BILL ANALYSIS
AB 2522
Page 1
Date of Hearing: April 20, 2010
ASSEMBLY COMMITTEE ON ARTS, ENTERTAINMENT, SPORTS, TOURISM, AND
INTERNET MEDIA
Mike Davis, Chair
AB 2522 (Saldana) - As Amended: March 18, 2010
SUBJECT : Professional sports teams: public funding
prohibition
SUMMARY : Prohibits a professional sports team located in this
state, as specified, from being eligible to receive public funds
in the fiscal year following any fiscal year in which a
broadcast of any home sporting event of that team is blacked
out, with specified exceptions. Specifically, this bill :
1)Declares that any professional sports team or franchise shall
not be eligible to receive any state public funds in the
fiscal year following a blacked out broadcast of any home
sporting event, for any reason, including but not limited to,
the black out rules of the professional league to which the
team is a member.
2)Applies the public funding prohibition to any professional
sports team or franchise whose home stadium is located in this
state.
3)Provides exception from the public funding prohibition for the
following.
a) Public funds appropriated to a professional sports team
or franchise prior to January 1, 2011.
b) Revenues from taxes imposed for the support of a
professional sports team or franchise that is in effect
prior to January 1, 2011.
c) Public funds that must be appropriated or allocated to a
professional sports team or franchise pursuant to a
contract if failure to appropriate or allocate the funds
would constitute a breach of the contract.
AB 2522
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EXISTING LAW :
1)Authorizes, under the Joint Exercise of Powers Act, two or
more public agencies (i.e., federal government, any state, any
state department or agency, county, county board of education,
county superintendent of schools, city, public corporation,
public district, and regional transportation commission in any
state) to enter into a joint powers authority to exercise
jointly any power common to the contracting agencies and to
form a separate Joint Powers Authority (JPA) at their option.
2)Authorizes the City of Santa Clara and the Redevelopment
Agency of Santa Clara as a JPA, the Santa Clara Stadium
Authority, to construct, operate, and maintain a stadium for
use by a professional football team using a specified
design-build authority.
3)Authorizes a city, county, or city and county to lease
property owned, held, or controlled by it for specified
purposes, including general sports purposes, for a period of
up to 99 years.
FISCAL EFFECT : Unknown
COMMENTS :
1)Background: Professional Sports Blackout Policies : According
to Wikipedia, the online encyclopedia, a blackout is defined
as: "In broadcasting, a blackout is when certain programming,
usually sports, cannot be televised in a certain media
market." Below is a summary of major sports black out
policies as detailed on Wikipedia:
a) National Football League (NFL)
In the NFL, any broadcaster that has a signal that hits any
area within a 75-mile (120 km) radius of an NFL stadium may
only broadcast a game if that game is a road game, or if
the game sells out 72 hours or more before the start time
for the game. If sold out in less than 72 hours, or is
close to being sold out by the deadline, the team can
sometimes request a time extension.
b)Major League Baseball (MLB)
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Unlike the NFL, the blackout of games have nothing to do with
attendance. Games are blacked out based on two criteria:
i) Local broadcast and cable stations which contract
with a team to show their games in the local market have
priority to televise those games over national
broadcasters.
ii) The Fox network has exclusive nationwide rights for
MLB games on Saturdays between 3:55 p.m. ET and 7:00 p.m.
ET and ESPN has the same rights for games on Sunday after
8:00 p.m. ET. Games beginning in these periods of
exclusivity can only be telecast by the network holding
the exclusive national rights. Games that run long, such
as extra inning games that run past 7:00 p.m. ET on
Sundays, are not cut off.
c) National Hockey League (NHL)
In the NHL, most national cable games are shown throughout
the country. Occasionally, the league will grant its cable
partner an exclusive window and not schedule any other
games involving U.S. teams at that time. For NBC's network
coverage in the 2006-07 season, only games it televised
could air during its window, airing different games by
region. The coverage was changed in the 2007-08 season to
a Game of the Week format.
d) National Basketball Association (NBA)
The NBA and the WNBA used to black out nationally televised
games on cable TV within 35 miles (56 km) of the home
team's market; however, these are now restricted to games
on NBA TV.
e) Major League Soccer (MLS)
MLS applies local blackout rights for the broadcasts of the
following teams as a part of MLS Direct Kick: Chivas USA,
Colorado Rapids, D.C. United, Los Angeles Galaxy, New
England Revolution, New York Red Bulls.
MLS Direct Kick contains MLS games originating from either
a regional sports network or a local over-the-air station
and delivers these games to customers who purchase this
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subscription. These games are not otherwise available to
DIRECTV subscribers because they are broadcast outside of a
subscriber's local area. Further, MLS games shown
nationally on ESPN, ESPN2, TeleFutura and ABC are not
included as part of this sports subscription.
