Federal Communications Commission FCC 14-141 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Sports Blackout Rules ) MB Docket No. 12-3 ) REPORT AND ORDER Adopted: September 30, 2014 Released: September 30, 2014 By the Commission: Chairman Wheeler and Commissioners Clyburn, Rosenworcel, Pai and O’Rielly issuing separate statements. TABLE OF CONTENTS Heading Paragraph # I. INTRODUCTION.................................................................................................................................. 1 II. BACKGROUND.................................................................................................................................... 3 III. DISCUSSION ........................................................................................................................................ 6 A. Authority to Eliminate Sports Blackout Rules................................................................................. 7 B. Sports Blackout Rules No Longer Needed to Ensure that Sports Telecasts Are Widely Available to the Public................................................................................................................... 12 1. Primary Relevance to Professional Football ........................................................................... 13 2. NFL Gate Receipts and Other Revenues................................................................................. 14 3. Reduction in NFL Blackouts................................................................................................... 16 4. Impact of Blackouts on NFL Attendance and Gate Receipts.................................................. 20 5. Migration of NFL Games to Pay TV....................................................................................... 22 6. Erosion of Economic Basis for Sports Blackout Rules........................................................... 26 7. Elimination of the Sports Blackout Rules ............................................................................... 27 C. Impact of Eliminating Sports Blackout Rules on NFL’s Ability to Control Distribution of its Games........................................................................................................................................ 29 1. NFL’s Blackout Policy............................................................................................................ 30 2. Compulsory Copyright Licenses............................................................................................. 31 3. Retransmission Consent and Contractual Arrangements with Broadcasters........................... 32 4. Contractual Arrangements with MVPDs................................................................................. 35 5. Compulsory License and Retransmission Consent Fees......................................................... 37 D. Local Impact of Eliminating Sports Blackout Rules ..................................................................... 39 1. Impact on Localism................................................................................................................. 40 2. Impact on Consumers.............................................................................................................. 41 3. Impact on Local Businesses and Economies........................................................................... 44 E. Other Issues.................................................................................................................................... 45 IV. PROCEDURAL MATTERS................................................................................................................ 46 A. Regulatory Flexibility Act ............................................................................................................. 46 B. Paperwork Reduction Act.............................................................................................................. 47 C. Congressional Review Act............................................................................................................. 48 D. Additional Information .................................................................................................................. 49 V. ORDERING CLAUSES....................................................................................................................... 50 APPENDIX A – Sample Provisions in Network Affiliation Agreements Federal Communications Commission FCC 14-141 APPENDIX B – Final Rules APPENDIX C – Final Regulatory Flexibility Act Analysis I. INTRODUCTION 1. In this Report and Order, we eliminate our sports blackout rules, which prohibit cable operators, satellite carriers, and open video systems from retransmitting, within a protected local blackout zone, the signal of a distant broadcast station carrying a sporting event if the event is not available live on a local television broadcast station.1 The sports blackout rules have reinforced the sports leagues’ private blackout policies since 1975, with the objective of helping to ensure that sports telecasts are widely available to the public. The sports industry has evolved dramatically over the last 40 years, however. The sports blackout rules have little relevance today for sports other than professional football. With respect to professional football, television revenues have replaced gate receipts as the primary source of revenue for NFL teams. For this reason, among others, we conclude that the sports blackout rules are no longer needed to ensure that sports programming is widely available to television viewers. 2. Eliminating the sports blackout rules will also remove unnecessary and outdated regulations.2 Additionally, eliminating the rules will remove regulatory reinforcement (and the FCC’s implicit endorsement) of the NFL’s private blackout policy, which prevents consumers – many of whom cannot attend games because they are elderly or disabled or are fans who have been priced out of attending games due to increased costs for tickets, parking, and concessions, yet have subsidized NFL teams with their tax dollars through publicly-financed stadiums and other tax benefits – from watching their teams’ games on local television. For these reasons, we find that eliminating our sports blackout rules will serve the public interest. We acknowledge that elimination of our sports blackout rules may not end local blackouts of sports events because the NFL and other sports leagues may choose to continue their private blackout policies. Nevertheless, to the extent that the NFL or any other sports league decides to continue its blackout policies, it will no longer be entitled to additional protections under our sports blackout rules, but instead must rely on the same processes available to any other entities that wish to protect their distribution rights in the private marketplace. II. BACKGROUND 3. In the Notice of Proposed Rulemaking (“NPRM”), the Commission provided extensive background on the history of the sports blackout rules, which we incorporate by reference and do not repeat here.3 The sports blackout rules bar cable operators, satellite carriers, and open video systems from 1 See 47 C.F.R. §§ 76.111 (cable operators), 76.127 (satellite providers), 76.1506(m) (open video systems). In its comments on the Further Notice of Proposed Rulemaking in MB Docket No. 10-71, which seeks comment on whether the Commission should eliminate or modify the network non-duplication and syndicated exclusivity rules (collectively, “exclusivity rules”), the National Football League argues that the Commission should examine the exclusivity rules and the sports blackout rules in the same proceeding, because “the exclusivity rules and the sports blackout rule are both designed to prevent cable and satellite carriers from circumventing private contracts that promote free, over-the-air broadcast television.” See Comments of National Football League, MB Docket No. 10- 71, at 4; see also Amendment of the Commission’s Rules Related to Retransmission Consent, Report and Order and Further Notice of Proposed Rulemaking, FCC 14-29, ¶ 40 (rel. March 31, 2014) (“Exclusivity FNPRM”). We decline to consolidate these two proceedings. We have developed a complete and thorough record on which to address the issues raised in this proceeding and see no reason to delay its resolution. Nothing in this Report and Order prejudges the outcome of the pending exclusivity proceeding. 2 See Exec. Order No. 13,579, § 2, 76 Fed. Reg. 41,587 (July 11, 2011) (“[t]o facilitate the periodic review of existing significant regulations, independent regulatory agencies should consider how best to promote retrospective analysis of rules that may be outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned”); Final Plan for Retrospective Analysis of Existing Rules, 2012 WL 1851335 (May 18, 2012). 3 See Sports Blackout Rules, Notice of Proposed Rulemaking, 28 FCC Rcd 17214, 17215-21, ¶¶ 2-12 (2013) (“NPRM”). 2 Federal Communications Commission FCC 14-141 retransmitting, within a 35-mile zone of protection, a distant broadcast station carrying a sports event that is not available live on a television broadcast station licensed to the community in which the event is taking place.4 The Commission first adopted a sports blackout rule for cable operators in 1975, when game ticket sales were the primary source of revenue for