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The Solution to the NFL Network Problem

By Jeffrey Standen

Like many sports fans, I'm a little upset at the prospect of missing this week's big Cowboys-Packers NFL contest, and also missing the Patriots-Giants game a few weeks down the road. The reason for this prospect is the NFL's decision to allocate these games to its fledgling NFL Network in an effort to boost channel subscribers. More to the point, apparently the NFL and the cable television giants cannot agree on a proper fee for featuring the NFL Network as part of the schedule of channels for "standard" cable service, much like is ESPN. Had these particular games been available to the "free" television networks, undoubtedly both would be nationally televised.

The commentators I've heard have described this problem as a stalemate between two business giants (the NFL and Cable TV) over the last dollar, with each side waiting for the other to yield. This characterization is true, but falls so far short of the whole picture as to be misleading. What's missing from the picture is the law's role in creating this mess.

As usual, the law is guilty as charged.

1. Start from the premise that clubs own the right to broadcast their games. By this I mean individual clubs, and not the collection of clubs gathered together to form a league, own their games. So the legal right to televise Thursday night's game is owned by the Cowboys and the Packers, the teams that will engage in the contest. This legal right is an intellectual property right, an intangible asset, and is based on a very questionable reading of the law. Federal copyright law precludes the "re-broadcast" of the particular versions of games broadcast over the air. But as to the initial broadcast of the games themselves, under federal law when Tom Brady completes a pass to Randy Moss for a touchdown, it's just news. Anyone who's aware of the news can broadcast the news, even simultaneously with another "permitted" broadcast, without violating copyright law.

2. What prohibits alternative, competing, bootleg broadcasts of live NFL games? Just the following historic judicial decision. In 1938 a local radio station decided to broadcast Pirates' games from vantage points outside the fences at Forbes Field. The Pirates had sold radio broadcast rights to NBC. When the Pirates sued to enjoin the local competitor, a lone federal judge stated that "it is perfectly clear" that broadcast rights belong to the Pirates. No citation to legal authority was provided to support this wild claim. The judge just said it was perfectly clear and that's that: the Pirates, and every team in history thereafter, has enjoyed a "property right" to broadcast its games. The court grounded this property right in a theory of unfair competition: that if other broadcasters could compete with NBC, then the Pirates would not be able to profit from their investments in the team and the event. Now it may be true (although very contestable) that the Pirates "need" to have this property right in order to field a competitive team, but generally speaking the legal protections for intellectual property are devised by statute and are pretty carefully circumscribed. Why? There is a large public interest in having ideas and information disseminated. Yet here, in the absence of a statute, a judge in Pennsylvania created a property interest out of whole cloth. Go Pirates!

3. In any event, teams have this property right, but have chosen, under league agreements with the NFL, to allow these rights to be sold as a group by the league: hence the mega-monstrous national television packages the NFL enjoys. But, here's the rub: there is a strong case to be made that this arrangement wherein the teams pool their rights for collective sale to the networks (and thereby to the public) is a violation of federal law, not copyright law, but antitrust law. So while enjoying the law's (judge-invented) property right, the teams are using those rights in arguable violation of the (Congressionally mandated) antitrust law. Gave them an inch, they took the mile. Is there any reason to believe it's an antitrust violation? In 1953 the United States itself sued the NFL on this very point, and won. The judge in that case issued a series of injunctions against the NFL that basically told the NFL to stop violating federal law. Yes, the NFL broke the law. (If Roger Goodell had been commissioner, he would have suspended himself for one year or until he could convince himself that he had learned his lesson.)

4. In the wake of the judge's ruling, did the NFL mend its ways? No, it did what any rich kid does when in trouble: it pulled strings, running off to the Congress to get a special exemption from antitrust law in the form of the Sports Broadcasting Act of 1961. This act allows the NFL to sell the teams' individual broadcast property rights as a group. But there's a limit: NFL teams may join together to sell their broadcast rights as a group, but only for what the act calls "sponsored telecasts" of games. This is obviously pre-Information Age language, but basically what the Congress had in mind, as NFL Commissioners have conceded, is free, over-the-air, received-with-rabbit-ears-held-by-duct-tape, old-fashioned network broadcasts. (Somehow not even the federal Congress foresaw the rise of cable, ESPN, and the internet, even though young Al Gore was around and could have been asked.) So it's pretty clear the SBA doesn't protect the NFL from antitrust scrutiny when it ventures beyond network broadcasts, as the NFL has done with the NFL Network.

5. So the solution to the Battle of Big Business is for someone to sue the NFL for violating the antitrust law in creating and broadcasting its games jointly over the NFL Network. Maybe those fans who sued and made millions over the Direct TV NFL package could make some more money on this one. Or maybe the United States government could stop worrying about the election and turns its attention to a problem that bothering millions of Americans. Or maybe even Jerry Jones, no stranger to suing the NFL, could find his way back into court to reclaim his ownership of the broadcast rights to this game and sell them to the highest bidder. The solution to the problem lies with holding the NFL's corporate feet to the fire. Now the NFL might well prevail in an antitrust suit: a contemporary court may not agree with the federal court's 1953 decision. The league's collective marketing of these game rights poses a close question; it might be nice to get it answered. I'd like to see Thursday's game.

Full post as published by The Sports Law Professor on November 27, 2007 (boomark / email).