noncommercial educational station fund raising - Broadcast Law Blog

Financial Challenges to Noncommercial Broadcast Funding - What Is the FCC Doing?

David Oxenford — Mon, 31 Oct 2011 07:07:09 -0500

As Federal funding to public broadcasters faces serious challenge in a Washington looking to cut the budget for all but the most essential government services, and where voluntary contributions to all noncommercial broadcasters have been constrained by the economic issues faced by the entire nation, more and more noncommercial broadcasters are facing tough questions about the future. We've seen colleges and municipalities sell stations that have been community fixtures for decades, and noncommercial groups (including some religious broadcasters) deciding to call it a day and liquidate their holdings. At the same time, the ratings success of many noncommercial broadcasters (both public broadcasters and those owned by religious or other community organizations), especially in the radio world, are showing much success in developing a large listening audience. With noncommercial stations, by law restricted to raising funds without commercial advertising, many are looking for new ways of operating. How are FCC regulations and interpretations reacting to these new realities?

The FCC's Future of Media Study (and the resulting Report on the Information Needs of Communities that we summarized here) recognized the importance of the diversity provided to communities by noncommercial broadcasters and, without detailing any proposals, indicated support for the development of new funding sources for those stations. Similar general statements were echoed in the hearing on the report recently held by the FCC in Arizona. But the options of the FCC in pursuing solutions are limited. In a recent decision, a noncommercial entity that operated a number of stations in small rural markets asked for a waiver of the FCC's underwriting rules to allow it to air a limited amount of advertising for commercial entities, restricted to the top of the hour, and presented so as to not break up normal programming. The applicant justified the request on the current financial climate that made donations and grants hard to come by, especially in the rural areas where this group operates its stations. While the Commission's staff expressed sympathy for the applicant's financial plight, it stated that it was powerless to waive the Communications Act, which prohibits noncommercial stations from broadcasting "any advertising." Faced with this prohibition, and a fear of opening the floodgates to similar requests, the FCC denied the waiver.

]]>So what options are there short of amending the Communications Act (which, if groups of noncommercial broadcasters and others in the community who favor all types of broadcasting that NCE stations provide joined in, is not beyond the realm of possibility)? One area might be for some clarifications and amendments to the FCC's own rules that interpret and implement the statute. Based on the number of recent fines levied on noncommercial broadcasters for exceeding the limits of the underwriting rules, and from the reactions of noncommercial broadcasters in discussion during various presentations that I have done on complying with the underwriting rules (see, e.g., our article here about one such presentation), the rules are not necessarily straightforward, and often lead to confusion. They get especially grey in areas of event-marketing, concert promotion, live appearance and other potential sources of ancillary revenue for noncommercial broadcasters, where such fundraising may have an incidental benefit to commercial groups. Where are the lines drawn as virtually any area of commerce will have some incidental benefit to commercial entities, even if it is at the level of sales of the the station's electronic equipment, telephones, office supplies and other materials used to create any message on behalf of a nonprofit entity and to convey it to the listener? Realistic, flexible and understandable rules need to be adopted.

While clarifying the underwriting rules may be helpful in this environment, there have been some troubling developments in the law surrounding fundraising for noncommercial broadcasters. In a letter of inquiry sent this summer to a noncommercial station involved in an LMA type arrangement with another noncommercial broadcaster, the FCC raised numerous issues about such arrangements. While nothing has been decided in this case, the fact that the letter was publicly released by the FCC raises questions about the continuing use of such arrangements in the noncommercial world. As a policy matter, why these arrangements, with another noncommercial broadcaster, would be troubling is unclear, as the Commission has recognized that any sort of promotion for noncommercial entities is not advertising and not covered by the Communications Act prohibitions. Why should it care if noncommercial broadcasters obtain programming from other noncommercial entities? Many noncommercial licensees, not ready to sell their stations but facing tough economic times, may look at such arrangements as a way to retain the license and the flexibility to resume full independent operations when economic times are more robust. Inflexibility in this area may cause the sale of more stations in the future. We will see what happens as this case develops.

