The business of blackouts

Season ticket holders play a key role against policy 

SAN DIEGO — Just days before the Chargers were to face one of their biggest challenges on the field, front office personnel were facing one of their own off the field — almost 9,200 general tickets were still to be sold in order to sell out the Chargers and Falcons game and lift the threat of a local TV blackout.

The tickets weren’t sold and the blackout was in effect.

The game couldn’t be seen in San Diego or any other market within a 75-mile radius of Qualcomm Stadium.

Sunday’s blacked out game against the Atlanta Falcons was the first for the Chargers this season.

The NFL is the only league to blackout its local games that aren’t sold out. The Chargers’ home opener against the Tennessee Titans was almost blacked out, but the team managed to sell the remaining tickets after filing for a 24-hour extension. That game set a TV ratings record for season openers in San Diego with a 37.8 rating, according to the NFL.

The announced attendance for the Chargers, Falcons game was 61,297. That would have amounted to an 87 percent capacity-filled stadium and allowed the game to be shown locally had the organization eased its blackout policy restraints.

Earlier this year, the NFL offered all 32 teams a chance to ease the restraints on the blackout policy created in 1973, and allow teams to locally broadcast games that were 85 percent sold out or more.

The caveat being that the teams selecting the relaxed policy would have to share 50 percent of the revenue over that 85 percent threshold with the opposing team.

“We don’t have the revenue generating opportunities that the newer stadiums do,” said Bill Johnston, the Chargers director of public relations. “That’s why our ticket revenues are so much more vital to us than they may be to other franchises with newer stadiums.”

“I think there’s a lot of factors that go into selling tickets and why certain games may be blacked out,” said Chargers Executive Director and CEO, A.G. Spanos. “You can look at the economy, you can look at how good the experience is on TV at home; I think that’s a big reason. …

“I think a lot of factors, team performance, perceptions of various things in the organization can all affect somebody’s decision to purchase tickets,” he added.

In the annual Forbes report released this year on the worth of NFL franchises, the Chargers (for the 2011 season) are ranked 24 out of the 32 teams with an estimated value of $936 million. The report lists their estimated revenue at $246 million with $52 million coming from gate receipts, which would account for 21 percent of the team’s earnings. The Chargers wouldn’t confirm the financial details.

For the Dallas Cowboys, the No. 1 ranked franchise, according to Forbes, their gate receipts amount to 18 percent of their overall revenue. The Cowboys overall revenue amounts to more than double that of the Chargers’.

As to whether the blackout policy could affect a team leaving a city or bargaining for a new stadium: “Sure,” said Robert A. Baade, a professor of economics and business at Lake Forest College and one of nine sports economists that contributed to an independent petition to the FCC to eliminate the TV blackouts.

“When you look at the contracts and the memorandums of understanding at this point, there are clauses written in some contracts which say, if the team is not in the…top 25 percent of revenue generators, they have a right to leave,” Baade said.

“It’s peculiar to the individual contracts, but more and more, we live in a world where teams are managing through virtue of a greater demand for teams than there’s an available supply.

“They manage to foist the risk on to the host city and manage to avoid assuming any kind of risk that you would expect businesses to ordinarily incur. And so, the NFL has been very, very clever about how to pass risk along to the host city. And as long as they maintain an excess demand for franchises, that will continue to be the case.”

Spanos said that being in Qualcomm (it was built in 1967; it was expanded in 1984 and again in 1997) does cause some issues regarding ticket sales.

“I think the designs of newer stadiums have taken into account better sightlines, making every seat have an unobstructed view of the field, an unobstructed view of the Jumbotron for replays, and so the fact that we are in an older venue does cause some issues,” Spanos said.

“In 2010 we had two blackouts,” Spanos said. “In 2009 we had four blackouts. So attendance, I wouldn’t say it’s declined overall, our season ticket holder base has declined,” Spanos said.

Though since 2008 average home attendance figures have shown a decrease by 4 percent.

Based on the average attendance for home games last season, the Chargers averaged a 93 percent capacity in the stadium.

The petition research to the FCC concluded that “blackouts have no significant effect on ticket sales in the NFL and increase no-shows only when the weather is bad.”

But some teams do benefit from what economists call “local revenues,” Baade explained. “You’ve got some teams in large markets that naturally have an advantage and so they don’t rely as much on attendance as do some other teams. …

“When you’re talking about some teams like the Green Bay Packers, who have long wait lists for fans, the whole blackout thing is superfluous, anyway,” he said.

The Chargers sold almost 6,000 additional tickets to the Atlanta game following the blackout announcement, according to Johnston. “Without the policy, it might have been, take a zero off that, 600 (tickets), so it does make a big difference,” Johnston said.

“If you’re in a situation where you say, ‘Look we’re not going to be able to see the team, or see the game, you might be able to convince some deep pockets person to, in fact, buy tickets to ensure the blackout will be lifted,” Baade said. “It can be very effective. I think people get a little panicky close to game time and start thinking about the fact that we’re going to have to sell these tickets somehow if we’re going to avoid the blackouts. It’s a very straightforward way of making sure you sell all the seats.”

Baade thought it was fair to say that season tickets holders make or break blackouts. “I think that of course, if you can muster season ticket sales, you’re just going to be at a huge advantage. In fact, in all sports, season tickets sales really give you a distinct advantage because they give you more certainty,” he added. “I think in all sports at this particular point in time, season ticket sales are the key.”

Spanos said the organization took great steps this year, setting a goal to put more value in the season ticket holder packages. “And we achieved that,” he added.

Some of those measures include more stadium and facility tours and allowing more access to conference calls with key personnel as the head coach and general manager and players. Season ticket prices also haven’t changed since 2007.

Chargers season ticket packages are still readily available for purchase.

Spanos wouldn’t say whether the policy was outdated, but knows there’s been a lot of criticism about the blackout policy. “The blackout policy has been in place for decades,” Spanos said. “If you look over the long haul, it served the NFL well in helping markets sell tickets. Because we need people in the stands; our players tell us all the time how important home field advantage is. I don’t think the NFL works if the stadiums are empty. There needs to be a big crowd at the stadium for everything to work.”

Spanos said he was optimistic for ticket sales regarding the remaining six home games. “There’s still a lot of football to be played. I think we’re 2-1 at the top of our division and I think team performance is going to be a big driver in ticket sales. I think if we continue to be successful on the field, I’m very optimistic about selling out the rest of our games and getting the blackouts lifted,” he said.

The Chargers remaining home games are against division rivals the Broncos and Chiefs, followed by the Ravens, Bengals, Panthers and ending the season against the Raiders.