. Let me get this straight. The U.S. Government gives the
NFL an antitrust exemption. The NFL takes that antitrust
exemption and exerts power on other third parties to get them
to buy something from the NFL at full value.
Now the NFL had every opportunity to turn around to me, the
Sports Fans Coalition, and say that the allegation is blatantly
false. How dare you make such allegations? Instead they said
nothing--nothing--for weeks, nothing.
When it was their turn to file at the FCC, the best they
could come up with was if Sports Fans Coalition really purports
to speak for fans, we should not care how we avoid local
blackouts. In my opinion, Senator, that is a tacit admission.
So do we allow the League to avoid blackouts by coercing
others into buying blocks of tickets? They talked about how few
blackouts there are. Yes, that is true, but how did we get
there? Do we allow the League to avoid blackouts under its own
policy by coercing others, allegedly, to purchase tickets? Or
do we just say enough is enough? You do not get the gift
anymore. You do not get to have your antitrust exemption for
local blackouts. There would be a loud cheer not just among
fans, but in my opinion, local broadcasters, local grocery
stores, and local business people, if we did that.
Senator Blumenthal. Thank you. I might point out with
respect to those local businesses and grocery stores and
broadcasters, if they got together the way that the clubs or
teams do in collaboration to maximize their bargaining power,
they would be seeing their State Attorney General or United
States Attorney Geneneral and they would be in court defending
against an antitrust prosecution, civil or criminal. So this
exemption is really very special, very unique, and very
undeserved if the leagues, in my view, fail to recognize their
special public trust because of that unique exemption.
So I would invite any other comments. If there are none, we
are going to keep the record open for 1 week and I will adjourn
the hearing. Thank you.
[Whereupon, at 12:30 p.m., the hearing was adjourned.]
[Additional material submitted for the record follows.]
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