Changing times call for changing approaches to regulation and operations. We will see where the FCC takes these regulations in the coming months, and where noncommercial broadcasters, facing the new reality of today's economic times, decide to push for change in the ways that they can and do they operate.

FCC Sets Out Procedures for Noncommercial Station Fundraising For Japan Relief

David Oxenford — Thu, 17 Mar 2011 21:52:45 -0500

Under FCC policies, stations licensed as noncommercial educational (NCE) stations cannot conduct fundraising for parties other than the station licensee if such fundraising will disrupt the normal program schedule of the station. So the Jerry Lewis Telethon and similar charitable programming efforts cannot be conducted by noncommercial stations without a waiver from the FCC. In recent years, when there have been major disasters, like Hurricane Katrina and the Haitian earthquake, the FCC has adopted a liberal waiver policy to allow noncommercial stations to join the rest of the world in aiding the victims of such tragedies. This week, the FCC adopted a similar policy for noncommercial stations wanting to conduct fundraisers for Japanese relief efforts, issuing a Public Notice setting out that policy. Waiver requests can be filed by an email to the head of the Audio or Video Division of the FCC (depending on whether the request is coming from a radio or TV station), setting out the following information:

a. the nature of the fundraising effort;

b. the proposed duration of the fundraising effort;

c. the organization(s) to which funds will be donated; and

d. whether the fundraiser will be part of the licensee's regularly scheduled pledge drive or fundraising effort.

As we wrote when the Haitian Notice was issued, there does not seem to be a need, under FCC precedent, for stations to have to request permission from the FCC if these fundraising appeals will not interrupt regular station programming. Yet it might be safest to ask for that permission if the requests will be regularly run during the course of programming on the station - to avoid any question about such activities. Of course, the question could be raised as to whether the FCC really needs to have this rule any longer - or if it might not be more appropriate for noncommercial stations to use their own discretion to make programming decisions about the fundraising that they want to do in the public interest. But that is a question for another day - as stations have a good cause to which they can contribute now, and the FCC has given them the ability to do so on an expedited basis.

Noncommercial FM Station Fined $12,500 for Sponsorship Acknowledgments That Were Too Commercial

David Oxenford — Thu, 17 Jun 2010 21:44:25 -0500

Stations that are licensed as "noncommercial educational" stations are prohibited by the FCC from running commercials - seemingly a pretty straightforward prohibition. Yet drawing the line between a prohibited commercial and a permissible sponsorship acknowledgment is sometimes difficult in these days of "enhanced underwriting." In a recent case, the FCC fined a noncommercial radio station $12,500 for repeatedly airing 4 announcements from sponsors that the Commission found to have crossed the line by being overly promotional. These announcements, which appear to have been recordings of unscripted sponsor acknowledgments, demonstrate how carefully noncommercial stations must police their sponsorship announcements to avoid risking an FCC sanction.

The announcements in these cases are worth reviewing. Some have subtle promotional messages, while the areas of concern are more clear in others. But in reaching its decision, the Commission goes through a close analysis of the wording of each announcement to see if the announcement contains "comparative or qualitative descriptions, price information, calls to action, or inducements to buy, sell, rent or lease", all prohibited language in a noncommercial sponsorship identification. So, when one of the announcement referred to "beautiful Harley Davidson light trucks" sold by a local auto dealer who sponsored the station, the FCC found that this was a qualitative claim that went over the line. Similarly, statements that "we have it here" or "where we are proud to be Mexicans" (these announcements having been run on a Spanish-language station in California) were found to be attempts to qualitatively distinguish this dealer from others, or to be inducements to buy - a prohibited call to action. And a specific statement that "no downpayment" would be required on a purchase constituted the kind of price information that should not be contained in a sponsorship acknowledgment. Another announcement for a local tire store had similar problems in the content of the ads, using phrases such as stating that the company "knows about tires" and that the company's product "reduces [the] loss [of tire] pressure" and "has less risk of suffering damages . . . last longer and [is] not too expensive cause you to save more . . . [and] save more in gas per mileage."

