Friday, February 1, 2008
Specter's inquiries put NFL's lucrative broadcast structure in play
By Lester Munson ESPN.com
Sen. Arlen Specter, R-Pa., thinks he can use the NFL's "antitrust exemption" as leverage to investigate the league's destruction of tapes turned over at the start of this season by New England as part of an investigation into alleged spying by the Patriots. Specter's surprise inquiry raises several questions. Here are some of those questions and their answers:
What is the significance of the NFL's destruction of the Patriots' tapes?
It sounds and appears worse than it is. It looks like some sort of
cover-up. Specter can easily say that the destruction of the tapes was an obstruction of his inquiry. But the NFL had reasons for its action. Once the league had possession of the tapes, NFL officials did not want them to be used in any other way. At the time the league made the decision to destroy them, there was no other investigation underway or even contemplated. So it is difficult to say the NFL was covering anything up. The destruction of the tapes would become significant only if Specter is able to come up with other tapes or other spying by the Patriots. He would then be in a position to say the NFL was covering up for one of its premier teams.
What is Specter talking about when he talks about the NFL's "antitrust exemption"?
Specter is talking about a law known as the Sports Broadcasting Act that is the legal and economic foundation of the NFL, the most successful enterprise in the history of sports. There is no faster way to capture the attention of NFL owners and commissioner Roger Goodell than to suggest that Congress could revisit the law that allows NFL owners to pool their television rights, sell them as a package, and split the profits equally. Enacted in 1961, the law is the single most important factor in the league's success. Without the law, each franchise would be selling its television rights individually, which would result in the big-market teams making big money and a team like Green Bay going out of business.
When you hear the phrase "antitrust exemption," you automatically think of baseball. Are these things the same? How important are they?
When U.S. Sen. Arlen Specter (R-PA) speaks about the NFL's antitrust exemption, Roger Goodell should listen.
The MLB antitrust exemption is different from the NFL's exemption. The baseball exemption is a historic artifact that goes back to a ruling by Oliver Wendell Holmes early in the 20th century. In an opinion that has lived in infamy, the otherwise distinguished Holmes ruled that baseball was a sport and not a business and so could not be regulated as a monopoly under antitrust laws. Holmes' ruling was reaffirmed in another bizarre opinion by Harry Blackmun when Curt Flood challenged the exemption and tried to establish free agency. Led by Marvin Miller, the players and their union found other ways to establish free agency and the salary system that has made them wealthy. The NFL exemption applies only to television broadcasting. Because broadcast income is the most significant in the NFL, the equal sharing of TV income permitted under the exemption has made all teams highly profitable.
How does the exemption allow the NFL to make money in television?
Without the exemption, each team would be selling its own broadcast package. They would be competing with each other for TV dollars. There could be five games on five stations in a single market on a Sunday afternoon. The competition would drive the price of advertising down. With a legally permitted monopoly on televising professional football games, the NFL is able to drive the price higher and higher. By pitting one network against another for NFL rights, the price can only increase. When there is only one seller of a popular product and many buyers, the price of the product soars. Without the exemption, the selling of leaguewide rights would be a conspiracy in restraint of trade and would be subject to triple damages under antitrust laws. NFL owners, in a brilliant set of decisions that began with George Halas and Curly Lambeau more than 80 years ago, agreed to share their incomes equally. When the agreement was attacked under antitrust laws in Pennsylvania in the late '50s, the owners and Pete Rozelle (who became commissioner in 1960) came up with the idea of the legal exemption and pushed it through the U.S. Congress. If you were to rank the top ideas in the history of the sports industry, this one would be in the top five, and might be the most brilliant of all.
What can Specter do to this exemption?
Specter is in the Republican minority on the Senate Judiciary Committee. If he wants to pursue anything, he must
work with or through Sen. Patrick Leahy, D-Vt., the chairman of the committee. It would be a demanding and possibly tricky political situation involving partisan politics in an election year. But Specter can take some actions. He
can introduce a bill that would eliminate or modify the exemption. Could he succeed in passing that bill? Probably not. But the exemption is so critical to the success of the NFL that even a mention in a press conference is enough to ignite a reaction at NFL headquarters. Specter, for some reason, is interested in the Patriots' spying violations; and the exemption gives him a basis for an investigation.
Why would Specter involve himself in something like this?
Politicians love to be mentioned on sports broadcasts and on sports pages. It makes them look important, and it generates publicity that is otherwise impossible. It is particularly good politics when the politician is in pursuit of cheaters. The steroids hearings in the House of Representatives are an obvious example of similar political behavior. Specter is a frequent guest on sports talk shows. He believes it is good politics and it will somehow allow him to remain in office. It is obviously a grandstand maneuver, but it is a very good grandstand maneuver. Many other politicians are wishing they had thought of it. As an Eagles fan, Specter
admits he wants to know more about anything the Pats might have done to prepare for the Super Bowl two years ago. Another factor motivating Specter might be the current battle between the NFL Network and the Comcast cable empire. The NFL wants its network on Comcast as part of the basic cable package, but Comcast insists on carrying it on its premium sports tier. Comcast is headquartered in Philadelphia, in Specter's home state.
Specter and his party are in the minority in the Senate. Should the NFL worry about his interest?
It is easy to dismiss Specter as a bit of a flake. Too easy. Many say he is the finest legal mind in the U.S. Senate. He might be, but that also might not be high praise. Others dismiss Specter partly on the grounds that he was part of a failed investigation into the assassination of President John F. Kennedy in 1963. Conspiracy theorists and others have long blamed Specter for some of the more bizarre findings of the Warren Commission, including the "single bullet theory" and the disappearance of things critical to the investigation. But Specter has served long and occasionally well in the Senate, and can be a formidable force. The issue he has chosen to address in this case is so sensitive and so important to the NFL that Goodell and the owners must take him seriously.
Lester Munson, a Chicago lawyer and journalist who reports on investigative and legal issues in the sports industry, is a senior writer for ESPN.com.