Denver Broncos quarterback Peyton Manning looks to pass against the Pittsburgh Steelers during the first quarter of an NFL football game, Sunday, Sept. 9, 2012, in Denver. The Broncos won 31-19. Manning got his first touchdown as a Bronco and the 400th of his career with a 71-yard pass to Demaryius Thomas during the third quarter.

Throw the Flag on Sports Blackout Rules

The FCC should say goodbye and good riddance to these outdated regulations.

Denver Broncos quarterback Peyton Manning looks to pass against the Pittsburgh Steelers during the first quarter of an NFL football game, Sunday, Sept. 9, 2012, in Denver. The Broncos won 31-19. Manning got his first touchdown as a Bronco and the 400th of his career with a 71-yard pass to Demaryius Thomas during the third quarter.

American viewing habits have changed substantially in forty years. The FCC's blackout rules should change too.

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Former television executive Preston Padden once remarked that media companies are subject to “a Rube Goldberg regulatory structure,” a complex system that performs simple tasks in indirect, convoluted ways. Sports fans are acutely aware of one small piece of that inefficient machine -- sports blackout rules.

The sports blackout rules were originally devised by the Federal Communications Commission in 1975. Fortunately, the FCC is considering repealing sports blackout rules as no longer in the public interest, but the ordeal reveals how difficult it is to remove regulations long after their (dubious) usefulness.

In the early decades of the NFL and other major sports leagues, believe it or not, many teams were losing money and the leagues needed to improve ticket sales. An infamous 1952 game between the Chicago Bears and now-defunct Dallas Texans drew only 3,000 fans on Thanksgiving Day. By blacking out game broadcasts in home cities, the NFL and other major sports leagues believed, reasonably, they could improve stadium attendance.

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Blacking out games in the 1950s and 1960s was fairly easy since the sports leagues only had to contract with three or four broadcast networks. In the early 1970s, however, local cable companies were quickly popping up around the country. To save the sports leagues time and money, in 1975 the FCC negated the need for blackout agreements between leagues and cable companies and created the sports blackout rules that have remained in place for nearly 40 years. The rules essentially banned a cable provider from showing a game if a broadcaster had agreed with a sports leagues to black out a game in a local area. Cable companies could not negotiate with leagues over home game blackouts. In the 1990s, similar rules were extended to satellite television.

The FCC justified the rules because they lowered the contracting costs for leagues and they protected broadcasters from cable competition. Today, neither purpose is supportable, and I make those points in a public interest comment I filed with the FCC. First, the FCC should not intervene in television markets in an attempt to lower the costs of profitable and financially savvy sports leagues. Second, why should the rules benefit broadcasters? Today, only a fraction of households rely on broadcast receivers (like "rabbit ears") to get television. Somewhere between 80 and 90 percent of households pay for TV from a cable or satellite company. As a result, the FCC’s blackout rules penalize most households, since their television provider is prevented from negotiating with the leagues over blackouts.

The television marketplace and American viewing habits have changed substantially in 40 years. The FCC’s blackout rules should change as well, particularly since sports programming has become such a valuable part of cable packages. The current rules unnecessarily prevent cable and satellite companies from giving their customers popular sports content from the customer’s home team. Removing the sports blackout rules would inject market forces into the media industry and eliminate one more complication in television’s Rube Goldberg regulatory system. Here's hoping the FCC agrees.

Brent Skorup is a research fellow at the Mercatus Center at George Mason University.