]]>As evidenced by this decision, noncommercial broadcasters need to concentrate on the facts when delivering a sponsorship acknowledgment. A station can identify the sponsor and provide a non-promotional description of what business they are in, and provide contact or location information. But they need to keep these product identification statements short and generic, and avoid all that stuff that sometimes makes commercials on commercial stations interesting - the music, the hype, the reason why one business is better or different from its competitors, and the real push to make the listener want to patronize the sponsor. We've written about some other cases where underwriting acknowledgments have gone too far and prompted FCC fines, here and here. There is a fine line between the permissible and the prohibited, but it is one that noncommercial stations must carefully walk to avoid FCC penalties.

FCC Permits Noncommercial Stations to Raise Funds For Haitian Relief - The Limits of Third Party Fundraising By NCE Stations

David Oxenford — Wed, 13 Jan 2010 22:57:00 -0500

The earthquake in Haiti has caused many to look for ways to help - including broadcasters. While many broadcasters are already pitching in to do their part to aide relief efforts, noncommercial broadcasters are, in some cases, limited in what they can do. Noncommercial stations cannot raise funds, even for other noncommercial groups, if that fundraising "substantially alters or suspends regular programming" of the station. Under these rules, NCE ("Noncommercial educational) stations are thus forbidden to hold a telethon or other pledge drive that suspends normal programming where the proceeds would go to a third party - even a nonprofit third party group. Thus, recognizing the magnitude of the tragedy in Haiti, the FCC has agreed to grant liberal waivers of these policies, issuing a public notice announcing that NCE stations wishing to conduct such efforts can simply file an electronic request, by email, with certain supervisors in the Media Bureau's Audio and Video divisions, setting out the nature of the programming, its length, and the beneficiary.

We obviously applaud the FCC's rapid response on this issue. But we note that it is interesting that the Public Notice states that applicants for one of these waivers also must state whether the special fund-raising effort is part of the station's normal fundraising, or if it is a separate program. The public notice does not mention that noncommercial stations can make fundraising appeals for third parties under the current FCC policies, as long as those appeals do not suspend or interfere with normal station programming. It would seem to me that such appeals would permit a DJ on an NCE station, in a normal programming break, to urge listeners to contribute to the Red Cross or some other charity, or for a regularly scheduled talk show on a station to feature a discussion of the situation in Haiti and of how people can assist with disaster relief, without needing any specific approval of the FCC. The key to whether a waiver of the FCC policies is necessary is whether there is a substantial alteration or suspension of the normal programming of the station.

]]>In many ways, the whole rule against third-party fundraising for nonprofit groups seems to be a relic of another era. When first adopted, the FCC had very strict rules on promotions or even acknowledgments of any business or entity that provided anything of value to the noncommercial station in exchange for on-air mentions. With a recognition that noncommercial stations did need to raise funds to survive, through "enhanced underwriting" and other changes, many of those restrictions have eased over the last 30 years. The prohibition against doing promotional announcements for other noncommercial entities has been totally lifted - so that NCE stations can essentially run sponsored promos for the activities of other nonprofit entities. Why, if you can promote the activities of another nonprofit on the air, even in exchange for consideration from the nonprofit, a NCE station cannot also fund raise for that same nonprofit entity seems a mystery.

Last year, on the FCC's periodic announcement of matters circulating among the Commissioners for consideration, there was a notation of a proposal to change the policies on NCE stations fundraising for third party organizations. As I represent many NCE stations, I made some inquiry among other lawyers who represent noncommercial entities, and no one really seemed to know where that proposal for change originated, or what it entailed. One hopes that the FCC does liberalize these rules so that, whether in the event of disasters like that in Haiti, or to simply promote the good works of other charitable organizations in its service area, NCE stations can freely serve the public and promote these activities without the need for prior FCC approval.

Update - The NAB has prepared PSAs for stations to use to promote Haiti relief efforts. See their press release here, with links to the PSAs.