Last week, the FCC commenced its long anticipated proceeding to reexamine its sponsorship identification rules. This proceeding has been rumored for over six months, having appeared on an agenda for a Commission open meeting in December, only to be pulled from the agenda days before it was to have been voted on. The Commission has initiated this proceeding, to a great degree, at the urging of Commissioner Adelstein who has been vocal in his concerns that the broadcast and advertising industries, in adopting advertising techniques to respond to technological and marketplace changes, has been exposing the public to commercial messages without their knowledge. One of the principal practices of concern to the Commission, though not the only one, is embedded advertising (as the Commission refers to product placement and product integration into the dialog and/or plot of a program). While many of the trade press reports have focused on embedded advertising, this proceeding is wide-ranging and important to the broadcast, cable and advertising industries. Comments on the proceeding will be due 60 days after its publication in the Federal Register, with replies 30 days later. We have prepared an Advisory, summarizing the issues raised by the Commission in this proceeding, which can be found here.
According to trade press reports, this proceeding was initially planned as a Notice of Proposed Rulemaking (NPRM), which would have proposed rules which, after public comment, could have been immediately adopted. After significant lobbying from the advertising community, the Notice was released in two parts. First, there is a Notice of Inquiry (NOI), asking a series of questions about the current state of advertising on broadcast and cable outlets, and asking how the Commission should amend its rules to deal with new advertising techniques. Second, the Commission’s announcement contains an NPRM with respect to certain specific items, including proposing to clarify the type of sponsorship identification necessary in television advertising, the extension of the sponsorship identification rules beyond local origination cablecasting to cable network programming, and clarification of the rules with respect to live-read radio commercials. The specifics of the NOI and the NPRM are set forth in our Advisory.
Also of interest was the Commission’s discussion of the background of the sponsorship identification rules. In its discussion, the Commission raised a number of issues with common broadcast techniques and whether or not these were consistent with existing precedent – some of that precedent dating back 40 years. For instance, the FCC cited a policy statement from the 1960s that stated that "teaser" announcements of a few seconds duration were impermissible if the sponsor was not clear from the teaser itself, even if the sponsor became clear in a later announcement in the same program. The use of "cwickies" by the CW Network was identified as a potential area of concern by the FCC.
The Commission also questioned whether there was a need for sponsorship identifications in interview programs where there was consideration given to the program for the inclusion of broadcast material. The FCC worried about "hidden commercials." That discussion was most likely triggered by the concerns over Video News Releases ("VNRs") and by payments to spokesmen to plug government programs without disclosing that they had been paid (as in the Armstrong Williams program which was the subject of a fine about which we wrote here, and the recent controversy about ex-military officers who offered on-air opinions on the War on Terror without disclosing their financial connections to the Defense Department). However, it would seemingly have a far greater impact. In watching television programs in the last few days, I’ve been wondering how far the FCC’s concern could go. On virtually every talk program, from the late night programs like the Daily Show or the Leno or Letterman, to daytime TV programs like Oprah or the Today Show, one staple is the author who is plugging his or her book or the actor plugging his or her movie. Could the provision of the guest on these programs for no payment by the TV show be construed as the receipt of valuable consideration by the book publishers or movie companies who are paying the costs of the promotional tour by the author or actor? Watching another cable television talk program, I noted the presence of numerous coffee cups with a recognizable logo on the desk of the hosts. Was that coffee paid for by the hosts, or was it provided by the coffee company just for the promotional value of having its cups appear on screen? While FCC policy currently allows the provision of material used in a program at no charge if the material is not unnecessarily highlighted in the program (so the piano may be provided by Steinway and its logo may be seen when the focus is on the player’s fingers, there is no tight focus on the logo nor is there a plug at the end of the concerto remarking on how amazing the piano was). But would even the existing indirect plugs be permitted (without a sponsorship identification) if rules were adopted to address some of the concerns expressed by the FCC.
The way that the advertising and broadcasting businesses work together could be profoundly affected by this proceeding. Read our Advisory, read the FCC’s Notice, and watch for the comment date. Think about the concerns that should be addressed by the Commission before enacting any new rules in this area, and let them know of these concerns before any new rules are adopted.