“The only person that ever made the NFL quiver”
There are many reasons for the NFL’s massive success. Are we overlooking its antitrust exemption?
Welcome back to Club Sportico, where we break down the intersection of sports and money—with an extra bit of humor and opinion. Today, we’re talking about the bedrock of the NFL’s business.
Former NFLPA boss DeMaurice Smith joined our podcast this week, and about 40 minutes in we asked what he thought was the biggest existential threat to the NFL’s empire. His answer surprised me.
He didn’t mention concussions, CTE or youth participation. He didn’t talk about politics, changing media consumption, rising NBA valuations, or my latest favorite talking point, the rapid changes underway in college football. Instead, he mentioned a law that dates back to the Kennedy administration.
“The only existential threat they have,” the former union boss said, “is if someone decides that they have too much power, and someone wants to check that power.”
To explain, he referenced “the only person that made the NFL quiver.” It’s not who you think. Here’s that bit 👇
Arlen Specter served in the Senate from 1981 to 2011, and was a frequent NFL critic. Smith, however, is referencing a specific one of those critiques involving one of the NFL’s antitrust exemptions. Back in the early 1960s, after a U.S. district court affirmed that the NFL could not sell media rights on behalf of all 14 of its teams, the NFL lobbied for—and secured—an antitrust exemption from Congress. The Sports Broadcasting Act (SBA), signed into law by President Kennedy in Sept. 1961, allowed the league to pool rights into one national product. In short, it greenlit the bedrock of the NFL’s business. The league’s current national TV deals pay the league about $12 billion per year.
In 1987, when the NFL negotiated a new TV deal with ESPN, Specter argued that it was a violation of the antitrust exemption because it involved a cable network and not a free broadcaster. In 2006, he pushed the topic even further. Following a congressional hearing, he said he was willing to sponsor legislation that would repeal the exemption.
“Wouldn’t consumers be better off if teams could negotiate [individually]?” Specter said at the time. “This is the NFL exerting its power right down to the last nickel.” The effort never maerialized.1
We’ve written about the SBA before.2 It’s remarkably influential in modern pro sports, and has been in the news recently for a totally different reason—some people looking to overhaul college sports have argued that the exemption be extended to allow for nationwide bundling of media rights. (For more on this, our colleague Michael McCann wrote this week about why the SBA “may be too archaic to save college sports.”)
During our podcast, Smith called this exemption the NFL’s ‘foundational crime,’ and made this analogy about $500 hammers to push back on the idea that NFL owners are genius titans of industry 👇
While I won’t debate the legality behind the SBA, there’s obviously a whole lot more to the NFL’s success. The other major leagues all have similar exemptions, and none of them are close to the NFL’s scale, revenue, viewership or cultural impact.
One thing the NFL did differently was utilize the full scope of the exemption. Instead of using it to sell national packages while also letting teams sell their local rights, NFL owners rolled all of their TV rights up into those mega national TV packages. That’s helped the league avoid entirely the cascading consequences of the collapse of many so-called regional sports networks (RSNs). It also allowed the NFL to blackout local telecasts, push exclusive games to its own NFL Network, and—despite a contentious legal battle that may not be fully over—sell its Sunday Ticket product as the priciest comprehensive out-of-market option among U.S. leagues.
The SBA isn’t the league’s only anti-trust exemption. The NFL also has one regarding labor, which encourages and protects collective bargaining. But the broadcast one is critical to the league’s current business model. Without it, the NFL would need to replace its current pool-and-share revenue policy—which ensures competitive balance—with a system where every team would hit the market on its own. Imagine the imbalance in media money paid for the Dallas Cowboys home package relative to that of the Jacksonville Jaguars or Cincinnati Bengals.
And while it’s lived on for more than sixty years, it wouldn’t take that much to dramatically overhaul the SBA—perhaps just one administration’s Department of Justice to decide, in Smith’s words, that the league had “too much power.”
During a senate hearing in May, Senator Ted Cruz (R-Texas) said the league had been “tiptoeing up” to the rules laid out in the SBA. Last month, the House Judiciary Committee sent a letter to commissioner Roger Goodell3 requesting a briefing on the league’s media strategy. This is the third sentence of that letter (emphasis mine):
“The sports broadcasting market has changed significantly since the SBA was enacted, and recent antitrust cases have raised important questions about whether the SBA should be modified or repealed as a result.”
Maybe don’t buy those $500 hammers quite yet…
Club Sportico is a community organized by Sportico, a digital media company launched in 2020 to cover the business side of sports. You can read breaking news, smart analysis, and in-depth features from Eben, Jacob and their colleagues at Sportico.com, and listen to the Sporticast podcast wherever you get your audio. Contact us at club@sportico.com.
Specter isn’t the only politician who has criticized the antitrust exemption. When the Browns moved to Baltimore in 1995, Ohio congressman Martin Hoke pushed for the SBA to be repealed. Vermont Senator Pat Leahy, Specter’s successor as head of the Judiciary Committee, also criticized the NFL’s broad powers in 2007.
In addition to the NFL, the SBA covered the NBA, MLB and NHL.
Goodell wasn’t the only major commissioner to receive a letter like this. The committee also sent letters to the NBA’s Adam Silver, NHL’s Gary Bettman and MLB’s Rob Manfred.