The outgoing chairman of the Senate Judiciary Committee, Senator Specter, a Republican of Pennsylvania, has decided — for reasons best known to him — that its time to repeal the National Football League's antitrust exemption under the Sports Broadcasting Act of 1961. Specter plans to introduce legislation as soon as the new Congress convenes in January. The bill would end the NFL's practice of bundling its 32 teams into one group for the purposes of negotiating both over-the-air and cable television contracts.
It's unclear whether Specter also plans to include Major League Baseball, the National Basketball Association, National Hockey League, the National Collegiate Athletic Association, and other sports organizations in his proposed legislation, as all of those businesses enjoy the same exemption.
Also uncertain is whether Specter can generate any support from the other 99 Senate members or the 435 House members — and it would take an awful lot for him to get President Bush's signature on the bill. The president once owned a piece of the Texas Rangers baseball franchise, and baseball owners have reaped the considerable benefits of the 1961 Sports Broadcasting Act. So Specter may be throwing a Senate version of a Hail Mary pass in this case.
Specter's bill may never make it out of committee but it's worth looking at how the Sports Broadcasting Act of 1961 changed not only the NFL but also sports and television.
In 1961, a Brooklyn Congressman and chairman of the House Judiciary Committee, Emanuel Cellar, pushed the exemption through the House. President Kennedy signed it into law on September 30 later that year. The legislation is considered the main reason the NFL went from a ragtag business to the powerful entity it is today.
This year, under the terms of four new network deals, each NFL team will annually earn more than $120 million in shared TV money. The league's officials negotiated various deals with CBS, NBC, FOX, and Disney and ended up with a six-year, $24 billion broadcast and cable rights contract. The television deals end in 2011. Additionally, DirecTV will pay $700 million every year through 2010 for its Sunday Ticket package. The NFL also decided to keep an eight-game Thursday-to-Saturday night package in-house, placing it on its NFL Network. That those eight games are not available to all fans may be why Specter is unhappy.
The NFL Network still has not reached agreements with Time Warner Cable and Cablevision to carry the league-owned network. League officials want too much money for the network, according to Time Warner executives. Meanwhile, Cablevision chairman Charles Dolan has said nothing publicly about his negotiations with the NFL. Specter seemed to be taking the cable operators' position when he said last Thursday that, "This is the NFL exerting its power … right down to the last nickel."
In what may be a goodwill gesture to Senator Lautenberg of New Jersey and, in an effort to sway Specter, the NFL announced yesterday that it planned to give Time Warner and Cablevision subscribers a free week of programming between December 24 and 30. The timing will allow subscribers to tune in to the Rugters-Kansas State Texas Bowl matchup and another college bowl game featuring Minnesota and Texas Tech. Lautenberg has complained that many Rutgers fans in New Jersey were being unfairly denied the opportunity to watch Rutgers in the Texas Bowl because the NFL Network, which has rights to the game, has not yet reached deals with Cablevision and Time Warner Cable.
But giving away a week's worth of programming probably won't appease Specter, nor will it be a catalyst for an agreement between the NFL and the two holdout, cable systems operators.
Specter wants to turn the clock back to a time when television contracts were negotiated locally, and when there were just two real networks, CBS and NBC. As television proliferated in the 1950s, the NFL was prevented by a court-ordered injunction from signing a single league-wide contract with a network. Instead, each NFL team negotiated a separate deal with a local television network. In 1960, the New York Giants received $340,000 for their deal, while the Green Bay Packers made only $105,000. The fledgling, eight-team AFL— which was not limited by the injunction — pooled its broadcast rights and signed a national network contract with a struggling ABC (the network had several weak-signaled affiliates at the time).
Immediately following the passage of the 1961 Sports Broadcasting Act, the NFL pooled its television rights and signed a deal with CBS for 1962 for $4.65 million annually. That money was split among the 14 NFL franchises.
The NFL commissioner at the time, Pete Rozelle, had to convince the franchise owners in the larger markets that they could secure greater leverage through pooled rights, although they might experience an initial drop in revenue. Rozelle saw the changing playing field and knew the big-market teams in New York, Chicago, and Los Angeles could land enormous contracts as television grew, leaving behind smaller markets such as Pittsburgh and Green Bay. Rozelle borrowed an idea first raised by baseball executive Branch Rickey when he was trying to challenge MLB with the proposed creation of a Continental League, in the late 1950s. Given the AFL's success in implementing the "Rickey" concept, Rozelle knew he had to work at getting a diverse group of owners to think about the league instead of their individual freedoms.
About six years ago, Giants owner Wellington Mara remarked that because the Cleveland Browns were willing to surrender their large television package, others were persuaded to do the same.
"[Art Modell] was really the one who gave something away. We didn't know what we were giving up. That is what did it. They made the decision. Without that, why, we wouldn't have the league we have today," Mara said. "I think [Rozelle] explained to everybody very cogently what was at stake and [Rozelle] knew it wasn't going to be much of a league with lopsided revenue. … It was too much to expect Buffalo to compete with New York or Green Bay to compete with Chicago."
Specter may be unafraid of taking on the NFL and its highly politically connected owners, but he is absolutely wrong when he contends that football fans of America are being "gouged." The real gouging would come after the antitrust exemption is lifted.
Pennsylvania's senior senator apparently does not know how sports owners operate today — as opposed to 1960 — where television is concerned. Most of the NFL's regular season — and all of its playoff games — are on over-the-air TV. That's an anomaly in sports. Take a look at New York's professional teams: the Knicks, Rangers, Nets, Devils, and Islanders are not on "free" television. Save for a few network TV games, the teams work strictly with cable programming. The Yankees and Mets have a handful of games on over-the-air television (the Boston Red Sox will not be on over-the-air television in 2007)
Specter needs to understand that sports owners have taken their properties from terrestrial TV to cable because that's where the money is. The Giants, Jets, Chicago, Philadelphia, New England (Boston), or Dallas would likely have no problem putting together a lucrative TV network because of their big city locations. Green Bay, Buffalo, New Orleans, Tennessee (Nashville), Jacksonville, Kansas City, or Cincinnati, on the other hand, would have major difficulties getting big money agreements.
Specter should realize that football also will migrate to cable television, where regional sports cable networks — who collect revenue from both subscribers and advertisers — have deeper pockets and so, more money to offer than local TV stations. This is not good news for cable TV subscribers since NFL programming is very expensive; it almost certainly means cable rates will go up for everyone, not just football fans.
NFL owners already are locked in a battle over shared revenue, with New York Senator Schumer looking over their shoulders to ensure the Buffalo Bills and other small market teams can line up with big market players like New York and Chicago. Can you imagine what would happen within the league if Specter's bill becomes law?
The bill would end not only the NFL's view of football economic socialism — which basically allows Green Bay to compete on a nearly even financial footing with New York in signing free agent players and offering bonuses to draft picks — but more important, would be costly for cable TV consumers. Which is why Specter's proposed legislation is pure folly and will more than likely never come out of committee.