2)NFL Blackout Policy Further Examined : While this legislation
is broadly targeted at any professional sports team or
franchise, in all materials and references to the bill the
author addresses her primary concerns to the NFL. Indeed,
according to background material supplied by the author, this
bill is part of a nationwide effort to persuade the NFL to
alter its blackout policies, which includes elected officials
from California, Florida, Michigan, Missouri, New York and
Pennsylvania. Not coincidentally, each of these states host
an NFL team which has experienced, or is anticipated to
experience, television blackouts of their home team games.
Much of the concern about potential blackout may be traced to
news reports of the NFL's own dire forecast for the upcoming
season, as reported last fall in the Sports Business Journal,
"Up to four times the number of NFL teams are at risk of
having at least one of their games blacked out locally when
the season begins next week compared with last year, the
latest sign the down economy is taking a toll on even
America's most popular sport.
"According to NFL and team sources, the league showed club
owners at their meeting in Chicago on August 19, 2009, a video
slide with the names of 10 to 12 teams that may not sell out
every game. A game that is not sold out within 72 hours of
kickoff cannot be broadcast locally.
"Despite the difficulty that one-third of the league's teams
is having selling out, the NFL is not contemplating amending
the blackout rule, which ahs been in place 36 years. 'There
is no consideration being given to amending the blackout
policy,' wrote NFL spokesman Brian McCarthy, in an e-mail."
In testimony before the Missouri Legislature this month, the
NFL provided the following explanation of their blackout
policy:
To promote home game attendance, the NFL has maintained a
blackout policy for over half a century. In enacting the
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Sports Broadcasting Act in 1961, Congress expressly
permitted blackouts "within the home territory of a member
club of the league on a day when such a club is playing at
home." In 1973, Congress adopted legislation that
prohibited blackouts in the home team's local market when
the game was sold out 72 hours in advance. This law was in
effect during the 1973-75 seasons, but was not extended in
light of the NFL's commitment to Congress voluntarily to
abide by these terms in the future. The League continues
to honor that commitment to this day.
There are 256 NFL regular season and 11 postseason games
each year. In the seasons 2006-08, there only were 7, 10
and 9 local blackouts of game telecasts throughout the
league, respectively. In 2009, the number of local
blackouts increased to 22 as our fans suffered the effects
of the recession as did many other Americans.
Our blackout policy is very important in supporting the
ability of the clubs to sell tickets; keep our games
attractive as television programming with large crowds; and
ensure that we can continue to keep our games on free TV.
Playing in full stadiums with thousands of fans is an
important part of what makes NFL football an exciting and
special entertainment event, both live and on television.
In the press, the NFL has been more direct in defense of the
policy. For instance, while NFL spokesman Greg Aiello
admitted recently to the San Diego Union Tribune that the NFL
has not performed a formal study of the potential costs and
benefits of revising the blackout rule, he did draw attention
to the experience of the 1950 Los Angeles Rams, "who were
persuaded to try home telecasts by a financial guarantee from
a TV sponsor. The experience, (former NFL director of
broadcasting) Pinchbeck wrote, vividly illustrated the point
that it is much more difficult to sell tickets to your home
games if your fans know in advance that the games
automatically will be available on television."
While the NFL may not have conducted an economic analysis of
its blackout policies, business economists have. In the
study, Should NFL Blackouts be Banned, economists from the
London Business School and Yale University School of Business,
conducted an exhaustive review of the economic and policy
implications of the NFL's blackout rule. In their study, the
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authors created a matrix of variables, and examined fan
behavior, to measure predicted attendance at NFL events. The
general variables included economic (ticket and concession
prices, local economy), team specific, game specific and
miscellaneous. Game specific variables included game day
weather, strength of the team (winning teams had higher fan
loyalty), strength of opponent, and whether the game was
blacked out. The formula used was number of tickets pre-sold
(season ticket holders and advance ticket sales) plus the
number of game day tickets sold, minus the number of no-shows.
Using this formula, the authors concluded that - somewhat
counter intuitively - blacked out games did not see an
increased attendance. Rather, attendance at blacked out games
was lower than games which were televised. This finding
mirrors earlier studies which also concluded that imposition
of blackouts did NOT increase attendance. (See, Welki and
Zlatoper [1994] US Professional football: and the demand for
game-day attendance, Managerial and Decision Economics;
Siegfried and Hinshaw [1979] The effects of lifting television
blackouts on professional football no-shows, Journal of
Economics and Business). Rather, the authors conclude, lack of
a sell-out reflects overall lack of interest in the particular
contest; interest which is not increased by failure to
televise a game in measure sufficient to overcome the impact
of personal economic, weather and miscellaneous, factors on
fans.
