The first formal investigation into the longstanding antitrust exemption granted to the NFL under the Sports Broadcasting Act of 1961 is officially upon us.
On Thursday, The Wall Street Journal reported that the Department of Justice has begun examining potential anticompetitive practices by the NFL in how it sells its media rights. Under the exemption granted to the NFL and other major North American professional sports leagues, the NFL is able to pool media rights for all 32 teams together to sell in packages to national broadcasters. The league can then split the revenue from those deals evenly among its franchises.
Recent bluster about the exemption largely centers on how NFL rights have become fragmented across broadcast networks and a litany of different streaming services, some paid and some not. Critics of the exemption argue the NFL is not fulfilling its obligation to remain easily accessible for viewers, and thus should have its antitrust privileges revoked, or at least reexamined to determine if selling games to subscription streaming services should receive the same protections as selling games to over-the-air broadcast networks.
Much of the concern in D.C. understandably takes the perspective of local broadcast affiliates, which are still viewed as critical infrastructure to communicate local news and updates to communities across the country. Keeping NFL games on broadcast television is critical to the health of these local affiliates, which rely on the advertising sold against the most-watched sports league to help underwrite local newsgathering efforts.
Of course, there’s also the consumer side of the equation. Simplifying the NFL viewing experience for fans, and perhaps keeping watching games more affordable, is a popular political position to take, no matter which side of the aisle you fall on.
But despite saber-rattling from both the legislative and executive branches on this issue, it’s difficult to believe there is a credible threat to the NFL’s antitrust exemption. The exemption is the number one reason the NFL’s product is the most compelling in all of professional sports, and it has nothing to do with the television product itself.
On paper, the NFL operates as 32 individual businesses. Each team is competing with one another for the services of the best players and coaches, to create the most desirable in-stadium experience for fans, to grow its brand quicker than its rivals, and to be generally superior in any number of on- or off-the-field areas.
In practice, the NFL operates as a cartel thanks to its antitrust exemption. While the 32 teams compete on numerous fronts, they operate as a unit when it comes to negotiating media rights with broadcasters or negotiating a salary cap with its players.
That’s allowed because it’s necessary for the quality of the product. See, what Congress acknowledged long ago in the Sports Broadcasting Act is that professional sports leagues aren’t in the business of selling football or baseball or basketball games to fans, they’re in the business of selling competition. Specifically, competition in the on-field sense. The belief that either team can win any given game is the reason fans watch in the first place. Someone might love football, but they’re not going to watch a football game where one team is destined to score 100, and the other might not get a first down.
It’s why professional sports warranted an antitrust exemption in the first place. Teams needed to act collectively in order to enact measures for competitive balance. When the product is competitive, there needs to be systems in place to ensure fairness.
Ultimately, this is why the NFL’s antitrust exemption is not credibly threatened by all the bluster in D.C. On paper, going after the NFL under the banner of keeping games accessible is popular. But what if the NFL calls the government’s bluff and continues its conquest to place more and more games on paid streaming services? Would fans be happy if the government actually revoked the league’s antitrust privileges?
The answer is a near-definite no.
First and foremost, game broadcasts would become exponentially more scattered as media rights return to individual franchises, free to sell them as they see fit. Cowboys games might end up on Fox, sure, but Jaguars games might end up on Apple TV, and Colts games on Peacock, and Lions games on Prime Video. The fan experience would be appreciably worse, right off the bat.
But beyond even worse fragmentation, the on-field product would deteriorate rapidly. As popular teams command top-dollar for their media rights while low-wattage teams try to scrape by, a stark revenue imbalance would quickly come to pass. The revenue sharing allowed under the antitrust exemption would become a distant memory, and teams with the most lucrative TV deals would quickly accumulate top talent while others struggle to even reach the salary cap.
The result: A diminished NFL product where everyone — the league, the fans, and the broadcast partners — all lose.
The NFL, with its army of lobbyists in D.C., will all but certainly be able to communicate this message to lawmakers and appointed officials who have the antitrust exemption in their crosshairs. While it’s no doubt a popular position to hold the NFL to account and pressure the league to keep games accessible to fans, any government action that ruins the quality of the NFL’s product would be deeply unpopular. Revoking its antitrust exemption would do just that.