3)Stated Need for Legislation: Blackouts Hurt Local Economies :
According to supporters of this bill, "The blackout rule is
bad for already-struggling local economies. When games are
not televised, fans stay home and restaurants and bars lose
out on revenues from Sunday and Monday night crowds. Local
television affiliates lose out on advertising revenues, as do
advertisers whose commercials never air. Team merchandise
sales fall and that hurts local retailers as well as the team
franchise."
The author supplied the committee with a statement from a
typical business owner impacted by the NFL blackout rule,
which demonstrates the harm of the policy on small businesses.
"When we subscribe to the NFL package we fully expect to show
every single NFL game, as their promotional material states
and as we advertise. During the football season we hire
additional cooks, servers, bartenders and spend more in
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advertising because of the business generated during the
games. During the football season Sundays are by far our best
day of the week and we depend on all 16 of those Sundays.
When the NFL decides to blackout a game, we lose about 75% of
the business we would have done if the game were on TV.
Because of this not only do we lose out on a considerable
amount of revenue, but we also have no need for extra
employees. This also means that the state is losing out on
taxes."
The author adds, "This bill is necessary to protect California
taxpayers' investment in its professional sports teams,
especially the NFL. Many of the stadiums used by the NFL are
significantly subsidized with public dollars. These subsidies
can amount to as much as fifty percent of multi-million or
even billion dollar construction and renovation costs.
According to NFL rules, games can be blacked out in a team's
home television market if the stadium is not sold out 72 hours
before kickoff. The NFL has the ability to suspend this
practice but chooses not to. Taxpayers support the NFL by
attending games and buying apparel and other merchandise,
which amount to hundreds of millions of dollars. The least
the NFL can do is to make a commitment to broadcast all home
games. I don't see this as an outrageous condition for public
subsidies."
4)Legislation is Intentionally Narrow : According to the author,
AB 2522 was drafted to intentionally be prospective in its
application, and not impact existing contracts, tax allotments
or other agreements which California-based teams may currently
enjoy. Therefore, the bill provides exceptions for these
existing agreements. Further, the author claims that the
penalty provision in AB 2522 is intentionally limited to only
one fiscal year
(the fiscal year following the blacked out event), thereby
preserving an ongoing incentive for corrective action in
subsequent fiscal years.
5)Drafting Concerns :
a) Covered professional sports : This measure would cover
those professional sports teams of franchises with a home
stadium located in this state? (Emphasis added.)
California has three NFL teams, five MLB teams, four NBA
teams, three NHL teams, and a number of other professional
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sports franchises. Many of these teams play in indoor
arenas, in addition to fields and stadiums. The author may
wish to clarify that the bill would also apply to teams who
play in other than "stadium" venues.
b) Definition of State Public Funds is Needed : Currently,
it is not clear that any professional sports team located
in California gets direct state public funds. Regardless,
the author may wish to clarify her intention to prevent
teams from accepting public assistance, and then denying
public access through television blackouts, by amending the
bill to provide a definition of the public benefits which
she intends to include.
For instance, on page 2, at line 9, strike the words
"public funds", and insert instead "public financial
assistance," and define the term as including: bonds or
other forms of indebtedness; loans, grants, subsidies,
guaranties, or payments; below-market leasing or licensing
of real property; below-market sale or conveyance of real
property; tax incentives, exemptions, credits, rebates,
reductions, or moratoria; acquisition of real property;
reimbursement or forgiveness of fees, and; tax exempt
financing.
6)Prior Related Legislation :
AB 3003 (Kehoe) of 2003, would have required mitigation from
one city to another when a professional sports team moves
within California. Status: Died in this committee
AB 2805 (Ridley-Thomas) Chapter 954, Statutes of 2004,
prohibits the state Infrastructure Bank from approving an
extension for the Hoover Redevelopment Project Area if it
would have directly or indirectly resulted in a California
professional sports team relocating into the project area.
SB 49 (Migden) of 2007, would have prohibited a city, county,
city and county, or redevelopment agency from providing any
financial assistance to a sports stadium project whenever the
project involves a NFL franchise which has played at least 25
years in its home stadium and has the name of the city from
which it is relocating incorporated into its team name, and
the team seeks to relocate within the same "market area".
Status: Held without hearing in Senate Local Government
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Committee
SB 43 (Alquist) Chapter 330, Statutes of 2009, authorized the
City of Santa Clara and the Redevelopment Agency of Santa
Clara as a joint powers agency, the Santa Clara Stadium
Authority, to construct, operate, and maintain a stadium for
use by a professional football team.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Dana Mitchell / A.,E.,S.,T. & I.M. /
(916) 319-3450